Hello, welcome to the full year preliminary results 2022 conference call for Erste Group. My name is Priscilla, and I'll be your coordinator for today's event. Please note this call is being recorded, and your lines will be on listen-only mode. If you require assistance at any point, please press star zero. I will now hand you over to your host, Mr. Thomas Sommerauer. To begin today's conference, please go ahead, sir.
Thank you, Priscilla, good morning to everybody from sunny Vienna. Today's conference call will be, as usual, hosted by Willibald Cernko, Chief Executive Officer of Erste Group, Stefan Dörfler, CFO of Erste Group, and Alexandra Habeler-Drabek, Chief Risk Officer of Erste Group. They will lead you through a brief presentation highlighting the achievements of the past year and of the past quarter in particular, after which they are ready to take your questions. With this, I would like to highlight the disclaimer on page two in relation to forward-looking statements, I hand over to Willi now.
Thank you, Thomas. Ladies and gentlemen, I also warmly welcome you to this conference call. In this call, I will present to you a set of financials that not many would have expected one year ago, including ourselves, I have to admit. I'm also very pleased that we can fully confirm our robust financial outlook for 2023 that we first published this November. Before assessing the prospects for 2023 in more detail, let's go to slide four and have a quick look at the full year performance and at Q4 in particular. 2022 was all about revenue momentum, successful cost containment, positive operating jaws, and low risk costs. The good news is that Q4 was not different despite this quarter being affected by some significant negative one-time items.
The key growth driver throughout the year was NII, rising almost 20% compared to 2021, supported by rate normalization and higher-than-expected loan growth. Despite the challenging environment, fees were also strong, growing more than 6%. One remark, one easily forgets that this on top of the 17% fee growth that we achieved in 2021, making the 2022 performance even more impressive. A very favorable core revenue picture. Operating expenses were well under control. Risk costs were primarily driven by portfolio provisions rather than actual defaults, and hence remained well within our guidance. If you add all of this up, it makes for an excellent bottom line, which exceeded the EUR 2 billion mark for the first time ever.
As a result of this strong performance, I've already moved to slide five, we were able to deliver on all our promises we gave to you last quarter. Unsurprisingly, all financial indicators point in the right direction. The Net Interest Margin is going on a rising trend, we see no reason for this trend to change in 2023. At 53.4% for the full year, we have comfortably outperformed our upgraded 2022 cost-income ratio target of 55%. What's more, we are confident that the trend of positive operating jaws will stay with us in the current year as well.
The provisioning ratio of 15 basis points will stay well within our guidance of 20 basis points, and Return on Tangible Equity of 13.8% for 2022 was fully in line with our guidance despite the number of negative one-time items in Q4, as already mentioned. The development of our balance sheet, as shown on page six, was equally impressive. Impressive because we enjoyed quality growth, fundamentally driven by core customer business. On the asset side, we added almost EUR 22 billion worth of customer loans. While corporate volume growth was clearly in the lead for most of the year, the retail business exhibited even and steady growth throughout the year. The development on the liability side was pretty much mirroring the asset side. Customer deposits were the key growth driver.
The fact that Q4 deposits dipped somewhat does not worry me at all, for our core retail and SME deposits, which make up approximately 85% of our deposit base, continued to show a remarkable level of resilience and actually grew throughout the year. Based on what I have just said about our balance sheet development, our strong balance sheet indicators, as detailed on slide seven, should come as no surprise. Our loan-to-deposit ratio was at a very healthy 90% at year-end. The increase of a couple of points in Q4 reflect some outflows in the volatile portion of our deposits. As already explained. Takes nothing away from our superior deposit mix. That is a clear competitive advantage for us. Loan growth comfortably beat our 10% target, and asset quality remained remarkably strong. In fact, the NPL ratio again came in at 2%.
This continues to be a post-IPO best. Capital ratios were comfortably above our targets, as were liquidity ratios and the leverage ratio at traditional strengths of our bank. I think it is fair to say that the quality of our financials speak for itself. This has led us to the conclusion that the quality upgrade is also due in respect of our capital return policy. For years, we have been a reliable dividend payer. We will continue paying out 40%-50% of net profit going forward. On top of that, we now target buying back shares. The current plan is for an amount of up to EUR 300 million in 2023, subject to regulatory approval, of course. Stefan will give you more details later in his presentation. Let's now move. Sorry.
Let's now move to my favorite part of the presentation, the business update starting on page nine. Hence I find it extremely valuable to talk to clients and observe retail customers' behavior. Before sharing some key micro insights with you, let's have a look at what the economists tell us about the macro future. To cut a long story short, the predictions were fairly similar to when we reported the last time in November 2022. That's not bad news at all because it means that our region is able to avoid recession. The expectation is for an economic slowdown, yes, but also for easing inflationary pressures and for very resilient labor markets. External balances are predicted to improve, primarily driven by lower energy prices and currency appreciation, while budget deficit should also shrink across the board.
Last but not least, public debt is expected to remain at sustainable levels. You might remember that last time around I concluded by saying that we see the glass rather half full than half empty, actually this statement still stands. If anything, the glass is maybe more than half full today, if you will. With this, I move to slide 10. If I had to summarize our retail performance, I'm pretty happy with it, despite the many challenges that our customers are facing, ranging from inflation to the economic slowdown, from rising interest rates to all of the stock markets. What makes the key difference here is that our customers all have jobs, this explain why consumer and housing loans have risen both year-on-year as well as quarter-on-quarter, even though new business volumes are unsurprisingly down.
Unsurprisingly because if we compare new business volumes with the second half of 2021, we are talking about the period that still predates the Eurozone rate hike cycle. Add to that it simply takes some time for customers to adjust to the new rates reality. Of course, regulatory interventions do not help either, even though we see some relief coming through in Austria as we speak. On the deposit side, we have started passing on higher rates to our retail customers by offering term and savings deposits, but customers are generally slow to shift their money around. On the investment side, clients warmed again to opening new securities savings plan in Q4 after a couple of quarters of declining new sales. Here as well, we see a constant increase in the stock of savings plans.
Continuing with the retail topic on slide 11, you can see that our digital platform, George, is also doing well. We added 300,000 new users to George over the past quarter, taking the total value of almost 9 million. Don't forget, this is a uniform platform across six different markets, enabling us to scale easily. Another trend that is an ongoing one is that clients forge ahead with doing their banking digitally. This is evidenced by the share of digital sales as of total product sales, which now stands solidly above 30% and will only rise from here.
Having said this, we continue to be fully committed to our hybrid banking model that aims to merge the best of both world, providing physical contact points for those clients who prefer or need this, but at the same time, make it easy for clients to do an increasing part of their daily banking digitally. Moving to the corporate business on page 12, it is evident from the numbers that this segment shows growing 18% year-on-year was definitely the key volume growth driver throughout 2022. This development was primarily driven by working capital financings. While the large corporate business has taken a breather in Q4, all other segments, such as SME and real estate, continued to show a healthy demand.
The strong corporate performance is very much reflected by the feedback we get from our customers that is all about expanding their operations, finding new employees, and successfully tackling the challenges posed by the evolving geopolitical situation. Let me also spend a minute or two on our markets business. The colleagues were very successful in helping clients raise their necessary funds in a volatile market environment. In total, we talk about 191 transactions that were executed, including green own issuances by our C subsidiaries. Over to our asset management business. Assets under management are also recovered somewhat towards the end of the year, while green assets amounted to almost a quarter of total assets under management by the end of 2022. Overall, we continue to view asset management as a key structural growth opportunity going forward across all our markets.
With this, I hand over to Stefan for the operating trends. Stefan, please.
Thank you very much, Willi. Good morning, everybody. As Willi already talked about, loan growth patterns of our main business lines, retail and corporate, I will approach the topic of volume growth from a geographic angle, and with that, we are on page 14. Two statements this time from my end on loan growth. First of all, there was not a single country that has not enjoyed solid loan growth throughout the year, so growth was really well-diversified and broad-based. Secondly, a consolidated growth rate north of 12% is truly exceptional, and frankly, one has to go very far back in history to find anything comparable. Taking into account the somewhat brighter economic outlook, we are confident to deliver on our loan growth guidance of 5% also in the year 2023. Let's turn to page 15 and deposit volumes.
When we look at retail and SME deposits, the impact of inflation as well as the fallout, the fade out, I would say, of the pandemic are becoming more visible. In other words, while core deposits were still slightly up year-on-year, quarter-on-quarter, we actually saw a sideways movement, so core deposit inflows are definitely slowing. Total deposits being down a bit in Q4 2022, and Willi already mentioned it, is however entirely due to the usual volatility of public sector and financial institutions deposits towards year-end. When taking a step back and looking at our overall deposit mix, I think there are not many banks that are better positioned in the current rate cycle. Roughly 70% of our deposits are retail deposits, and of those, approximately 60% are sight deposits.
Just to put the last figure in context and to understand the speed of dynamics, one year ago, this figure stood at 62%. I'll talk about deposit betas in the context of the big picture on NII, and if you please could follow me to slide 16. Combined with the strong volume momentum, the vigorous start to the Eurozone rate cycle last July, as well as rate hikes in C and significantly higher sovereign yields, drove the NII development of almost 20% year-on-year. The growth clip in the final quarter of the year would have been even more significant had the ECB not changed the terms and conditions of the TLTRO program, which led to a negative one-time effect of more than EUR 120 million.
This has primarily affected Austrian, Slovak, and the other segment. That explains the somewhat unusual-looking moves in these segments on a quarter-to-quarter comparison. With taking these hits immediately, we are now able to book all further TLTRO income for the remaining tranches until maturity at the effective interest rate of 67 basis points. Just to manage expectations here, almost EUR 9 billion of our remaining position of EUR 15 or so, EUR 15.5 billion, I think it's exactly, will mature in Q2 and Q3 2023. Returning to the topic of deposit betas, it clearly makes little sense to talk about one number or just one trend here. Differences between retail and corporate, countries and currencies, interest rate levels, and in particular, also curve shapes, are very significant, especially at the moment.
However, it's fair to say that we are in a very comfortable position of possessing a superior deposit mix that is heavy on euro-based retail current account deposits. Here, you will see deposit betas, but low ones, simply because the float on the current accounts is almost a given. That does not mean that customers do not switch excess liquidity from current accounts to savings or term deposits, as we have just seen last year and continuing 2023 happening in the Czech Republic, but it's a slow process, and there is limits to this. Whether eventual retail deposit betas will be 20%, 30% , 40%. We are, to be fair here, nowhere close to these levels yet. I really can't tell you right now, but that's the ballpark that seems realistic.
If putting the full picture together, I can say that we are positive, very positive on NII for 2023, and hence confident about our guidance of about 10% NII growth. However, 2023 NII growth will not be about Czech NII, but Euro area-driven, as 60% of our NII is tied directly to Euro rates. Let's move on to page 17. We have decided, as you can see from the slide, to show fee income in more detail given its enormous strategic importance. Fees made a strong contribution to revenue growth in 2022, growing by 6.5%. This is all the more remarkable as it follows the strong performance of 2021, when fees grew by 17%.
To talk about a couple of details, payment services and lending business were the key growth drivers, supported by the better-than-expected economic performance and very strong loan growth. It is not really surprising that asset management and securities, the drivers in 2020 and 2021, were lagging in 2022 due to volatile and mostly bearish financial markets. Despite this, we managed to post a new quarterly fee record in Q4 of approximately EUR 622 million, supported by the strong lending and assurance brokerage fees. One thing is for sure, we delivered our fee target of EUR 2.4 billion originally set for 2024, two years early. We continue to see significant growth opportunities across this fee spectrum, primarily in asset management, given the significant wealth catch-up across our region, combined with still low penetration rates in this business.
Insurance brokerage, building our exclusive partnership with Vienna Insurance Group is another such opportunity. Having talked about our core revenue streams, let's have a look at costs on page 18. I think we did reasonably well here with costs growing 6.2% for the full year. Bearing in mind that we are operating in countries with tight labor markets and quite elevated inflation rates. We could not escape the general inflationary trend, leading primarily to cost updrift across the entire range of other administrative expenses, just like IT, office expenses in the broadest sense, but also marketing and deposit insurance contribution have been remarkably rising. In the final quarter of the year, we saw the usual quarter-on-quarter seasonality with other admin expenses, especially in the form of higher marketing spend, once again being in the driving seat.
Plus bonus accruals for our personal cost line. On a year-on-year basis, Q4 2022 looks pretty good, being up only 2.4%. A kind of warning here, this was somewhat helped by a partial refund of deposit insurance contribution in Hungary. Certainly the inflationary trends are still very strong. Moving on through 2023, it remains to be seen when and how significantly inflation will ultimately drop. Delivering on operating jaws is our main goal, which brings me to page 19, discussing cost-income ratios and operating jaws. If we put all operating items together, we get to a quarterly operating result of more than EUR 1.1 billion. That's a new quarterly record. Quarter-on-quarter, this was primarily driven by return of our trading and fair value results.
You remember they were quite weak in the quarters before. We expect this run rate to be around the average again in 2023. Interest rates started to stabilize in some key markets, that should help on that income line. The full year performance was equally strong. We posted an operating result of almost EUR 4 billion for all the reasons we have already talked about. With this, we significantly outperformed even our upgraded cost-income ratio. Willi mentioned that in his introductory remarks. I want to indicate strongly that we are expecting and targeting operating jaws again in 2023. Plus, we are confirming our cost-income ratio target of 52% for 2024. With this, I hand over to Alexandra to update you on the excellent risk results.
Thank you, Stefan. A very good morning, ladies and gentlemen. I can continue on page 20. As has already been highlighted by Willi Cernko, the risk trends were also quite similar in Q4 compared to the earlier quarters of 2022. What exactly did we do in terms of risk costs in Q4? Firstly, we ran another update of our forward-looking indicators, which led to additional allocation of about EUR 100 million. Secondly, we also created some additional portfolio overlays, but this was partly offset by releasing our last remaining COVID provision. Finally, we booked provisions for some minor default cases, especially in Austria, which explains the somewhat higher-than-usual charges in the other Erste Bank Oesterreich and other Austria segments. We don't see any negative trend here, so no cause for concern.
All in all, for the full year, we came in 15 basis points and 28 basis points for the quarter. With this, with the 15 basis points for the full year, we remain comfortably within our guidance of maximum 20 basis points, which we consider not a bad performance, bearing in mind the challenging environment that we had to cope with also throughout 2022. We are also looking ahead with confidence because the credit risk performance of our portfolio remains strong across the board, so no changes from what we are seeing on the ground. There is a high level of resilience, not just on the part of corporates, but also in the retail business, and this is true for all our geographies. Add to this our continuous buildup of portfolio provisions, portfolio overlays, and FLI provisions, they now account for more than EUR 900 million.
You will not be surprised that we can fully confirm our risk cost guidance of maximum 35 basis points for 2023. Let me guide you to page 21, asset quality. As far as asset quality is concerned, it's pretty much a mirror image of what I already said on risk costs. As a result, the NPL ratio was unchanged quarter on quarter at 2%. Year on year, we actually saw quite a healthy improvement of 40 basis points. Coverage levels remained more than adequate across all segments. When you analyze IFRS 9 Stage migration trends, it is important to bear in mind that the elevated Stage 2 level is a direct result of portfolio overlays and FLI updates and not connected to actual portfolio deterioration.
All in all, the credit risk situation is promising, and we feel very well prepared for the challenges that 2023 has in store for us. With this, I hand back to Stefan.
Thanks, Alexandra. A few words only from my end on the development of other results, we are moving on to page 22. It becomes pretty much evident from the left-hand chart that the main drivers in Q4 2022 were one-off items related to Romania. On the one hand, we provided for an asset held for sale, on the other hand, we booked some additional provisions for legal risks related to the Romanian Building Society, in total, approximately EUR 70 million. However, if you look at the full year, we also benefited from some legal provision releases of about EUR 55 million in Romania in Q2 2022. From this perspective, it's almost a wash.
As this is all there is to say about the other result, we move on to page 23 for a snapshot of our bottom line performance. The story of our Q4 net profit is quickly told. Despite the one-offs just mentioned, we produced a respectable profit of a double-digit Return on Tangible Equity. The key drivers here were operating results on the positive and other results on the negative side. For the full year of 2022, net profit amounted to almost EUR 2.2 billion. That's a Return on Tangible Equity of 13.8%. This excellent performance is a direct result from our strong revenue tailwinds that brushed away cost inflation, slightly increased risk costs, and a weaker other result. With this, I move over to the funding and capital section starting on page 25.
The year-on-year balance sheet growth of EUR 16.5 billion is mainly composed of the rise in customer deposits of EUR 13.5 billion, accompanied by the steady build-up of equity. Outstanding debt securities grew on the back of group markets activities in CDs, while interbank deposits decreased on a year-on-year basis. Turning to our wholesale funding activities on page 26, it's worth mentioning that with the higher rates, the end investor market demand for fixed-rate instruments has picked up strongly. We have already placed two benchmark transactions in the year 2023, EUR 1 billion mortgage-covered bond and EUR 750 million green senior preferred bond.
The year-end 2022 TLTRO III volume, I mentioned it already, was at EUR 15.5 billion and a significant share of approximately 60% of that volume will mature by mid-2023, i.e., in the Q 2 and Q3. Let me remind you that the 2027 maturity peak refers to MREL funding activities, which I explained in more detail on page 27, where I, for today, will be quite short since everything is on track for the years 2022 execution and 2023 start. It's worth mentioning that the next couple of months and quarters, we will see quite some MREL issuance on the back of our strong balance sheet growth. To be fair, this is also connected to quite some costs.
The growth in risk-weighted assets, of more than 14 billion on a year-on-year basis, we are on page 28 already, of course, mainly comes from the strong business growth. Please let me once more and finally and last time remind you of the Q1 2022 one-off step-up due to structural FX reflected in our Market Risk RWAs. Coming to a very important page, to our year-on-year CET1 waterfall on page 29. Those effects are, of course, perfectly visible, and you are also aware of all the other key drivers that we are displaying here. Therefore, let's talk about our capital return policy. Ever since the COVID pressure started to subside and interest rates moved north, the topic of capital return was center stage in every investor meeting.
We always said that in addition to paying a regular dividend, returning additional capital by means of share buybacks is certainly something that is an option. In the meantime, many of you have even already incorporated various assumptions on share buybacks volumes into your financial models. In our Q3 analyst call, we additionally told you that we will give further details on our plans, either with the Q4 2022 or the Q1 2023 results. In reality, the timing only depending on the macro situation and the business outlook. Since the financial outlook is robust, Willi will summarize this in a minute, and the macro situation has certainly not deteriorated since Q3 2022. We have sharpened our thinking on this topic towards targeting a share buyback in 2023 in the amount of up to EUR 300 million.
That's an equivalent of approximately 2% of shares outstanding at the current market prices. The formal decision is still outstanding. We need to apply to regulators for their okay, which we plan to do sometime in March. That's where we stand at the moment. Let me also be very clear once more about our unchanged capital allocation priorities. Funding the growth of the business will always be the first order of the day. As a leading bank in the region, we will take part in market consolidation, as we have done in the Czech Republic and Hungary over the past 1-2 years, if the price is right and the deal makes sense. A regular dividend in the payout range of 40%-50% is also something you can count on from us.
In case everything runs smoothly and our capital ratios are strong enough, share buybacks can be considered in addition. With this, I turn it over to Willi again for conclusions and outlook.
Thanks, Stefan. I'm concluding this presentation with our financial outlook for 2023 on page 31. I think we have highlighted a lot of positives in our presentation, not just about the past year, but more importantly, also about 2023. I don't want to be repetitive here. It's enough to say that our 2023 outlook ticks all the boxes, in my view. A strong revenue momentum will enable us to deliver positive operating jaws. Risk costs are projected to be manageable, and we are set to earn a solid premium on our cost of capital. Add to this a solid dividend yield complemented by a share buyback. I think we have a pretty compelling package in front of us. With all these positives, you may rightfully ask, what's the risk? What's the downside? My answer will be equally clear.
The risks are in the fields of politics and geopolitics, effectively risks we can hardly influence. Hence, we will focus our energy on those things we can influence and which we are good at, capturing the growth opportunities in the fastest-growing countries in Europe in a sustainable and responsible way, and offering our shareholders an attractive capital return. Ladies and gentlemen, thank you for your attention. Now we are ready to take your questions.
Thank you. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. We'll take our first question from Mehmet Sevim from J.P. Morgan. Please go ahead. The line is open.
Good morning. Thank you very much for taking my question. Could you please talk in more detail about the NII and margin trends in the Eurozone in particular? It seems the underlying momentum is stronger in the Q1, what would have one initially thought, I assume. Could you explain why the margin expansion was so strong, particularly at Erste Bank Austria and the savings banks, while it was more subdued at the other Euro segments. Given the effective interest rate in these numbers, I assume reflects the very early part of the cycle, how should we think about the quarterly developments in the Eurozone segments from here?
Morning, Mehmet. Let me try to structure the answer on NII along your question. First of all, savings banks, picking that up or Austria in general. I mentioned in my presentation already that we are leaning very much towards sight deposits in certain areas. What has to be added here that the asset side, especially on the savings banks, is very much still a floating rate loan book compared to other countries, but also in EBO.DE, it's more fixed rate. That's one thing why the savings banks are moving quicker in this upward trend, number one.
Number two, you are perfectly right when you describe the Q4, in the light of TLTRO and other strong trends. I would say taking all, let's say quarterly specials out. It's fair to say that you can add round about 100% +, a little bit above 100% to the quarter Q4. I mentioned EUR 120 million stemming from the TLTRO. There were a couple of other items which would take too much time to explain in detail now. I think it's fair to say 100% higher would have been a normal run rate in Q4. The question, of course, is how will this develop further throughout the year 2023? We have, I would say a couple of contradicting trends here.
Very positive still with the, I would say, upgraded expectations on the terminal rate of the ECB key rate on Euro land, we have stronger dynamics. This is absolutely clear. On that, probably our guidance is still a little bit on the conservative side. Please don't forget that in other parts of our region, and in other currencies, the cycle has been moving on significantly further. If you look at what Czech banks have been reporting on NII, we see a completely different development.
I think all in all, we feel confident with the 10% guidance on the back of our strong 2022 NII result, and we certainly will monitor very closely the situation when and, if and how, we need to upgrade or update this guidance.
Great. That's very helpful. Thanks very much, Stefan. If I may ask on the Czech Republic also, I mean, if you take out the quarterly run-off that you mentioned, there seems to be quite a visible decline. Also the deposit trends look quite challenged there. Is this, again, is this something that we should expect will continue for a while? From a group perspective, were it not for the ECB and the Eurozone support, how concerned would you be about the Czech NII in 2023?
I'm not too concerned, to be honest. I think that we have seen most of the adjustments. maybe not everything, but most of the adjustments in the market we have seen. Why? Let's not forget that the rate hike cycle in Czech Republic started already in June 2021, and it actually finalized, at least for time being and listening to the Czech National Bank, it already finished in the summer 2022. There was a lot of time already for the adjustments in the Czech market. What I know from my colleagues is that most of the repricing that they expected has happened.
Of course, we cannot firmly predict the future, but I personally think that the current levels of overall NII run rate are a good assumption to start with. What is, of course, a question mark, not only for NII, but general development in Czech Republic is how will the inflation further develop, and with that, the need of the Czech National Bank to do something on the rate side. I mean, they committed to remain at the 7% level and then go down when inflation drops. So far, if you look at the reported numbers, inflation has not been dropping. That's a little bit of an uncertainty there. Overall, I would say, yeah, neutral to the Czech NII development for the rest of the year.
Great. That's all very helpful. Thanks very much.
Thank you, Mehmet. We'll now move on to our next participant, Gabor Kemeny from Autonomous Research. Please go ahead. Your line is open.
Hi, thank you. My first question is on the buybacks. Can you just walk us through how you determined the size of the proposed up to EUR 300 million of share buybacks for this year in light of your capital distribution priorities? Just to follow up on NII, actually, this the underlying performance was very impressive. You mentioned EUR 120 million of one-off. If I just exclude those, I would get to, I think on an annualized basis, a 13%-14% growth from the 2022 levels. Can you just elaborate a bit on the 10% growth guidance in light of that? Specifically, I think you mentioned, Stefan, that you can't be really specific about the deposit details, but some kind of indication would be useful on what is embedded in your NII growth guidance. Thank you.
Okay. I'll try to answer your questions in the order of the way you brought it. I think the first one is relatively easy because we have always been saying that on top of our 13.5% CET1 management target, we regard any levels sustainably above 14 as— How do we always say, Thomas?
Excess.
Excess
Capital.
That's exactly how we got to the EUR 300 million. Don't forget that we have also to take into account additional cyclical buffers which are kicking in by the end of 2022 and then by the end of 2023 again. All those things have not led to a change in our, in our management target. I just changed it because we feel very comfortable with our ADI and MDA levels. I think nothing has changed on that back.
If you do your math, you will end up somewhere around a similar number as we did. On NII, on top of what I already said, replying to Mehmet's question, please, let's maybe follow a little bit our thinking here for a minute. First, we are really very early in the year, we have given a very robust and as Willi explained it, I think quite optimistic guidance at the beginning of November. Since then, we have seen a little bit of a change in the expectation on euro rates, things can change in either direction quite quickly. That's my second argument.
There are many, many moving parts on the NIIs, that you are very much aware of, product spreads, asset deposit pricing, as we just discussed, bond yields, volume developments, and so on and so forth. I think it's fair to say that there is room, and that's my third point, there is room around the 10%, plus or minus 1 percentage point - 2 percentage points in terms of what the guidance means, because we are guiding for approximately 10%. If you ask me today, will it be rather more or less? I would say, yes, most likely it's gonna be rather more. If you remember our discussions after the November presentation on the roadshow, I had— I think 2/3 of my counterparts in the meetings were rather skeptical about it.
Things are moving quickly, and I think it's a fair and balanced guidance that we give today. As I replied already to the question of Mehmet, should we see further evidence that we need to move and adapt higher, we will do so.
Yeah. Thank you, Stefan. Can you just clarify what ECB rates are you assuming in your 2023 NII guidance?
We are currently expecting 3.75%, maybe 4% terminal rate in the rate hike cycle. That's our expectation. If you remember when we talked last time on the call, it was rather in the 3%, 3.25% area. This is the current expectation, but as you will agree upon, this is also a little bit of a moving target.
No, indeed. That's clear. Thank you.
Thank you. We'll move on to our next participant, Máté Nemes from UBS. Please go ahead. Your line is open.
Yes. Good morning, and thanks for taking my questions. I have a couple of them. Firstly, I wanted to still talk a little bit about NII, specifically in Romania. It seems like in Q4 you had another big step up in the margin, and the loan growth was also quite solid in the fourth quarter. I'm just wondering if you could walk us through what is your expectation specifically for Romanian margins and Romanian NII in 2023. Should we expect a continued strong growth in the country? You would assume some trailing off in the margin versus the second half of the year. The second question is on risk costs. You reiterated the up to 35 basis point guidance.
You have a very substantial stack of overlays. Perhaps for Alexandra, could you remind us what exactly is your assumption regarding the release or addition to overlays in 2023? The final question is related to George Business that you started rolling out. Could you give us a sense of the cost implications of such a rollout? To what extent does this play into the 7%-8% OpEx growth in 2023? Thank you.
Okay. On Romanian NII, nothing really specific. I think what you have been spotting, and I just discussed it with my colleague, I think what you've been spotting was Q4. We saw a quite strong momentum on rate hikes by Romanian National Bank, which played out short-term there. Overall, I would see it stable. 2022 was, of course, additionally fueled by sharp loan growth. I would say nothing really in particular on Romania on that end. Stable, strong, but not skyrocketing. That would be my answer on that. Alexandra takes the risk.
On your question regarding risk costs, what amount of release, of overlays, or FLIs included in the maximum 35 basis points, it's roughly 20% of our existing overlays and FLI.
May I come back to your third question that is related to George Business? As you rightfully said, we kicked off the process of rollout George Business with Austria. Other countries may follow in the upcoming years. The initial investment is around about EUR 30 million. This is within our, let's say, ordinary budget. The rollout takes on an annual basis than EUR 10 million-EUR 15 million. This is the investment that is related to George Business.
Thank you very much.
Thank you. We'll move on to our next participant, Johannes Thormann from HSBC. Please go ahead. Your line is open.
Good morning, everybody. Three questions on my side. First of all, on the accelerated number of savings plans over the last quarters, is there any special sales campaign or what would you attribute this? Because in other regions of the DACH region , we see a lesser client interest.
Secondly, again, more on the DACH region also on your Austrian business. We saw weaker loan growth in other Austria, but still strong loan growth in Austria in the savings banks. What would you attribute this to? Do you expect this to continue? The last thing is, where do you see the biggest upside risk to which line of your guidance, be it NII, fee income costs or whatever, or risk costs? Thank you.
Willi, do you want to start? Should I? As you like.
Start. You would like.
I take first, the last question, if you allow, Johannes.
Yeah.
I can be short here. Operating jaws, that's what we are focusing on. Region by region, segment by segment. I think it's really not the time to say, "Here I see a percentage points higher, percentage point lower." I think it becomes obvious from the discussion that we had already today that on NII, should the trends, so to say, maintain throughout the year, there is some upside, possibly. The same, however, applies for other lines. Like, for example, on the cost side, we expect the inflation to drop through over the year, like pretty much all economists expect. Should that, for whatever reason, not happen, then of course our cost ambitions are quite tough.
I think that's the situation. Operating jaws, the cost-income ratio to improve further, I think that's an overall target which in any situation, at least in any, let's say, acceptable situation, we are confident to deliver. On loan growth Austria, I can be very, very clear here. Other Austria segment, mainly dominated by large corporate, had an enormous boost throughout the year. However, in the fourth quarter, slowing down a little bit by also end of year balance sheet management by our clients there. That's the one argument. The other one is a very important one, that's the perfect handover also to Willi.
Mortgage lending business obviously has been slowing down, in particular also in Austria in Q3, Q4 on the back of higher rates and a very critically seen regulation. We definitely saw a drop there. The difference between savings banks and other parts of Austria, I think is just due to a little bit different business mix. Nothing specific there. With that, I hand over to Willi.
Coming back to your question with regards to the savings investments plans. We are currently talking about around about 900,000 plans. These are growing numbers. Yes, you are right. This comes first of all from Austria. In Austria, we talk about on average on a monthly payment, around about EUR 200 a month. In CE, we talk about close to EUR 100. This is a growing business where we are benefiting over the years.
Thank you.
Thank you, Johannes. We'll move on to our next participant, Riccardo Rovere from Mediobanca. Please go ahead. Your line is open.
Thanks, thanks a lot for taking my question. Three, if I may. one, I think is for Stefan. You mentioned before that one of the areas, the gray areas with regard to your NII guidance is clearly the deposit creep deals. The rates have started going up quite a long time ago in Czech Republic, in Hungary. What we see today in terms of passing higher rates to depositors, can we assume this as the status quo given that rates have started going up more than before? More or less at the same tone, how long do you think it would take to see the status quo in the Euro area, Slovakia and Austria?
Meaning, if the status— If the current situation remains as it is till, I don't know, just to put a date, June 2023, do you think that at that point we could assume nothing is gonna change after that? The second question I have is on the NPL ratio. This is, I think it for Alexandra. In the previous guidance, you mentioned kind of 3% NPL ratio. You know, I was looking at the presentation Q3. I might be wrong, but I can't see that anymore in the new forward-looking guidance. I was wondering whether that still stands one way or the other. If I remember correctly, that kind of 3% was underpinning capital billions of additional NPLs. What happened to that?
The third question I have is on capital return. It seems to me that you consider excess capital anything that is above 14%, excess capital is then devoted to M&A, bolt-on acquisitions or eventually share buybacks. I was wondering, in your thinking, is this which of the two comes first? Did you think, "Okay, we have hundreds of millions above 14%, we can do a buyback, we need first to leave something for M&A," "Okay, there is an M&A opportunity, we first have to take care of the buyback, of another buyback." Just the way you're thinking. Thanks.
I will start with your question on the NPL ratio. Yes, you recall correctly in the previous quarterly announcement, I indicated for 2023 an increase in the NPL ratio, but for sure, not higher than 3%. Three was the absolute maximum. As we came in in 2022 with a very, very comfortable 2%, we still expect for 2023 an increase, but let's say, rather around 2.5% than to 3%. Still right, for sure, not higher than 3%, from the tendency a little bit lower around 2.5%.
Riccardo, on deposit beta, to say the topic of today, very unsurprisingly. I give you two, which I found quite interesting, infos here. The one from Czech Republic. There, as we all know, the rate hike cycle happened between June 2021 and June 2022. My info base tells me that by September 2022, the current level of our most popular depositing and savings products, and I think this compares very well also to our friendly competitors there, has been reached. We are talking about 5%-ish area. It took about two to three months after the last rate hike until the market has been stabilizing at a certain level of deposit. Is this an indication for other countries? I would say partially. Why partially?
On the one hand, I think we would all agree the expectation that we go that high in Euroland is not there. The levels are different. Definitely also the behavior and the competitive set, competitive situation is different. The second answer I can give you, that in Slovakia and Austria, we clearly still have quite some buffer. We expect higher migrations on term deposits to the current status quo, especially when the next two, maybe three rate hikes in Euroland happen. In terms of timeframe, I would expect in a market like Austria, but also Germany, do the adaptation to happen a little bit quicker. Yeah.
I would say what takes maybe three, four months in Czech Republic would happen within one or two months in those quite competitive and developed markets. That's our current expectation, and that we are building our NII calculations on. Willi.
Yeah. I wanna come back to your question, the way we look at excess capital. There are three options, more or less, to give it back to the shareholders. When it comes to bolt-on acquisitions, and looking back in the last two years, I tend to say this is closer to ordinary business. When it comes to M&A transaction of relevant size, we would expect that at least midterm, we'll see a further consolidation in the region. As we are a strategic investor relevant in all those countries, I would not exclude, let's say, to take an active role in that. Currently, there is nothing on the table. If this would happen, for sure, for such an operation, excess capital would be allocated.
Okay, just for me to better understand. From your wording, Willi, I understand the DNA of the bank is growth first and buybacks second, but I'm not sure I...
The-
You know what I'm saying.
To give you the priorities as already Stefan outlined, the first is always, or top priority always gets the organic growth. We were able to outperform the market. Secondly, it's about bolt-on acquisitions and also, let's say, providing to our shareholders, let's say, an attractive dividend. For sure, we cannot and won't exclude inorganic growth opportunities in our region if there are any. Yeah.
Yeah, thanks.
Thank you. We'll move on to our next participant, Alan Webborn from Société Générale . Please go ahead. Your line is open.
Hi, thanks for the call today. Now you've reached a level of sort of 35% of digital sales, I mean, is Erste at a point where the end-to-end processing means that you're gaining in terms of efficiency in the way that you're selling, I guess, particularly the more simple retail products? Is there still more room to and a need to invest further in the sort of back office to achieve that? I just wondered whether you are now seeing the benefits of the investment in digital selling, and, you know, whether that is within the sort of cost growth guidance or it's something that you think will be more benefit later on. I'd just like to see where you are in terms of that. I mean, I appreciate the hybrid model, clearly it's the processing that's important and the processing that costs. That was the first question.
Secondly, in your overall loan growth guidance, I think before the call today, you've talked at sort of mortgage g rowth sort of, you know, settling down at a lower level. Presumably it's going to be more difficult in the non-euro countries where rates are a lot higher. I wondered within that sort of 5% loan growth, you know, do you think that sort of, you know, mortgage lending is going to rise, or is it going to sort of stabilize? You know, really where do you think the real, the strongest driver of that 5% loan growth is? I wonder what the assumptions are there. Are you assuming that there's gonna be more investment growth from corporates, or just a continuation of working capital growth? Just to give us an idea of the trends within there would be useful.
The last question was, I see that you've tucked away some quite interesting looking ESG targets for, you know, the loan portfolio decarbonization at the end of your presentation. I wondered, the sort of four categories that you mentioned with some quite interesting interim targets for 2030, how much of the loan book does that actually include? When do you think more of the loan book can be included? Will you be giving us annual updates in terms of your progress towards those interim targets? Thank you.
I wanna start with your first question, digital sales. Last time, we were talking about every fourth product was sold digitally. Today, we're talking about every third product. We show an increasing rate of products sold digitally. This is mean digitally and not, let's say, in any kind of hybrid sales process. Secondly, it's all about efficiency, yes, but it's also about improving our cross-selling activities, because we are pretty sure that the more we are able to read our data, the more we have to be prepared to offer digital solutions for our customers. This is not in a contradiction to our hybrid business model, but when I try to sum it up, I would tend to say banking of the future is digital within retail.
We see huge growth opportunities, especially when we're able to get access to the opportunities in a digital manner. It's on both ends. It's about efficiency, yes, but it's also about cross-selling. I think with the ratio we're able to show right now, every third product is also digitally, we are on the right track, and we're able to gain additional 300,000 George customers over the last quarter, meaning the fourth quarter 2022. I would say we are right on track.
To mortgage
Coming back to your question related to the mortgage business, you are right. Based on many aspects, it starts from interest rates, it starts from new regulation coming in as of August 1, 2022. This had a significant impact on the new businesses, on the new flows. Looking at the stock is still growing. Why is stock still growing? Because we don't see any early repayments as we have seen in the past. Stock is further growing. New flows, let's say, coming down, let's see. It is further developing.
I would say, now we are stabilizing, and I'm pretty sure we will see further growth rates, positive growth rates, not to the extent we have seen in the last 2 years-3 years, for sure. Yeah.
I can fully confirm Willi's explanation. Just adding to the other part of your question, which was about how do we put together in general the 5% growth. Obviously, as you well know, making a forecast for a full year-over-year volume loan growth is always a tricky challenge. But just what I heard already for the beginning of the year, we have quite some good dynamics in many fields. I know from the corporate business that the business has been picking up well at the beginning of the year again. Certainly a good confidence that we will see positive net loan developments throughout the year. Will it be around this mid-single-digit area finally?
It's our current best possible assumption. The arrows are pointing in that direction. To be very honest, now at the end of February, making a real big guess on whether it will be rather 4% or 6% is hard to do. I think the growth will be coming throughout across over the businesses a little bit more on the consumer lending side, maybe than on the mortgage lending side for the start of the year. That's what we see. The rest remains to be seen, I hand over to Alexandra for the ESG question.
Thank you. On your question, regarding the industries displayed on page 48 of the presentation, it represents roughly 50% of our loan book. For this year, the year 2023, we plan to add four more industries, which are smaller and which account for roughly 10% additional volume of the loan book. The rest will follow in the subsequent years.
Just, and you hope to update us annually in terms of the progress that you're making.
Yes.
towards 2030.
Mm-hmm. Yes.
Thank you.
Thank you, Mr. Alan. We'll move on to our next participant, Tobias Lukesch from Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. Good morning, two questions from my side as well, please. First I would like to touch on a potential M&A and share buyback again. If I understand you correctly, you mentioned the increase in capital requirements, I think you're moving towards a 12.5% rather of coming from 11.5%, including P2G. The above 13.5% buffer, you say excess capital is above 14%, so that would give you only 150 basis points. I was just wondering, given you're vital, that you're vital basically for the Austrian economy and definitely and the most important banking institution there, if this is really enough in your planning.
Secondly, if I understand you correctly with the potential share buyback, to me, it doesn't look like you're really going for a bigger M&A opportunity in your planning, and that you might be pushed a little bit by investors into this share buyback. Correct me if I'm wrong there. Secondly, on the cost bridge from 2022 to 2023 would be very helpful if you could maybe give a bit of a more detailed approach to the cost. I'm very sorry I didn't catch the kind of costs attached to the George rollout earlier. Thank you.
Yes. Looking at Tobias at your, at the mix of your questions, we can do that together, Willi. I take the first part on the technical side on capital. You are almost right with your assumption regarding our expected requirements. They are moving up by a total of 63-64 basis points from year-end 2022 to January 2024. From the low to mid 11%, 11.4% to something like 12.28% by beginning of 2024. A little bit lower than you assumed. Yes, you're right. They are increasing. However, the management buffer of without is always to be looked at as without Pillar 2 Guidance .
We're still at 150 basis points, and we feel very comfortable with this. This is on the, on the management target, not on the definition of excess liquidity. oh, sorry, excess capital. I think it's smaller since the cyclic buffers have been increasing. But overall, we are feeling comfortable with that and also feel ready for driving the business forward and having a proper capital distribution. For the M&A question, I hand over to Willi, please.
Yeah. I can just repeat what I already said, because you said, it seems there is incorporated a significant M&A transaction. There is nothing on the table right now. As already said, we cannot exclude, or in other words, we would expect at least midterm further consolidation in the region for sure. In that case, we could be seen as potentially as an interested party. Coming back to George Business.
sorry, Willi, if...
Yeah, please.
If I may. I was just thinking the other way around. I mean, to me, it seemed like you were not creating a capital buffer to really go for a mid-size or larger size M&A transaction there.
Sure.
For me, it looks like you're more incorporating kind of bolt-on acquisitions, but nothing more basically on your current capital plan.
You are right. You are right. You are right.
Okay.
When it comes to George Business, as I said, there was an initial investment of around about EUR 30 million, and the rollout takes EUR 10 million-EUR 50 million per annum. This is the investment incorporated in the ordinary budget.
Thanks, Willi, because that's perfectly bridging to your question about the cost bridge. First of all, I want to point out that when we look at our cost base, not only that it's always in the context of operating jaws, it's also very much in the light of the investments that Willi has already been talking about and the investments into our digital and overall business future are very, very important to us. How do we get to the numbers? It's basically a mix of expectations around overall inflation and the results of collective bargaining in Austria and the Parex with that, the salary increases in the countries we operate.
In that sense, in terms of our costs related to that, there is good and bad news. Let's start with the bad news. Inflation has not been coming down yet. I think it's fair to say that we are operating in countries which are among the ones with the highest inflation in, in Europe. Also Austria has been showing, compared to, I would say, peers an elevated level of inflation, which of course, makes negotiations with the unions a little bit harder. That's the one, that's the one part. The other part is, you probably well know that a lot of those increases are only kicking in the course of the year.
Typically the current collective bargaining that is currently running is only valid and materializing with April 1st in the respective costs. It's actually 75% to be allocated. That's just as a technical explanation. How do we get to our numbers? It's pretty much around what we have also shown in our outlook. We want to, and we do, mitigate the significant inflationary pressure by efficiency measures. If you look at the record of the last two, three years, it's always about one-third that we can, so to say, deduct from the run rate of inflation. That's definitely at least the ambition also going forward. However, the absolute numbers are not in our hand, as you will certainly understand.
Thank you very much.
Thank you. We'll now move on to our next participant, Jovan Sikimic from RBI. Please go ahead. Your line is open.
Yes. Good morning. Thanks a lot for the call. I have one question on Czech windfall tax, because in the last presentation, I think you gave a guidance of around EUR 100 million per year. Can you maybe give us an update on that? On Croatia also, I mean, they should have a windfall tax. Maybe you also have some assumptions how it should look like 2023? Also in the respect of Croatian business, you still stick to this around EUR 20 million negative effect from euro entry on FX fees, right? Thank you.
Okay. To answer the two questions related to windfall tax, I wanna start with the Czech Republic. There is nothing new. They stick to the formula, and as already mentioned last time, we're talking about around about EUR 100 million. When it comes to Croatia, there is an extra for 2022 and nothing for 2023. They have increased the income tax to 25% across all industry up a certain threshold. We're affected by around about 50 million EUR for 2022.
That's why you booked it already in the other op results, right? That explains this then maybe.
Absolutely. The Croatian.
Okay.
The Croatian corporate tax, to be very precise. This is not a windfall or even banking tax. This was explicitly also by the government named an increased corporate tax one-off to so to say a little bit reduce the impact of the 2022 inflation in the country. That was a one-off booked in the year 2022, like also all the other banks represented it as far as I understand.
Okay. Okay. Thank you very much. On this impact from euro on FX fees, still EUR 20 million, right? Per year.
Croatian.
Croat-Croatia, you mean? Yes, yes. I think,
Yes, yes. That's okay.
Thanks for the question on Croatia. Let me spend one or two sentences on it. First, I think it's.
Yeah.
We can really be proud how our colleagues have been executing the euro introduction very successfully, very smooth, with very good customer feedback. I think it's worth mentioning that. Thanks, a big thank you to the Croatian colleagues for executing this project very successfully. That's number one. On the business side, I think to be very honest, I believe it might be even a little bit less in the course of the year. Let's see. That's our best estimate, but we see already for the start of the year, that actually colleagues are able to make up for it a little bit better. I would say the maximum of a drop there on revenues from that area is EUR 20, maybe a little bit less.
Okay. Super. Thank you. Thank you very much.
Thank you. We'll now move on to our next participant, Robert Brzoza from PKO BP Securities. Please go ahead. Your line is open.
Good morning, everyone. I have few quick questions. The first one on Hungary. There was about EUR 20 million in provisioning there, one of the highest over the recent quarters. My question is, was it related to overlays or does it represent perhaps some worsening of the underlying portfolio, with some implications for 2023? Second, also on Hungary, in the quarterly terms, the NII went down a bit from a high level. How does the competition for deposits is shaping up in Hungary, and what's the outlook for the NII, given the very high interbank rates in Hungary? Personally, I would be expecting customers increasingly moving savings products to higher yielding offerings.
Lastly, on Czech Republic, there was indeed a very low tax rate of 7.5% only, which I believe contributed to the 15% tax rate on the consolidated level. My question is, I mean, is it sustainable going forward or should we expect the tax rate across the group to normalize to the statutory level for 2023? Thank you.
Let me start with your question on Hungarian risk costs. The charges that you see were a mixture, mainly of three topics. The one that you mentioned, overlays. The second, there's also a part, a risk cost related part given due to the moratorium, which has been introduced and the interest rate cap. The third topic is the integration of Commerzbank, which also resulted in some provisionings that we did. All in all, no deterioration of the underlying portfolio quality in Hungary.
Robert, Alexandra already answered half your question on Hungarian NII because this was the reallocation of the moratorium-related positions. More importantly, looking forward into 2023, the most important info for you, we expect round about a stable NII from Hungary in the year 2023. In terms of deposit behavior, well, let me say Hungary is very special. I think no one would disagree on this one.
You have, not only a situation where by all the measures of the local government with regard to prices and also in the financial market, there is such a very special behavior in the market that there is no move by any of the banks, also not by the leading one, and you know who that is, in, on the deposit front. However, of course, the customer requests on, re-returning some yield to the deposit holders is, satisfied by other products. Those are the government bonds which are offered to the retail. You don't...
You cannot look at deposits in Hungary the way you look at deposits in all the other markets because it's such a specially, let me say, driven market by the respective players on a national bank and government front. If there are moves from deposits to other products, it's going into those very special government bonds. But most importantly for you and us, NII 2023 in Hungary currently expected to be quite stable year on year. I think you had a.
Czech.
A question on the Czech tax rate. To be very honest, I don't have any detailed info on that for you. I can look into it, and we can get back to you later on. Nothing specific that has been catching my eyes there.
Oh, sure. Thank you very much.
Thank you. We'll move on to our next participant, Riccardo Rovere from Mediobanca. Again, please go ahead. Your line is open.
Thanks. Thanks for taking my follow-up questions. Two, if I may. The first one is on RWA. Given the outlook you depict for GDP and unemployment and the mention to the NPL ratio made by Alexandra earlier, is it fair to say that RWA should mirror more or less credit volumes growth in 2023? Should we expect anything on top of that from models overall in checks by the SSM and stuff like that? The other question I have on the FLIs in 2023, Alexandra before mentioned around you expect to use around 20% of the EUR 900 million you have. I was wondering why 20%? Why not all of those or 60% of that?
It's just because some sectors are particularly doing particularly well that you think those will not be needed. Just curious why 20%? Thanks.
Good. Let me start with RWA development, what we expect for 2023. The total full year loaded RWA is expected to increase in 2023 by a low single digits, roughly 3%. Mainly growth of credit risk-weighted assets and mutually offsetting expectations on Operational Risk. There we expect a very, very small increase in Market Risk, where we expect a small decrease. As you already rightly mentioned, in line with our loan growth, no specific topics from the modeling area. For the years to come, for the later years, we expect for credit risk RWA that they grow around 4%-5%, mainly reflecting portfolio growth expectations. On the FLI, why 20% release?
These are the assumptions that we based on our forecast and on our guidance. Of course the macro is decisive on the 2023 risk cost development. I mean, it's very early in the year and too early to review the risk cost guidance, which we'll do together with Q1. What I can say is this 20% release assumption, depending on the macro environment could give some room for higher releases, but it's really much too early to say.
Very clear. Thanks.
Thank you. We'll move on to our next participant, Simon Nellis from Citigroup. Please go ahead. Your line is open.
Hi. Hi. Thanks very much for the opportunity. Yeah, just two quick ones from me. Firstly, on your capital requirements, do you have line of sight beyond 2023? Where do you think they peak? My other one, and I may have missed this because I joined the call a bit late. I see a big increase in the levies in Austria in the fourth quarter. Could you just explain what's behind that? Thank you.
Sure. First of all, for more color on the details of our capital requirements, I kindly refer you to page 39, where we are lining up all the details. If there are further questions, please turn to our IR any time, and we can go into those details. We don't expect, just to say that explicitly, and also the regulator has been indicating that we don't expect any further significant adjustments there for the foreseeable future. I think the levels are set up until 2024, 2025, but of course, no one knows exactly what will happen on the regulatory front in the longer run. That's that's on the one.
The other one, thanks very much for that question because that gives me the opportunity to say that this was actually not a booking related to any 2022 initiated tax or whatsoever. It is simply is an old case based on our so-called Stabilitätsabgabe in Austria, where we had a long-lasting tax discussion with the Austrian tax authority, where we just ended up for this additional payment, mostly, just as important for you also, mostly in the savings bank sector. It's half of that roundabout is going out again on minorities. That was a booking on the first quarter.
I also may say that we are still in the case itself, so it might be that over the years, but it can really take years, some parts of that might come back. We are not accepting the, their interpretation. It's nothing new in the sense of any kind of new taxation or related to current business. It's a case from the early, and mid-2010s.
It's a clear one-off.
Yeah, absolutely. Yeah. Absolutely.
Yeah, yeah. Okay. Thanks. Thanks so much. Over.
Thank you. Thanks, Simon.
Thank you. We'll move on to our next participant, Andrea Vercellone from BNP Paribas Exane. Please go ahead. Your line is open.
Good morning. Two left. The first one is on Czech Republic, the other one is on personnel costs. On Czech Republic, can you give us some indication of the capital impact, positive or negative, I think it's positive, but you may tell us something related to the acquisition of the Sberbank portfolio, and also if you can give us a guidance on the NII contribution related to this. Also, I struggle to reconcile the guidance of EUR 100 million of levy, special levy in Czech Republic. I get a lot less than that. I was wondering whether this guidance includes anything related to this portfolio or not. On personnel costs, it's a qualitative question specifically on all of the CEE countries.
When you agree the new salary level bank by bank, do you backdate it to first of January, or it starts when it starts, and then it continues for 12 months? Thank you.
I can take, Hi, Andrea. I can take the second question right away. Since there are no structural rules like we have it in Austria or Germany anywhere existing, you see it's exactly as you assume. It's negotiated, it's implemented, it becomes, so to say, live, it goes live. We have had significant salary increases, as you will understand, especially in those countries with very elevated inflation, namely Hungary, Romania, Czech Republic. In the course of the year 2022, you see most of that already in the numbers. As long as the inflation and the cost of living of our employees is that much elevated, we will also certainly readjust according to the market.
That's the situation in CEE countries. It is a c ompletely different situation in Austria, where all of that is very much regulated, I've been pointing to the currently performed collective bargaining already. Willi, do you take the Czech Republic or shall I? Okay. On the first capital, Czech Republic, very simple. No whatsoever effect of those two transactions that we have seen. The Hungarian one and the Czech one on any capital levels in the group. That's number one. On the NII, I'm just looking around. There will be, of course, a positive effect from the portfolio. Can we get back to you with a specification? Because I don't have it at hand now. Yeah. It's
Yes. Yes. Is there any implication of the acquisition on the tax, on the bank levy?
Thanks for that. Thanks for specifying this one. No, because this was part of the negotiations in the first place that don't ask me exactly how it technically is represented, but my understanding is that there was a prerequisite in the course of the acquisition was that at least for the year 2023, it's not going to be considered. By the way, you asked about whether it could be turning out much lower. Willi gave already the clear information that we have not changed our assumptions so far, since the political decision process is, let me say, choppy. We don't know what the final outcome is. You are right.
According to the formula, as you and some of your colleagues have been calculating, according to the pure formula, given the numbers, it even could be significantly lower. We are rather on the cautious side. I'm sure you understand that.
Thank you.
Thank you. It appears there is no further questions at this time. I'd like to turn the conference back to Mr. Willi Cernko for any additional or closing remarks. Thank you.
Yeah. Thank you very much. Thank you to all of you for your participation, your questions. I should not forget to invite you to our next presentation on the 28th of April. We are going to present our results for the first quarter 2023. Happy to see you again. All the best. Have a nice day. Bye-bye. See you next time.
Thank you for joining today's call. You may now disconnect.