Good morning, everyone. I hope everyone's keeping well. I'm joined this morning by Enver, our CFO. Let's start with the summary of the Q3 results on slide three. We delivered net profit of EUR 123 million, earnings per share of EUR 1.38, and a return on tangible common equity of 16.4% during the third quarter. The underlying operating performance of our business was strong, with pre-provision profits of EUR 187 million and a cost income ratio of 39.2%. Total risk costs were at EUR 22 million, with the ECL management overlay now at EUR 72 million. We continue to not release any credit reserves, although we see a substantially improved macroeconomic environment and continued positive developments across our customer base. In particular, observing payment holidays falling to approximately 10 basis points across our total customer business.
In terms of customer loan growth and capital, average customer loans were up 4% QoQ and up 7% YoY. We continue to accrete CET1 capital, generating 60 basis points of gross capital during the quarter. Our CET1 ratio was 14.7%, up 70 basis points from year-end 2020 after all dividend deductions. As of the third quarter, after deducting year-to-date 2021 dividend commitments of EUR 158 million, we have additional excess capital of EUR 500 million above our target CET1 ratio of 12.25%.
In terms of dividend distributions, we paid our earmarked dividend of EUR 420 million from 2019 and 2020 profits in early October, which is really following through on our commitment to distribute dividends post the ECB recommended dividend ban, which was lifted at the end of September. We are on track to deliver on our 2021 targets with a return on tangible common equity of approximately 15% and a cost income ratio of approximately 40% for the full year. On the M&A front, we expect the closing of both Hello bank! Austria and DEPFA BANK plc, both signed earlier this year to take place during the fourth quarter. We recently held our Investor Day in September, where we shared our new targets and four-year plan through 2025.
We updated our medium-term targets to a return on tangible common equity greater than 17% and a cost income ratio under 38%. Our 2025 financial targets aim for profit before tax of greater than EUR 750 million, earnings per share of greater than EUR 7.25, and a dividend per share of greater than EUR 4. We also committed to a set of ESG targets for the first time by 2025, targeting a reduction of our own Scope 1 and 2 CO2 emissions of over 50% from a baseline of around 2,900 tons in 2020. We committed to annual new business green financing of over EUR 1.6 billion, which is 2x from where we stand today.
We also established a female gender quota of 33% for both the supervisory board as well as the senior leadership team. With the newly approved members of the supervisory board following our AGM in September, we stand today at a woman quota of 44% on the supervisory board level. In terms of capital distribution policy, we target a dividend payout of 50% of net profit for the financial year of 2021 and will increase the dividend payout ratio from 50% to 55% starting from financial year 2022, resulting in a targeted dividend distribution of approximately EUR 1.4 billion for the financial years 2021 through 2025.
In line with our capital management framework to distribute excess capital to our shareholders, we're also targeting a share buyback in 2022 in an amount above our CET1 target of 12.25%, which as of the third quarter of 2021 equaled up to EUR 500 million. We plan to file the formal regulatory application in the coming days. The past 18 months have been incredibly challenging and not without adversity, testing our collective patience and resolve. However, the COVID-19 pandemic truly highlighted the quality, resilience, and sustainability of our franchise. With everything we've gone through, the team is more excited than ever to address the many opportunities ahead of us and committed to delivering on our future plans. Okay, moving on to slide four.
We delivered net profit of EUR 123 million, up 57% versus prior year. Overall strong operating performance with operating income of EUR 307 million and total expenses of EUR 120 million, up 6% and down 4% respectively versus prior year. Total pre-provision profits were EUR 187 million, up 13% versus prior year. Risk costs were EUR 22 million, down 57% versus prior year in reflecting the normalization of risk costs. Tangible book value per share was EUR 34.43, up 5% versus prior year and 3% versus prior quarter. This reflects the recent dividend payment of EUR 420 million from 2019 and 2020 profits, as well as the year-to-date 2021 dividend accrual of EUR 158 million. Moving on to slide five.
At the end of the Q3 , our CET1 ratio was 14.7%. For the quarter, we generated 60 basis points of gross capital as we continue to consistently generate significant amounts of capital, averaging around 210 basis points annual gross capital generation over the past four years. As of the Q3 , and after deducting year-to-date 2021 dividend accrual of EUR 158 million, we have excess capital of EUR 500 million versus our target CET1 ratio of 12.25% and stand at 558 basis point buffer to our SREP of 9.14%. We are targeting a share buyback in 2022 in an amount above our CET1 target of 12.25% subject to regulatory approvals.
On slide six, our retail and SME business delivered net profit of EUR 95 million, up 21% versus the prior year, and generating a very strong return on tangible common equity of 28% and a cost income ratio of 38%. Average assets for the quarter were EUR 20.6 billion, up 9% versus prior year, and 3% versus prior quarter, driven by continued growth in housing loans and a pickup in consumer loans. Average customer deposits were EUR 26.8 billion, up 10% versus prior year, and 3% versus prior quarter. Pre-provision profits were EUR 143 million, up 8% compared to the prior year, with operating income up 4% as we begin to see a gradual normalization of customer activity.
Overall operating expenses were down 3% versus prior year, resulting from a number of operational initiatives and a continued focus on driving synergies across the franchise. Risk costs were EUR 15 million, down 43% versus prior year, reflecting a gradual normalization of risk costs without any credit reserve releases. The trend in asset quality continues to improve across our customer base, with payment holidays below 20 basis points as of the end of the Q3 . Our customer payment rate continues to be around 90% on all expired deferrals with an average of 12 months. We've continued to execute on various operational and strategic initiatives. We expect to see continued average asset growth and efficiency gains across the retail and SME franchise. The shift to greater percentage of secured housing loans and greater normalization of customer activity in the quarters ahead.
On slide seven, our corporates, real estate, and public sector business delivered net profit of EUR 40 million, up 105% versus prior year, and generating a strong return on tangible common equity of approximately 18% and a cost income ratio of approximately 22%. Average assets for the quarter were EUR 14.1 billion , up 3% versus prior year and 5% versus prior quarter, driven primarily by real estate and corporate lending. Pre-provision profits were EUR 61 million, up 27% compared to the prior year. Risk costs were EUR 6 million, down 72% compared to prior year, reflecting positive developments across our customer base with no reserve releases taken as well.
The trend in asset quality continues to improve with payment holidays under 10 basis points and 100% paying ratio for customers that took up payment holidays over the last year. We've been pleasantly surprised with how our customers have responded and the overall credit performance of the business. We continue to see solid and diversified lending opportunities as well as a greater normalization of customer activity. We will continue to maintain our disciplined underwriting, focus on risk-adjusted returns, and avoid blindly chasing volume growth. With that, I will hand over to Enver Siručić.
Thank you, Anas. I will continue on slide 9. Overall, a strong third quarter. Core revenues up 1% for the second quarter, with both better net interest income and net commission income. Compared to prior year, core revenues were actually up 3%. Operating expenses further came down as well as risk costs without releasing any treasury reserves. Net profit up 3% versus Q2 and 57% versus prior year. On slide 10, an overview of our balance sheet. In terms of customer loan growth, average customer loans were up 4% quarter-over-quarter and year to date, with asset growth across our customer segments while we reduced our cash position by more than EUR 1 billion in the Q3 , but are still up 10% year to date.
We believe that being patient at the current interest and spread levels will provide an interesting opportunity in the future to deploy our excess cash. On the funding side, we continue to improving our long-term funding profile through issuing the next EUR 500 million covered bond, first time in a green format. On slide 11, core revenues. Net interest income up 1% versus Q2 with a slightly lower net interest margin of 224 basis points, largely driven by asset mix. We continue to see a positive trend in NI for the coming quarters, which is coming from continued asset growth. In terms of net commission income, positive trend continues, up 2% for the Q2 . We observed a continued overall improvement, especially with stronger advisor business and improving payments business. For the full year, expectations are unchanged.
We still see core revenues growing by at least 2%. With that, moving on to slide 12. No changes here as well. Operating expenses further coming down. Cost income ratio was at 39.2% for the quarter. Absolute costs came in at EUR 120 million. For the full year, we expect to be below EUR 485 million absolute costs and to be around 40% cost income ratio. Slide 13, risk costs. In general, unchanged conservative prudent approach on provisioning with improving underlying trends and a strong asset quality performance. In Q3, we booked 22 million of risk costs, mainly driven by normal run rate in retail and SME of approximately EUR 15 million. Overall, we have not released any credit reserves and the ECL management overlay now stands at EUR 72 million versus EUR 38 million as of year-end.
We have no plans to release any reserves this year and expect risk costs to come in below EUR 100 million for the full year. Slide 14 provides more details on reserves. Overall reserves increased by 8% versus year-end, resulting in a total reserve ratio of 1.4% and a cash coverage ratio of 49%. Excluding City of Linz, which was fully provisioned through a capital prudential filter last year, total ECL reserves now stand at EUR 148 million, up 13% versus year-end, of which almost 50% or EUR 72 million is comprised of management overlay reserves. Stage two assets are approaching pre-pandemic levels, while NPL ratio remains stable at 1.5%, considering that we have not executed any routine retail NPL sales since Q2 last year.
Overall, we see both an improved overall macro environment and continued positive development across our customer base and asset quality. To wrap up, on slide 15, unchanged 2021 forecast since our Investor Day, 15% ROTCE and around 40% cost income ratio. In detail, this is based on core revenues growing by at least 2%, while we expect other income to be at around EUR 10 million for a full year. Operating expenses to be below EUR 485 million, risk costs to come in below EUR 100 million and regulatory charges to land at EUR 65 million for a full year, of which we have taken EUR 61 million year to date. In terms of full year timeline, we plan to publish our financials on March 1 and to host our AGM on March 28 of next year.
With that, operator, let's open up the call for questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, you can press the hash key. Once again, please press star one if you wish to ask a question. Your first question comes from the line of Isabelle Dobrova. Your line is now open. You may ask your question.
Hello, good morning. Thank you very much for taking my questions. I had three questions, and actually they're all on the business outlook and net interest income. Firstly, I wanted to ask you a question on corporate volumes. If I look at the asset development this quarter, the assets in the corporate and the real estate segment were up quite substantially, about 15% QoQ. In your comments, you have highlighted the strong pipeline too. I wanted to ask you how much of that volume is pent-up demand from the pandemic, and would you expect this trend of volumes getting an extra boost to continue also into 2022, or by then you think that it will be more driven by the underlying demand? That's my first question. My second question is on the consumer segment.
If I look at the loan growth there, it was up 3%, and I think that's the fastest growth we have seen since pre-pandemic. What are you seeing when it comes to consumer patience, and is the demand back to the pre-COVID level? My final question is actually on the treasury business. I saw that you have given us a new disclosure on the book split, which is very useful. In there, it looks like the cash portion currently is very high, about 70% of that book, whereas historically it's been much lower. I know some is still TLTRO, but still on my numbers, it looks like there is at least EUR 15 million of NII, which could be a tailwind if you were to normalize that cash position.
My question is, how are you thinking about the timing of deploying that excess cash now that the five-year swap rate is materially higher and, you know, actually close to breaking positive? Those are the three questions I had.
Thanks, Isabelle. This is Anas. Hope you're doing well. I'll go ahead and take the first two questions. Just, Isabelle, on your question, the real estate and corporate outlook, that was twofold. That's pent-up demand because you had a slowdown in 2020 where I think people were on the sidelines, at least the number of customers that we had worked with, and things were quite static. That's one explanation. The other explanation, at least when you look at the quarter-over-quarter growth rates, is that you have a number of commitments and sometimes the funding gets delayed. That, I think, is a bigger explanation for some of the growth rates. I think you're more focused on what is the long-term outlook. As far as kind of the growth, we've always assumed things.
We don't put volume targets on the corporates, real estate, and public sector. If there's great deals, we have capital and liquidity to pursue those deals. We're gonna be disciplined in terms of our underwriting. I think a lot of this was pent up, or a pipeline that we had built up over the past few quarters, and you start to see that pipeline executed on in the Q3 and hopefully in the Q4 . We'll give outlook going into 2022 based on what the pipeline looks like at the end of the year. As far as consumer loans, I think it's twofold. It's a resumption of customer activity, which we highlighted during the course of this year. We're seeing more of a normalization.
Just the number of initiatives that we have on the consumer loan front in terms of partnerships and the like, and that's why you're seeing the drive, the growth rates in consumer and SME. I'll turn over to Enver for the treasury questions. Thank you.
Sure. Isabelle, on the treasury side, I think the question was around the excess cash. You're right. If you look at the numbers, it came down a bit versus June, but we still have a lot of excess cash. Obviously, we'll try to redeploy it into customer loans, which worked out well in Q3. I think it's not gonna happen overnight. It will just take time to deploy it. If you just take out, as you pointed out, the TLTRO cash out of the position, you're gonna land with EUR 5 to 6 billion, of which we would try to deploy as much as possible with customer loans. You mentioned the rate situation.
Obviously, it's helpful that, you know, the five-year and also the 10-year rates moved up a bit, but still, it's to be seen how long this will last and, you know, if you see further increases in the future. We really see it as just more potential for us. Although it's now obviously a negative carry on our balance sheet.
Thank you very much.
Thank you. We will now be taking our next question that comes from the line of Máté Nemes. Your line is now open. You may ask your question.
Yes, thank you very much for the presentation. I have two questions, please. First of all, on net commission income. Clearly we are seeing a good development sequentially there. Could you just give us a bit more color on what's been driving this? I think you mentioned the securitization trends, but you also alluded to the fact that some areas are still showing some sort of subdued activity. What would be these areas and when would you expect improvement here? Secondly, clearly volume growth was outpacing RWA growth. Could you give us some explanation around this? It seems like there's been a bit of a de-risking in treasury, but interested in your views on why the divergence.
Thank you.
Thanks, Máté. Do you want to take the questions?
Sure. On the net commission income, I think it's just continuation of what we have seen so far. Advisory is really doing quite well, so in terms of insurance and as well as securities. We see also, you know, pickup in payments. That's still a bit below the pre-pandemic levels. It is probably has caught up most of the gap that we had during the pandemic. The main driver is really the advisory business. On the RWA growth or development in Q3, if you look across the segments, retail was quite stable despite the asset growth. The reason for that is just on the new business that we are doing, it's more mortgages and lower risk weight.
Whereas the, you know, redemptions runoff, especially the portfolios that we have bought a few years ago, carry a high risk weight, which pretty much finance all our new business in retail. On corporates real estate public sector, that was just in line with asset growth. RWAs just went up as assets went up. The offset was through treasury services and then corporate center. As you pointed out rightly, it's just de-risking and, you know, we shifted some assets in the treasury book that, you know, provided the offset for the growth that we had in corporates and real estates.
Thank you. Very clear.
Thank you. Your next question comes from the line of Gábor Kemény. Your line is now open. You may ask your question.
Oh, hi. Firstly, just a follow-up on the capital build. We've seen a combination of pretty solid loan growth and no meaningful RWA growth for the reasons Enver just mentioned. Do you think there is room to continue this trend in the next few quarters? Secondly, on the capital distribution. Just a clarification on the possible size of the buyback. When you will talk to the ECB in the next few weeks about the possible buyback, the basis of the excess capital would it be the last reported like the Q3 figure, which would be the basis for the possible size of the share buyback discussion?
Just lastly, the full year core revenue of 2% growth, I think it implies roughly flattening core revenues in the last quarter of the year. Can you elaborate a bit on why you would expect a change in the trend we have seen in the last few quarters of gradual growth? Thank you.
Thank you, Gabor.
Thanks, Gabor. Go ahead.
I think on the capital side, you know, this quarter, we managed kind of to balance the RWAs overall. You know, with increasing asset growth that we expect for the rest of the year, but also for the out years, you would expect also that, you know, RWAs will move in line with the asset growth. I don't think it's realistic to assume that RWAs will stay flat, with continued asset growth. You know, in terms of size of the buyback, what we said, we obviously didn't disclose, you know, the number, but we try to give as much, you know, kind of guidance or to give you some idea of the size, the technical question around is it based on third quarter or any other date.
The idea was that we, you know, start with final Q3 numbers. That's why, as Anas said, we'll file the application next couple of days because it will be based on the reported numbers as of today. What you then have to take into consideration is not just Q3, but also the outlook, right? For full year next year, the asset growth, the RWA growth. It's a mix of starting point Q3, but also you have to lay out the development of the future when you define the size. It will be in the context of being above, you know, 12.25% or slightly above that. In terms of core revenue growth, look, I think the 2% number is just very conservative.
In reality, I think the expectation is, it will just continue as what we have seen, so far year to date. If you just extrapolate that, in reality, the number is gonna be, you know, bigger than 3% in terms of core revenue growth.
That's very helpful. Thank you.
Thank you. Your next question comes from the line of Isabelle Dobrova. Your line is now open.
Oh, thank you. Yes. I wanted to ask a follow-up question if everybody else has already asked theirs. I just had a small one, which is technical on the buyback. I wanted to clarify, do you have a preference as to how you conduct this buyback? Meaning, do you have a preference that you do it in the open market, or would you be open to participating in a placing if the opportunity was to present itself?
Isabelle, we have not, you know, made a final decision, but I think as we laid out at Investor Day, our preference right now would to do an open market buyback in very likely in a safe harbor format.
Thank you.
Welcome.
Thank you. No further question that came through, sir. Please continue.