Earnings Call: Q4 2023

Mar 7, 2024

Summary

FY23 net profit rose almost 13% to ILS 7.4B, with 15% ROE and a 38.5% cost-income ratio. Credit grew 4.8%, while an ILS 8B allowance and strong capital and liquidity buffers supported resilience amid war-related uncertainty.

Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim fourth quarter and full year 2023 results conference call. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest, if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com, by clicking on Financial Information on the homepage, and then click on the Annual Report Presentation. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded March 7th, 2023. With us on the line today are Mr. Dov Kotler, CEO of Bank Hapoalim, Mr. Ron Zev, Chief Financial Officer, Mr. Victor Bahar, Chief Economist, and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respective company's business financial condition and result of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include but are not limited to product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies, as well as certain other risk factors which are detailed from time to time in the company's filings with the various securities authorities. Mr. Kotler, would you like to begin? Thank you, operator. Thank you, everyone, on the call for joining us today. Today, we are reporting outstanding results for the fourth quarter and the full year of 2023. The full year of return on equity of 15%, with an increase of almost 13% in net profit to ILS 7.4 billion. ILS 7.4 billion. The results were achieved in unusual time in Israel, and I think that the bank has demonstrated outstanding resilience during this period. I will talk about it later on. Our strong results reflect the significant operational lever we created. Again, this year, almost 20% growth this year alone in total income versus only 3% this past year in expenses. This led to substantial positive growth and efficiency ratio of less than 39%, 38.5%. In fact, we were able to maintain last year high return on equity, even slightly improved it, despite the substantial increase of the collective allowance this year and provision for the five-year wages agreement signed during 2023. I am moving on to slide number 5. We are currently in a period of high uncertainty, and some of the consequences of the war are not fully apparent yet. However, until now, this situation has demonstrated once again that the Israeli economy has the power and the capacity to withstand crisis in any impressive way. I don't know if many countries, including wealthy ones, could get on course so quickly towards recovery. Household consumption tend to recover, as shown in the graph. Although this data still is not representative of the entire economy or all of Israel, unemployment is also returning to previous levels. Still, there are several challenges ahead. First, around 100,000 people, 1% of the population, are still displaced from their homes. The construction industry is still suffering from a labor shortage that brought works to halt on many projects across the country during the fourth quarter. In tourism, very few tourists are entering Israel. Now, we will move to slide 6. In an environment of such high uncertainty, Bank Hapoalim is the best prepared in the industry for potential negative macroeconomic developments. This readiness is evident in two main parameters. Credit growth. Back in 2022, we recognized the global and local rising risk and adjusted our growth, becoming more selective. As we adjusted the pace of our growth, we also increased our allowance buffer every quarter to our current level of ILS 8 billion, almost 2% of our total credit portfolio. Moving on now to slide 7. Our readiness also reflected in capital liquidity, which enabled the bank to take advantage of growth opportunities as they arise. In capital, we grew our capital buffer while continuing to pay out dividends to our shareholders. Looking ahead, we are well-prepared for a scenario of rising demand for credit. By the fourth quarter, we have reached a Tier 1 capital ratio of 12.2%. This was partly due to the restriction placed by the Bank of Israel on dividends distribution in the preceding quarter. As the war continued, Bank of Israel extended its instruction and limited the distribution for another quarter, the fourth one. Although we are clearly able to pay out dividends in line with our policy and even more. Obviously, our view is that the remaining capital surplus should be distributed to our shareholders, and we are working on that with Bank of Israel. Our liquidity has always been strong, supported by our stable retail deposit base, which accounts to 58% of total deposits, enabling us to present high solid liquidity ratio over the long term, with an LCR of 129%. Slide 8. Our real estate exposure figures speak for themselves, demonstrating that we are primarily focused on residential properties with less exposure to riskier segments. In every category detailed in the slide, you can see that we are focused on projects with high LTV and strong absorption capacity. We show strong underwriting in mortgages too, with an average LTV ratio of 46% only for the portfolio. Taking into account the current balances and the rise in housing prices, the effective LTV is clearly lower. Moving on to slide 9. The power of Bank Hapoalim lies not only in the strong figures we have presented, but also in our activities since the outbreak of the war. Anything this country experienced, Bank Hapoalim experienced too. As a large leading organization, we were instantly aware of our moral responsibility and took action to provide meaningful support to our customers, and actually, to any Israeli citizen in need, right away. This issue is close to my heart, and I'm involved in it personally. I'll mention a few examples of the main measures. The Poalim Rebuild Fund, ILS 100 million allocated by the bank for the restoration of the affected border communities in the south of Israel. It's the largest amount in Israel. We sent emergency aid in the form of donation to medical and rescue organizations and to the groups aiding displaced families in the amount of ILS 10 million. Through this, we raised another ILS 40 million for the similar cause. Benefits for customers. We expanded on the outline provided by the Bank of Israel to include payment exemption and suspension for directly affected customers and other benefits for the general population. In total, the cost of benefits is about ILS 159 million recorded in this quarter and another ILS 59 million to date for the coming quarter. We built a banking support system for the families of our customers who are casualties of the war or hostages, to deliver immediate solution as needed. We also set up a contact center for people injured or harmed by the attack on Israel, opened just a few weeks ago, where we will provide individual care and make sure that at least when it comes to banking, they can have peace of mind. I would like also to mention our employees who participated in a wide range of volunteering efforts. In addition to being excellent professionals, they have shown their strong moral fiber. Finally, I am moving to slide 10. I want to stress that despite the challenging conditions, we have continued implementation of our strategy. Two years ago, we worked with McKinsey to build our four-year strategic plan under the name of Poalim 2026, which primarily focused on the retail banking division this year. We designed the plan to help us adapt our retail banking to what customers want today. In essence, they want digital first and more remote banking, but also to hold on to their option to come into the branch in certain situations. Before we move on to review of the financial results by our CFO, Ram Gev, let me just sum up my comments. The bank is demonstrating strong performance for the quarter as well as for the full year. The interest rate and CPI supported these results, but our performance also achieved thanks to a long-term perspective and decision made by the management in the best interest of the bank, its customer, and of course, its shareholders. I am very proud of this organization, of our results, yes, but also of how we reacted in moment of truth, both to the employees as well as for the customers. Thank you very much for listening. Ram, please go ahead. Thank you, Dov, and good afternoon to you all. I will briefly review the financial results. Bank Hapoalim delivered yet another strong quarter while coping with the consequences of the war. As Dov mentioned earlier, our preparedness and strong position are the key factors for the good financial performance and our ability to support our customers, our employees, and the Israeli society. Moving on now to discuss the financial results of the quarter and the full year. I will start with slide 12. Impressive results, I must say. 14% return on equity for the quarter, 15% for the full year, driven by the positive jaws we are showing. Total income grew 19.3% this year due to rate hikes and the growth in activity. However, the macroeconomic trend changed during the year, and more so in the fourth quarter. Coupled with the costs of benefits and reliefs, this resulted in an increase in fourth-quarter income. Speaking of the operating leverage, alongside the trend in income, discipline in expenses has been maintained this year, bringing the cost-income ratio to a very low level. On growth, we continue to lead responsible credit growth, as the pace was pre-adjusted to the changing environment, allowing us to be even more selective and focused on credit quality and pricing. This approach is well reflected in all credit quality metrics. The NPL ratio is low, below 1%, and we increased the balance of the allowance, which covers 174% of the NPLs. Lastly, we continue to also solidify our capital and liquidity position while creating substantial shareholder value. This quarter, we declared a 20% payout ratio, continuing our consistent dividend distribution. The bank distributed ILS 2.3 billion in respect of 2023 net income, the highest in the industry. The significant capital surplus reflects a potential for higher distribution. However, the bank adjusted the payout ratio this quarter, as it did in the third quarter, in order to meet Bank of Israel guidelines to the banking sector. This guideline from last November, which also applies to the fourth quarter, requires all banks across the sector to re-examine dividend distribution policies in view of the war and the increase in uncertainty. Moving to slide 13. Let's focus on the message of this slide. Each quarter, we are demonstrating strong profitability of mid-double-digit return on equity. This is due to the successful implementation of our strategy and the set of responsible long-term decisions that were made by the leadership of the bank. On slide 14, we present our core income on an annual basis, the key driver of our robust profitability. Income from regular financial activity grew by almost 19%, and the financial margin increased by 32 basis points. On fees, the financing activity also supported the growth in various fields, driving 5% growth year-on-year in total. On slide 15, we take a look on income on a quarterly basis. The vectors affecting income have changed since the third quarter. This includes the pause in Bank of Israel rate hikes, the continued migration of non-interest-bearing deposits to current accounts, although it stabilized at the end of the year, the reduction in the CPI, and the impact of the support we have provided to our customers since the outbreak of the war. The latter amounts to ILS 129 million, which was booked in the non-regular financing activity line. Looking at margins, these were affected by the lower CPI as well as the increase in deposits in the fourth quarter. Fees were also affected by customer benefits of ILS 30 million in the quarter, as well as the temporary decline in economic activity right after the outbreak of the war. Let's move to slide 16 and 17. We grew our credit book by 0.7% this quarter and by 4.8% in 2023 to ILS 407 billion. As Dov mentioned before, we have already aligned our credit growth pace in 2022, and more so in 2023, when we identified the changes in the global economy. The pace of the growth also reflects the impact of macro dynamics and the demand for credit in each segment. Our deposit base, on slide 18, continued to grow, with 58% of total deposits attributed to the retail segment. Accordingly, the LCR and the NSFR are both substantially above regulatory requirements. On costs, in slide 19, total expenses increased year-on-year, mainly due to a one-time expense of approximately ILS 200 million in respect of the wage agreement signed in 2023, and an increase in software depreciation and impairment expenses. Total expenses this quarter decreased 7.9% due to a decline in salary expenses. The lower salary and related expenses are attributed to year-end adjustments of performance-based compensation. The cost-income ratio, both annually and quarterly, remains very low at roughly 38%, and as you can see in slide 20, productivity ratios are improving as well. On slide 21, we present another lever that will have an impact on our costs going forward, but will also bear one-time capital gains and have a positive impact on organizational culture. As you know, we are in the process of building a new headquarters building, Poalim Center. The center is going to be best in class in terms of operational efficiency and of employee experience, and is well located on a primary transportation hub in Tel Aviv. in view of the exciting move to Poalim Center, we will gradually sell our own properties, some of which are currently undergoing a betterment plan and therefore incorporate future value. I'm moving to slide 22. As I mentioned before, following the last few quarters in which we materially increased the collective allowance, we continued doing so in the fourth quarter as well. This was due to the expected economic effect of the war, where the third quarter impact on collective allowance was more material, as it reflected the effect of the outbreak of the war. The fourth quarter provision was also affected by an increase in automatic charges. The individual provision, however, remains very low, below long-term representative levels. in total, credit losses amounted to ILS 453 million, or 0.44% of total credit in the quarter, and 0.46% in 12-month period, equivalent to the ILS 1.9 billion provision we booked in 2023. The next slide shows our resilient asset quality, as well as the buffer covering problematic debt. Total problematic debt increased this year, mainly as a result of an increase in special mention debt balances. There has been also an increase in non-accruing debt, but the NPL ratio remained low at 0.97% of total credit. On the right-hand side, you can see the high reserve amounted to ILS 8 billion, of which ILS 7.1 billion is the collective allowance. The balance sheet reserve covers 174% of the NPLs. The next slide is on capital. The CET1 ratio increased to 12.02%, well above both internal and regulatory minimum requirements. Our solid position derives from strong organic capital generation capabilities, reflected in a 12.7% growth in shareholders' equity this year. in addition to the solid CET1 ratio, both the total capital ratio and the leverage ratio are comfortably above minimum requirements. On dividends, as mentioned before, the bank distributed ILS 2.3 billion in respect of 2023 net income. in the first two quarters, we distributed 40% of net income according to our policy. Since the outbreak of the war, dividend payout was adjusted to 20% due to Bank of Israel guidelines, despite the bank's significant capital surplus. Before we conclude, I'm moving to shortly discuss the macroeconomic environment in slides 25 and 26. The resiliency of the Israeli economy is being reflected by several parameters in recent weeks. As I've mentioned, domestic private consumption is recovering. The formal unemployment rate is stable, and the number of workers who are absent from work has declined. As for the GDP, after falling by an annualized rate of 19.4% in the fourth quarter of 2023, we expect a rebound in the first quarter. However, some sectors of the economy are still suffering from the circumstances, like construction and tourism. This also means that overall activity is still below the potential. It should be noted that the government is compensating employees and businesses affected by the war, and of course, all reservists. It means that in most cases, their income has remained stable. On slide 26, we present additional indicators showing that although the cost of war is high and the budget deficit has increased substantially, Israel entered the war from a very strong position, low public debt, a high private saving rate, and high credibility in global markets. However, while risk premiums in global markets have increased, the shekel actually gained strength, and the local 10-year yield is following the US Treasury. Inflation went down faster than expected, probably with a tailwind from the war. For example, the increase in housing rental prices has slowed. However, we still think inflationary pressures exist and do not foresee a further fall. Things like in the U.S. and Europe, uncertainties remain high. The labor market is tight, and wage pressure still exists. As for the Bank of Israel interest rate, the decrease in inflation to the target zone enabled the Bank of Israel to reduce the interest rate in the beginning of 2024 to a level of 4.5%. The market now implies about three rate cuts till year-end to a level of 3.75%. Before we open the call for your questions, I will summarize the key takeaways in slide 27. Following the initial shock from the war, economic activity is impressively recovering, but there are still several economic challenges ahead. As you all know, there is significant importance to the position in which organizations enter this period. Bank Hapoalim arrived with best-in-sector preparedness, thanks to a good combination of responsible credit growth Capital buffers, ample liquidity, a strong allowance buffer, high underwriting standards, and excellent leadership. The fourth quarter and full-year results reflect continued robust performance, with return on equity of 14% and 15%, respectively. This was mainly derived from the almost 20% jump in total income, while costs grew by 3.2%. This created substantial positive jaws, leading to a low cost-income ratio of 38.5%. We continue to increase the collective allowance, mainly due to expected consequences of the war. The total allowance constitutes 1.92% of credit. Our capital is robust, allowing us to pay dividends while growing the book and strengthening capital ratios. With that, let's open the call for your questions now. Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. Please lift the handset in order to ask the question. The first question is from Chris Reimer of Barclays. Please go ahead. Hi. Thanks for taking my questions, and congratulations on the strong results. First off, just looking ahead a bit, assuming the status quo remains the same for the next few quarters, how should we be looking at loan growth going forward? Any dynamics you could talk about? Chris, hi. Good afternoon. This is Dov speaking. Look, we have experienced two intensive years after the coronavirus. I believe that 2024 will reflect a lower growth rate. Let's not forget that the fourth quarter, the economy in Israel went down by almost 20%, and I assume that this will impact the demand going forward. Our Chief Economist, Victor, his assumption is that the growth rate of the economy will be around +2%. Everything is subject to any future or current development in the north. To sum up, it will be less than previous year, and we expect that the economy will recover, subject to the north. One more item that I should emphasize, if there will be a faster rebound, based on our equity position, Tier 1 12% and total equity of 50%, more than that, we are ready for a larger rebound, and we are ready for any optimistic scenario. On the contrary, we are also ready for any pessimistic scenario, because the allowance reached the level of ILS 8 billion. It was a long answer for a short question. Got it. Yeah, thanks. That's helpful. Also, if I could ask, it's been mentioned in the press and also Ministry of Finance about a special tax on the banks. Your report mentions a special payment. How do you view this playing out? Any color you can give? Excellent question, Chris. It's in the process of the legislation in the Knesset. At the beginning, the tax should have been in the level which is higher to my expectation. There was certain negotiation between us, the banks, and the Ministry of Finance. The understanding, which will be presented to the Knesset next week, is that we will pay on a quarterly basis around 6%. This is a better result than what is expected, and I believe that we should be smart and not wild. Better have a compromise where we know the limit than hoping for either failure or success. The effect on the results going forward, the numbers in the deal speaks about ILS 1.2 billion in 2024 and ILS 1.3 billion in 2025. If you take our market share or our share in this amount, it should be, I would say, in the end of ILS 300 million to ILS 400 million a year. Got it. Thanks. That's great color. Yeah. It's, by the way, just to be accurate, there is a description on page 212. How many pages do you have in the report? Right. Make it short. The next question is from Micha Goldberg of Psagot. Please go ahead. Hi. Congratulations on a strong quarter and excellent year despite challenging times. A couple questions, if I may. First of all, regarding dividends, and you mentioned Bank of Israel guided you to pay out maximum 20%, and I'm just wondering, to the best of your knowledge, does the Bank of Israel have a minimum capital buffer in mind, or is this purely, I don't know, a qualitative or, I don't know, possible kind of guidance? Michal, let me respond to the first question, and then with your permission, we'll move to the second one. The Bank of Israel instructs any bank to a minimum equity position. It's published in the report. Ours is around 10.5, if I'm not wrong. It's published in the report. If you want, I will find the exact page. But each bank has specific Of course, there is a differentiation between the large banks and the small banks. Above that, it's internal decision of each board of director, an additional buffer by each management of each bank. So this is the system, and the decision of the 20 is regardless of that buffer or numbers that I've just mentioned, because as you know, we are able to give dividend to a much higher number. Our dividend policy is around 40%, and our position is that we are able to do so. Of course, we are doing exactly following the instruction of Bank of Israel, which limited us to 20%. Thank you. I actually was referring just to that guidance the Bank of Israel put forward, not to your internal ratios and minimum that the Bank of Israel put forward. Those are clearly stated in your financials. I am just wondering, the fact that the Bank of Israel is guiding the banks to put out no more than 20%, pay out more than 20%, is that based on some buffer their shareholders, they want you to reach at least X amount of capital? Or it is just a blanket kind of guidance, don't pay out more than 20% because it doesn't look good in the press? That's what I am trying to understand. Okay. But what I have explained before will be the same answer. There is no specific guideline as of this date. Okay? The only guidance is the requirements that are presented in the balance sheet and the report. Above that, Rami, you want to say something? Yeah. Micha, if I can add to what Dov said, there is no specific guidance of any buffer that one bank should hold. And the company is very simple. You see that Bank Hapoalim holds actually the highest level of Tier 1 capital ratio, and still the guidelines also relate to Bank Hapoalim. The reason is very simple. The essence of the guidance is the level of uncertainty that Bank of Israel see today during the war, and it says to the banks, "Be more cautious." Obviously, you have buffers, and Bank Hapoalim have a very large buffer and potential dividend distribution higher than that in the future. But it says to the banks, "Take into account the uncertainties and lower your dividend payout ratio as for this period." So, no, let's say they didn't define any, let's say, buffers that they see. Okay, clearly. Thank you very much for that. Another question. I mean, your current excess capital is hurting your return equity by, I don't know, close to 1%. I was wondering, under these guidelines by the Bank of Israel, assuming they won't be lifted in the near future, are there any other ways that you can reduce the excess capital or other ways without paying dividends and increase return equity? Micha, thank you. Obviously, the banks, and you mentioned, have very high buffers above regulatory requirement and internal target as well. The bank is targeting to be effective in capital, so obviously, we want to be back to implementing our policy, which is up to 40%, and considering in the future, obviously, other tools, for example, updating our policy or considering buyback plan. We didn't decide any of that at the moment because of Bank of Israel guidelines. Obviously, everything is off the table. Our ability and the potential is for higher distribution. I am sure, Micha, that Bank of Israel is listening carefully to any note registered by economists or analysts today. Okay. Thank you very much. Two more questions. You mentioned the Poalim 2026 strategic plan. I'm just wondering if there is any guidance in that plan for cost-income ratio. You have successfully reduced your cost-income ratio significantly, and the other such as situation has improved as well. I'm just wondering, is there a target that you think you can achieve? Is there something you can share with us on that? Dear Micha Goldberg, it's a constant question and the same repeated answer. Of course, we have a guideline. Of course, we have ambition. Of course, we are not giving up and we want to win, but it's not published. We are in the same picture. Poalim 2026, which was built by the management of the bank with McKinsey, and marked down 11 large projects, which are being monitored by the chief transformation officer, which is supervised directly by me. One of them, for example, is Arab Avenue Way, the other one is the future branch plan to be implemented in 2026. There is a list of huge, large projects, and the goal of all of them is to lead the right return on equity that we believe will satisfy the investors in general, and specifically you. But again, you will try, and I will try to present the specific numbers. That's very clear. My last question is regarding the integration of H2A. I think you mentioned in the past that it would be completed by year-end. I'm just wondering, will this have any impact on the credit card business and your credit card revenue? Will this allow you to improve profitability, not just at Bit, but also in other areas? Thank you very much. Look, it's an important milestone, and depends how it will be implemented. The second factor is the user interface. How will they materialize or exercise this ability? If there will be a large scale of implementation, certainly there will be effect on both sides. So it's a question of usage of the user interface. I'd say it's too early because we did not see the end product that is being developed these days, and we'll have to wait till year-end to see how good is it. Very clear. Thank you very much. The next question is from Uri Bar of Excellence. Please go ahead. Hi again, and again, congratulations for the outstanding results. Really, really excellent. Just one question about the salary expenses, cost. I see that in last quarter, it was abnormally low, by ILS 100 million, if I compare that to Q3 and Q2. Is this the new level, or is it just adjustment, one-time adjustment, because it's just maybe a larger amount in Q4, sorry, the first quarter? On the optimistic side, I hope with your question, you can get the right answer. What we have done over the year, we have the allowance for paying a bonus based on certain expectation. The results of the war certainly affect, there is an effect. The decrease by ILS 100 million in the fourth quarter is a result of adjustment of the bonus, and it's only for this year, and it's only for this quarter, not for next year. Hopefully, we will succeed, but this is not the answer. For next year, or this year, we expect to have ILS 1.1 billion, something like this? I don't remember the exact numbers, but let's not forget, it's ILS 1.1 billion you said, or shekel? No, shekel. No, no, shekel, no, you're mistaken. We have a salary of expense- This quarter, sorry, by quarter. Oh, okay, okay. That's why I changed to dollar. Yes, the numbers I would say, look, we have signed an agreement with the employees at the beginning of 2023, and I believe that we have reported that the tax and the expenses with an increase of about 3%. I'm not sure if it was 25 average. Average. Okay. I believe this pace will continue going forward, and this is the assumption that I would take going forward, unless- 3% over 2022. Average, it's not the fourth quarter specifically, the total of 2023. In one condition, on one correction, we have plans to be more efficient, which we did not expose, and this will cut part of the increase. Yeah. Thank you very much. Thank you. The next question is from Valentina Stoykova of Barclays Capital. Please go ahead. Yes, thanks. Thanks a lot for the presentation, and congratulations on the good results. Perhaps I'm the fourth person that's congratulating you today, but really strong results. My question is on the sensitivities of your capital ratios. How do you see these sensitivities, especially in the context of potential deterioration in asset quality of your deferred loans? And how much of your excess capital do you see at risk here? And also, what's the difficulty with the potential for the downgrade of the sovereign rating insurance? And lastly, we've seen the sovereign coming out with bond issuance, so it would be very helpful if you give us an update on your bond issuance plan. Valentina, these are three separate complex questions. Let me first have the second one, which is the easiest one. We are not rated by Moody's, so we are not affected. We are following the rating of S&P. So far, they did not downgrade their rating. If they will do so, it is published in the report that the effect on the equity ratio is 0.24%. This is going to your second question. Okay? The first question, look, we are trying to manage the credit portfolio on a conservative basis, and I believe that the quality is strong or solid enough, on one hand, and on the other hand, the reserves, the allowances are up to ILS 8 billion, 1.92% of our loan portfolio, which is a record high. I don't think that we will see a substantial increase going forward, because I do believe that we have sufficient allowance that will not reduce the capital that we have presented so far. I hope I answered your first question, because I am not sure that I followed it properly. Yeah. It is Valentina. If I can add to what Dov said clearly, first, our position is very good in our loan book, and the loan book has very positive elements. Nevertheless, we provided very conservative, and the allowance is reaching ILS 8 billion, like Dov mentioned. The majority, about 90% of it, are collective allowance. The collective allowance is calculated or based on the CECL methodology, which is relatively conservative. While doing the CECL calculation, we are taking different scenarios. We are taking into account even more pessimistic scenarios or a combination of scenarios. So, in case of a very pessimistic scenario, that you can see that in table 3-3, we disclosed that if we would have taken only the pessimistic scenario, then the additional provision would have been ILS 0.74 billion. So it implies that our current provision is very conservative, mainly compared to our very high underwriting standards and the quality of the loan book. Thank you. That was very clear. On my last question regarding transition plan. Valentina, could you elaborate on the question? I did not understand the question, please. Just bond issuance plan at the moment. If you look at our figures, you can see that our liquidity, both LCR and NSFR, are in very good numbers, about 129%. Another element, our broad-based retail deposit base enable us to be very flexible in liquidity. We are now in a very good liquidity that enable us to cope with different scenarios, execute our growth plan, and maintain all the regulatory requirements. As for the moment, our liquidity base is sufficient for our needs this year. Obviously, if we face a very optimistic or good scenario of a rebound, we have enough liquidity to serve that. But obviously, in a very good scenario, let's say, or sharp rebound, we have the ability to address capital markets, but it is not the current situation. Thank you. That is very clear. Thanks a lot. If there are any additional questions, please press star one. If you want to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. This concludes the Bank Hapoalim fourth quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.