Earnings Call: Q1 2021

Apr 30, 2021

Good day, and welcome to the Erste Group Bank AG First Quarter Results Conference Call. Today's conference is being recorded. I would now like to turn the conference over to Mr. Thomas Sommerauer. Please go ahead, sir. Thank you, operator. A very warm welcome to everybody who is listening in from Vienna. Today, we follow our usual conference call routine, as I am sure everybody knows by now. My colleagues, Bernd Spalt, Chief Executive Officer of Erste Group, Stefan Dörfler, Chief Financial Officer of Erste Group, and Alexandra Habeler-Drabek, Chief Risk Officer of Erste Group, will host the call. They will give you a brief overview, a couple of slides as usual, on the key achievements and developments of the first quarter. After this, they are ready to take your question. Before handing over to Bernd Spalt, let me draw your attention to page 2, which contains the disclaimer. With this, Bernd, please take it away. Thanks very much, Thomas. Good morning, ladies and gentlemen. Welcome to our Q1 earnings call. Let me start the presentation by maybe a little bit of a picture. For those of you who have followed us for longer, you will see from the presentation style that we are returning back to a structure which is pre-corona. In a way, that over the last couple of quarters, we tried to sort of put an emphasis on the COVID-19 specific elements of our economies, and how it plays out. That we are now returning to the old structure in terms of going through balance sheet P&L and business development and risk, is a reflection also that we firmly believe, and it is our confidence, that we are into a year, 2021, which will be a year of recovery and rebound and where COVID-19 will still play a role, but will not, hopefully, dominate the economies. With this, let me take you to page 4 of our presentation, in terms of the key developments, and setting the frame for today. You see that the macro developments in our region have been very robust. We are showing, and we are expecting a very robust rebound this year and recovery after a difficult year 2020. With growth rates of real GDP up to 4.5% in our region, this is reflecting an improving health situation. We get to vaccination rates a little later down the line. But what we see, and what could not be expected 12 months ago, was that the availability of vaccines and the logistic preparations will allow us to go into a summer where hopefully a substantial part of the population will be vaccinated and where severe lockdowns further ahead will be avoided. So we see an improving health situation. We see vaccination progress. If you look at Hungary, very robust. We see that, and this has been already true for a while, that industrial production is already at pre-crisis levels. I think the outstanding development for this quarter is the fee and commission income line, which has been very positive. It was very much reflecting in the context of this ultra-low interest rate environment situation. The success of our strategy which we presented on our Capital Markets Day in 2019, where we said it is at the core of our strategy to turn zero-yielding deposits into AUM to convince our customers that they can, on a monthly basis, save on securities. Also to offer to our corporate population, alternatives to negatively yielding cash deposits. I think this is something which we have understood relatively early on, and which we have been successfully building upon ever since. We are on our way to reaching all our targets, which we put in place pre-corona. At the same time, I think it is very important to say, and Alexandra Habeler-Drabek will speak about that later, that obviously credit risk deterioration, even though we have been applying a very much forward-looking approach and a very much front-loading approach, credit risk deterioration is not a major feature of this century dimension crisis. We see a quarter where we still see recoveries. We see a quarter where delinquencies and insolvencies are still low. We have relatively low risk costs at that quarter. While this is not the time to revise our guidance on risk costs, which we have put in place in the last couple of calls, there is an opportunity to undershoot this guidance forward looking. I think this will mainly depend on what is happening now in the second and third quarter with the vaccine strategies of the countries. But there is some reason to be confident. Now, if we turn to page number 5, the group income statement performance, and I would like to take you to the left-hand chart. You see clearly that the uplift of the net profit after tax by over 50% is clearly dominated by lower risk costs, as I have said, and also normalization of trading and fair value income line. You remember Q1 last year was dominated by a double shock, COVID-19 plus an oil price shock, so the volatility hit our income line very heavily last year. Now we are back to normal, I would say. If you can speak about the run rate in trading and fair value at all, I think we are at the run rate, so that should be relatively sustainable. This is how we end up with EUR 355 million for the quarter. If you look at year-on-year, I think what you see is that operating income has been very strong, compared to last year, and very much also supported by our fee income line. Next page number 6, the key data. In a situation where, in the Czech Republic, we have seen massive interest rate cuts, in a situation where on the Eurozone, there is, of course, zero movement on the interest rates, margins continue to be under pressure. You see that net interest margin is now, for the first time, falling below 2%. The other major features, operating income, as I said, because trading in fair value and good fee result moving up, cost of risk being very benign, and this leads us to return on equities and return on tangible equities, return on tangible equity, which is now, again, back to double-digit levels. On page number 7, I think this is a very important page if you look at the development of our balance sheet. Our balance sheet is expanding, and the major driver of the balance sheet expansion is, of course, the liability side, where we see a very significant inflow of customer deposits to start with. So in this crisis situation, in this situation of uncertainty, customer deposits, both from the retail side as well as from the deposit sides, keep flowing in and are expanding our balance sheet. We are participating, as you know, in the TLTRO, and this is also reflected in our balance sheet positions when it comes to the cash positions on the asset side. So I think what we see is a moderate loan growth, 1.1%, so we get to the guidance a little later, so it is not bad. An okay loan growth, but a very significant deposit inflow, which is dominating the picture, and which is even more supporting our asset management strategy forward-looking. Let me take you to page number 8 of the presentation with the key balance sheet data. This deposit inflow, which I have been elaborating upon, leads us now to a record low loan-to-deposit ratio of 81.7%, which I think is hopefully the lowest point, and something which at that level is still surprising. On the credit risk-weighted assets, they basically reflect the loan growth which we see. So we have not seen yet massive downgradings in the portfolio as such, so this is moving in parallel. If you look at the NPL coverage and the NPL ratio, again, very benign. NPL coverage ratio is now approaching 90% again, and the NPL ratio is still falling. I do not think that this will necessarily be true for the remainder of the year, the NPL ratio, because insolvencies will come in the second half of this year, will rise, but I do not see a tsunami. I do not see anything like a record inflow of delinquencies forward-looking. Capital ratios, we end this quarter, of course, without reflecting and taking into account the quarterly profit. A common equity tier 1 ratio 14.0%, which is way above, of course, our internal target of 13.5%, and it is also way above our legal requirements. You do know that we will propose EUR 0.50 per share for the dividend distribution for the upcoming AGM in May. We also have reserved EUR 1 for an extraordinary dividend if and once we are allowed to do so. Liquidity coverage ratio, no need to mention with this kind of deposit inflow, very high, and leverage ratio at 6.2%, still very robust. So, very quickly on page number 10, the CEE economies, and the overall developments. The recovery is taking place. All the figures are showing up. All the confidence indicators which we measure are moving up. If you look at the industrial productions, all of the order books are full. All of the stock figures are good. So on that, with the exception of the services industry, everything looks really well. And we can say that the tourism industry, which has been hit hard by a non-existing winter season, has been very strongly supported by fiscal stimulus packages. Overall, I think economy is robust and recovering. We are now in a situation where all of the countries have handed in and filed their national recovery plans under the EU Next Generation Fund. They will be a source of growth, and we are standing ready to co-finance any of the larger projects which will come. Also in the local markets, we see tax cuts in the Czech Republic. We see investment intentions in Hungary, and we see a lot of efforts in terms of building, again, sustainable workforce. On top of that, also, unemployment rates are still incredibly low, and we look at very robust labor markets throughout the region. You see also a chart here on this page on the vaccination progress, and this will speed up now in the next couple of weeks significantly. All of the countries are very firmly intended to be successful on that end because everybody has a strong desire to return back to what one could call normality. I will jump over page number 11. Just on the business side, retail, what is happening on the ground. Page number 12. We still see a very strong demand on the housing loans in all of the markets. We see quite a bit of a reluctance on the consumer loan side, which we believe will change as soon as vaccination will be dealt with. Deposits, as I said, dominate the balance sheet picture. On the securities products, demand for alternatives to cash deposits is high, both on the retail as well as on the corporate side, and is driving our assets under management strategy. You see numbers on this page when it comes to newly opened savings plans on the securities side. You also see the development of the fee income, which shows a support of our strategy, which we have chosen. On page number 13, we are also seeing that branch traffic, which was dropping significantly last year, has recovered very strongly. This is not only because there is a certain desire to meet people again, but also in the context of a strong demand for mortgage loans. These are products which need to have physical interaction where customers insist on speaking to people in terms of advising them what they can afford and how the structure of the loan can be done. Digital sales, of course, have increased significantly. Cashless and mobile transactions are on the rise. I think we still see a very strong support of our hybrid business model, being physically present and accessible, and digitally competent. On page number 14, on the corporate side, I think the recovery is really already visible. Loan demand is driven predominantly by large corporates, not so much yet on the SME side, and if so, then on the working capital and bridge financing side. Investment loans are still somewhat subdued in a context where visibility still needs to be improved. But large corporate credit is rising. We also see a lot of deals in the pipeline on the commercial real estate side. And we see price levels robust and stable, and we do not see in our portfolio or on the market bubbles arising here. This is a market where loan structures are of a relatively robust shape. Of course, in this context, margins are heavily under pressure, so it's not all rosy. The margins which can be charged are getting very meager at that stage, and this is a development which I expect to continue as there is an abundancy of liquidity and also an abundancy of capital available for banks who want to lend, and everybody wants to lend. On the capital market side, debt capital market side, there's a very strong deal pipeline. There is also a strong origination deal flow already, where we have been mandated, and this is something where in terms of fee income is incredibly important to our sales. Asset management, I've been mentioning, corporate customers do want to switch from cash deposits to short-term money market products. Again, not something which is yielding them much, but is avoiding that they are burning cash. It offers some fee income potential on our side. Also, more and more, what we see is that corporate customers request advice on sustainability matters and topics in terms of what they can do. It is something which we can offer and which we also can use in terms of showing competence to our corporate customers. With that, I will conclude my first presentation and would hand over to our CFO, Stefan Dörfler, to go into more details. Thank you very much. Let me follow up with operating trends and start on page 16 with the volume developments. Customer loans developed basically just as expected and communicated earlier. That means the overall development points to a low-to-mid single-digit annualized growth rate, showing 1.1% year to date. Bernd has already been describing that in retail, with the steep increase in mortgage loans and an ongoing drop on consumer loans, we kind of see a reflection of crisis patterns. We expect, and I will get to that later on, a certain reversal, especially on the consumer loan side, once consumption can really kick off when all the restrictions are lifted. The situation on the non-retail and corporate development is a little bit more mixed, which quite naturally is due to different industry and segment developments, and also countries are performing differently, as you know. On page 17, we see a reflection of the customer deposit development. The customer deposits have been sharply increasing, 13% year-on-year and 7.5% year-to-date respectively. This is due to ongoing deposit inflows on the retail and corporate client side, typically parking their cash in overnight accounts as far as they are not, as Bernd has been describing, already engaging into longer term asset management investments. What comes on top for the first quarter is growth in our foreign branches business, which we translate to an add-on on our profitability. So all in all, loan-to-deposit ratio is down to a really historic low of 81.7%, and it's also my personal expectation that once consumption picks up, that this number will somewhat stabilize at least and not drop dramatically further. Remains to be seen in the upcoming quarters. On page 18, we show NII and NIM developments. NII is slightly down year-on-year, EUR 57 million lower than the first quarter of 2020. This is basically completely driven by Euroland, meaning Slovakia and Austria, and of course the Czech Republic. Let me at that point, make a brief remark on TLTRO. We have added another EUR 4 billion in a March take-up, bringing the total to EUR 18.1 billion. I think we have been talking and informing you about the way we account for the TLTRO position. The second quarter will show whether we will develop sufficient confidence in the growth requirements of TLTRO. Should this be materializing positively, then we can have a catch-up booking of up to EUR 90 million. Up to why? Because it's of course, by legal entity to be measured whether the requirements are fulfilled. With all of that, and based on our expectations with regards to economic developments, volumes, and interest rates, we confirm our indication of flattish year-on-year NII development 2021 over 2020. On page 19, we show the overall picture on operating income, and let me spend a few words on net fee and commission income, as well as on net trading and fair value result. The trading and fair value result with EUR 66.4 million is just as our CO has been mentioning, well in range of our, whatever you precisely want to say, with run rate, but that's exactly what we typically communicate, 60 to 75 million quarterly, leading to something like in the area 200 to 300 million on an annual basis, in a normalized environment. The first quarter, as you know, was on one hand, a little bit negatively impacted by upward-sloping yields in some markets, at least temporarily. On the other hand, there were very constructive overall risk markets around. So I would say a reasonably positive and neutral quarter. What has been really a very good development and which makes us very confident that on those three key strategic pillars we can deliver on the fee income is the 540 million first quarter result on net fee and commission income. This has been structured in the way that on securities and asset management business, we showed very significant growth. We're talking about 14%, respectively 18%. In the same moment, we had a very stable, and I think for the very difficult macro environment with regards to shop openings and so on, a very solid income on the payment fees. All in all, a very positive development, which allows us to communicate a mid-single digit growth with some upside potential if the markets remain constructive. Very little to say this quarter about operating expenses. I just want to reconfirm our commitments given in formal reports, i.e., to apply well-balanced discipline across our countries and businesses in order to allow for the necessary investments into our future. The one remark that I have to make when it comes to first quarter is the fact that we have been booking the unfortunately higher deposit insurance contribution, EUR 107.6 million, a quite prominent amount. In the meanwhile, 20 million, or 22% higher than in the first quarter of 2020. This has been fully and even more than absorbed by other cost reductions. All in all, and this you will find on page 21, that results in a quarter one operating result of EUR 725 million and a cost-income ratio of just above 60%. I can say already at this point that our ambition remains to deliver positive operating jaws, which would require us to get below 59% cost-income ratio for the full year. We think that the first quarter has shown that we have developed some confidence to achieve that. With that, I hand over to Alexandra for the risk part. Thank you, Stefan, and good morning. As already outlined by Bernd in particular, and very visible in the Q1 figures, so far, credit risk-related losses have not been a significant feature. The benign level of risk costs in Q1 are, on the one hand, not surprising as we, as you all know and for sure remember, did perform an in-depth extraordinary UTP assessment exercise late in Q4, in line with our commitment of prudent front-loading. Furthermore, and this you know as well, the various government support measures are still largely in place, so the NPL inflow is expected for later in the year. So Q3, Q4 of this year, maybe even in 2022. At the same time, we see a continuous good development post-moratoria, and we see stable, strong recoveries also in Q1. Overall, this leads us to keeping our prudent guidance of 65 basis points max for the time being, as there is still a lot of uncertainty out there regarding the economic recovery and the development of insolvencies after the support measures are withdrawn. However, the current developments in Q1 opens up the way that we may beat consensus expectations. Of course, a lot is depending on the vaccination progress, the size and the magnitude of the economic recovery, and the timing and the effectiveness of overall the government support measures. When we go to slide 23, the effect of hardly any new defaults in Q1 and the already mentioned strong recoveries, reducing the existing NPL stock led to a small improvement of the NPL ratio and of the coverage ratio as well. The Stage 2 remains stable and is already outlined in the last call. We see this level as the peak. Now, only very briefly on the post-moratoria experiences and other portfolio developments. In a nutshell, we see a continuous trend in all the aspects that we have been presenting very detailed, especially in the call of the Q4, the full-year results 2020. That means, in particular, the vast majority of ex moratoria clients resume or resumed payments without delay. Payment ratio for retail is above 90%, for corporates, even higher, and the overall default rate of ex moratoria clients, so newly defaulted after entering into a COVID moratorium, is still very low, around 1%-1.5%. Just to be clear, and as already mentioned in the last call, this excludes clients that have already been entering the moratorium in a defaulted stage. So taking this into account as well, these are 3.3%, this would total 4.6. Currently, there is also no change in our industry view. Most hit tourism, restaurants, entertainment, everything connected to international travel. On the other hand, production and construction doing very well in all our markets, and retail remains with a mixed picture. The winners, consumer electronics, furniture on the one hand, and clothing and footwear more hit on the other hand, and of course, highly depending on the further progress on openings. With this, I would hand back to Stefan. Thank you very much. Page 24, just a few brief words on other results. Nothing too spectacular to report here. Year-on-year, quite stable. Important is only that here we have been digesting the pretty exactly EUR 100 million of recovery and resolution fund contribution. To sum it all up, let me refer you to page 25 and add that after the higher tax rate in the year 2020 for known reasons, we calculate with a 22% average tax rate for the year 2021, which is completely in line with our long-term indicated range. All of that results in a net profit after minorities for the first quarter of 2021 of EUR 355 million. Before I hand back to Bernd Spalt, who will be talking about the key conclusions for our 2021 outlook, let me spend a couple of minutes on wholesale funding, MREL, and capital. Page 27, in this respect, only shows the latest breakdown of our debt securities and the interbank deposit development, obviously driven especially on a year-on-year comparison by the TLTRO program. Therefore, let's look at the maturity profile, which is shown on page 28, a very well-known slide to you. We are very happy with the overall funding structure and also with the levers at which we could execute our transactions in recent quarters. Looking into the further 2021 program, it's fair to say that the funding volumes will mostly be comparable to 2020. However, some would adjust it for, on the one hand, the active pre-funding, which we executed in the last quarter or late in 2020, and of course, taking into account, especially when it comes to covered bond issuance, taking into account the big size of TLTRO funding. So far this year, just to inform you, we have been executing one benchmark transaction, a EUR 500 million senior preferred note, mid swaps plus 55, 10-year tenor. This already took place in January, and we are planning for one or the other activity in the course of the second quarter. On MREL, and this brings us to page 29, where there is a general overview. I also may refer you for a more detailed description in the appendix, pages 42 and page 43, for those who are very much into the MREL program. There we show all the details on breakdown and when the timing of the respective regulatory guidelines happens. I just want to let you know that besides the transaction I just mentioned on the holding level, we have already issued this year in Slovakia and in Croatia. We are expecting transactions for all the 6 resolution groups further on in 2021, fully in line with our outlined overall 3-year MREL issuance plan. For that purpose, the multi-issue program for all local entities have been set up, and which I'm pretty proud of, to be honest, we have held a very well-received MREL roadshow the end of March with all our local CFOs presenting their countries and explaining the plans for their local activities. All in all, what you should take away from the MREL update is that it's all on track. We are executing the program, and frankly speaking, we believe that the cost for it will be quite significantly lower than it was expected maybe 1, 2 years ago. Last but not at all least, on page 30, we show the quarterly waterfall for CET1, and frankly speaking, it's rather unspectacular this time, which is, in my eyes, a positive. It brings us to 14.05 common equity Tier 1 fully loaded. Let me remind you, Bernd Spalt already mentioned it in his first presentation part, that this is not including the profits from the first quarter, and also not the positive OCI developments. Adjusted for those, on a pro forma basis, we would be around about 24 basis points higher. So if you want flat for the year, which is very much reflecting our very stable and good capital development. Since there is, on dividends, nothing else than to reiterate what we have already been saying by the end of February, I hand back to Bernd for the outlook. Thanks very much, Stefan. Let me take you to page number 32, key takeaways and outlook. I will focus on the right part of the presentation for the 2021 outlook because I think Q1 2021 takeaways, we have broadly elaborated upon. The outlook on the macro side, as I said, we expect a robust recovery, and that will also shape 2022 as much as we see. Loan growth will, as again indicated in our last call, be in the low to mid-single digits. On the cost-to-income ratio side, we reiterate our ambition, and we stick to our ambition to have positive jaws forward-looking based on a flat NII, a very strong fee and commission income. A normalized trading and fair value result should show, on the basis also of cost discipline further applied, positive jaws throughout this year. On credit risk, I do not want to repeat what Alexandra Habeler-Drabek has been saying. Credit risk costs will certainly be below the 65 basis points, and with a certain hope that we even can beat the market consensus at that stage. Depending, as we said, on the vaccination, depending on the overall economic rebound. Capital position, nothing much to be added. We stick to our 13.5% common equity Tier 1 ratio. No reason to change that. We have a dividend now in front of us. We have the EUR 1 reserved for the later stage of this year, depending on regulatory guidance. We also look into a market where possibly bolt-on acquisition opportunities will arise. So we are not only very well protected against adverse economic developments, but we are also in a position to, A, pay dividends and, B, look at acquisitions as they come. On profitability, it is clear that the net profit line will look substantially better than in 2020 based on the risk development as we see. I think that pretty much concludes our presentation for today, and we are very much looking forward to taking your questions. Thank you. Thank you. If you wish to ask a question at this time, please press *1 on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press *1 to ask a question. We will take our first question from Anna Marshall from Goldman Sachs. Please go ahead. Good morning. Thank you for the presentation. Two questions, please. Firstly, on NII, could you please indicate what is your expectation on a quarterly trajectory going forward? You have already mentioned that CO2 rose due cost, but is there anything else particular that you expect to play a role? For example, a mix effect, as you mentioned, the consumer picking up later in the year. This was my first question. The second, could you please elaborate on the M&A front, if you have anything in the pipeline, or this is at the moment sort of a theoretical perspective? Thank you. Thanks, Anna, for the question. I try to keep it short. Nothing really special, to be honest. What, of course, you are aware of first quarter on quarterly comparison, especially year-on-year, a little bit less of the day count. Starting into the year with a difficult interest rate environment and of course also, which is affecting all areas, still a quite dominant lockdown all around us. In the same moment, I explained the potential catch-up and increasingly likely catch-up on TLTRO. I think it remains to be seen how volumes in the different segments will really develop. We are in constant talks with our business colleagues. It is really something which we are very keen to learn week by week. Overall, I think it is fair to say that we simply stick to our assumptions. So far, we have been pretty right in what we anticipated, knowing the markets very well. But it is a little bit too early to say, and I hope that I can give a more concrete guidance also with regards to sector NII developments by summer. But for the time being, a flattish NII overall is a fair assumption, of course, with very different developments country by country. Anna, on the second question on M&A, no, this is not a theoretical exercise. This is a very practical exercise, and we are having very close looks at opportunities still inside what we guided over the last couple of quarters in terms of bolt-on acquisition opportunities in our markets which fit to our strategy. Let me just quote two examples, and none of them sort of represent any kind of probability that they will materialize, but still they are sort of things which we look upon. One of them is Commerzbank, who is giving up their presence in our markets, so would be a very natural sort of fit. We are looking into that. And the other thing which I want to quote is Sberbank Europe, which is also a potential opportunity which we are analyzing. Whether or not this materializes, whether or not sort of in terms of earnings accretiveness and capital accretiveness this works, and can be a fit, it is sort of yet to be decided and the jury is still out. But no, it is not a theoretical exercise, and we are looking almost every week at opportunities as they come. Understood. Thank you. We will now take the next question from Natnique D'Vine from JP Morgan. Please go ahead. Good morning. Thanks very much for the presentation. I have two questions, please, and one is a follow-up to Anna's question on NII. You mentioned the potential TLTRO benefit of up to EUR 90 million. Could you please remind me to what extent your flat NII guidance reflect this potential of up to EUR 90 million? My second question would be on cost of risk. You obviously gave us your views about normalized levels of cost of risk previously. But going into the crisis, it was obviously far from those normalized levels given the strength of the economies across the region, and now it looks like we are back to those low levels. Once COVID-19 is behind us and assuming it is a temporary hit to economies, where would you see cost of risk would rather settle? Would that be the normalized levels, you were saying 30, 50 basis points, or is there a risk that it could be back to just pre-COVID levels of meaningfully lower levels? Thanks very much. The second question on risk is definitely the more tricky one at this point in time. We all are very keen on hearing Alexandra's answer on that. I keep it very short on NII. It is including the potential catch-up, and that is what we have been always communicating. We, for very good reason, have been cautious on the volume requirement fulfillment. We will know probably somewhere by the middle, end of June, and we will certainly report on that in July. It is including all components which play into the NII. Yeah. On cost of risk, I remember when we had our event in Vienna before the crisis. It was also discussed, the 30-50 basis points. Yes, you are right. What we have seen before the crisis, over many, many, many quarters and years, was much better. But we have also seen years before with much higher costs. I can repeat, and now with a lot of confidence, seeing the resilience of our portfolio. What I also said at this occasion, so 30-50 is a reasonable assumption. But I am not hiding that I consider the lower end of this range a realistic figure going forward after the crisis. Okay. Thanks very much. We will now take the next question from Nathan Nemeth from UBS. Please go ahead. Yes. Good morning, and thank you for the presentation. I have two set of questions, please. Firstly, on risk costs. Can you confirm whether you have released any general provisions in this first quarter? Looking at specifically Austria and Romania, where you had negative risk costs. Were these workouts or specific situations, or are these releases reflecting general provisions? Secondly, on the expected NPL ratio between 3%-4%. Can you elaborate a little bit on what should be driving this? Are you expecting perhaps more credit events on the corporate side or the retail moratorium or loans coming out of the moratorium could play a role in this as well? Then secondly, on fee income, clearly a very good development on that front. Does the Q1 figure include any one-offs? Should we take that EUR 540 million a good basis really for the next quarters as well? Related to that, I promise last one, can you comment on the AUM development and inflows in asset management? Thank you. Okay. I'll start with the question on risk costs. The first quarter was characterized by very low new NPL inflows, roughly EUR 350 million, which was almost entirely compensated by recoveries and upgrades. This is the reason why we had hardly any risk cost bookings, EUR 54 million. When you deduct also the recoveries on the written off stock, this leads us to this EUR 36 million. To your concrete question, no, there were de facto no releases of the FLI or the overlays that we had performed. We did not release reserves. The reason especially also for the negative or positive risk costs in that sense, releases in Austria and Romania were really recoveries and upgrades. On the NPL ratio of 3%-4%, this is very similar for retail and corporate. We do not consider one of them outperforming or underperforming the other one. We expect this evenly for both sections or segments. On fee income. Let me answer first the very justified question on how sustainable do we regard this positive momentum. I would say overall, quite sustainable. You remember that we have communicated at the Capital Markets Day in 2019 at 3.9%, somewhat 4% compounded average growth rate up until 2024, which would have been bringing us from the basis back then to EUR 2.4 billion in 2024. Now, I wouldn't say that 2020, especially with regards to fee income, has been a lost year, by no means. As you know, we have been pretty much developing a flat fee income in the year 2020, adjusted for the changes in the regulation on payments. I think it was not a lost year, but of course it was a year where we did not deliver the growth. As of today, and given the overall mix of trends in the different components of fee income, I would say there is a good chance that we will make up for this year and basically re-embark on the original trajectory. In other words, whether we will be able to deliver on every single quarter the 540, here I would be certainly a little bit cautious. But if you take the basis of the end of the year 2020, so 1973, I guess, if I remember correctly, then you certainly can expect a significantly higher growth rate year-on-year than the original trajectory that we were indicating over time. The other question, and this is of course one important part of it, how did the AUM develop? Here I have the latest number for the end of Q1, and this is the first time north of EUR 70 billion, concretely EUR 71.1 billion under management. Let us not forget that we had a harsh drop in the first quarter 2020. So year-on-year, this is a dramatic increase, but I think it makes more sense to look at the end of year 2019 and end of year 2020 levels, which were EUR 64 billion and EUR 68 billion respectively. So all in all, quite optimistic on fees. However, and for very good reason, my business colleagues also point to the fact that there could be shaky times, both in markets and production. So I think that we should be able to get back to the trend originally outlined in the year 2019. I hope this answers the question. We will now take our next question from Izabel Dobreva from Morgan Stanley. Please go ahead. Hello, good morning. Thank you very much for the presentation. I had a few questions too on NII and one on fees. Starting with the NII question, I suppose we have seen a quite meaningful steepening of the yield curve across your market since the start of the year, most notably in the Czech Republic. So I was hoping you could give us an update of how much of a replicating portfolio headwind we should expect now for this year. I suppose there should be an improvement since the last quarter. Then my other question on NII was regarding the performance of the quarter. I think in one of the slides you flagged that the Austrian holding company business was affected by movements in derivatives this quarter. And we can see that the NII in that business dropped by about EUR 11 million sequentially, whereas normally it is quite stable. My question is this a one-off or should we consider it a step down in the run rate of that sub-business? Then finally, my question on fees. On the liability side, we have seen a huge inflow of deposits this quarter. How would you see that developing for the rest of the year? Would you expect it to reverse as the economy reopens? Or is it a longer-term fee opportunity from your perspective? I guess I'm just curious how your conversion rates look like when we think about deposits converting into AUMs. Thank you. Okay. That was a couple of questions, Izabel. Let me try to answer those first, which were both acoustically and from content, easy to understand and we can answer very clearly. Absolutely correct, and I mentioned also in my presentation already that, in some areas we saw, of course, also increasing yields in the course of the first quarter, and that was namely true for Czech Republic as well. On a short-term perspective, this is always a certain burden. But I think longer-term, obviously, this is also a positive. What we did, by the way, we were executing a significant share, not to say pretty much everything that we have in plan in terms of investment books on the back of higher yields on the long end, as well as, of course, the liquidity inflow, and that should give us significant positives on our investment books on the asset liability management side. That's the first remark. The other remark is that we expect on a year-on-year basis, given the latest developments into higher yields, a drop of around about EUR 30 million in our investment book, which is a little bit less than we originally expected, which was close to EUR 45 to EUR 50. So, that's the positive side. The negative side somewhat, and I mentioned it before when we were talking about trading and fair value income, which it still looked very okay in the first quarter, but of course on the fair value positions, both in savings books and other entities, it is a little bit of a burden when rates go up. Obviously, in general, we are not unhappy if the curve is overall steeping. I see it as a medium-term positive. Unfortunately, to be honest, this has been very temporary. If you look at most of the curves, they have been coming back as expected, to be honest, very quickly. However, in some of the countries, especially Hungary, Czech Republic, so non-euro countries, I'm a little bit optimistic that we will see a more constructive yield environment. The last part of your question, I also understood it was about whether we can translate ongoingly incoming deposits into asset management. A clear yes. Our CEO has already described in his presentation that this is not something where we go for one-offs, where we kind of shoot for the big tickets. We go for constant savings. We even have internally a discussion around asset management and long-term investment as kind of the new savings book, is something which I very much like as a thinking. Of course, a very well-balanced and long-term oriented way of investing is what we recommend to our retail customers, of course, once they have available savings. That's a long-term trend, and absolutely, I think you used the word convergence. We clearly believe that step by step, our markets will converge to somewhat Western European levels, which as you know, would give us a tremendous upside there in terms of volumes and shares of invested money. I have to admit, I did not really get this one question around derivatives and EUR 11 million or something. Can you maybe repeat it once more so that we understand what you're referring to? Yes, of course. Sorry I wasn't clear. If I look in the Other Austria segment, the holding company segment- Yeah The NII there was EUR 98 million, and normally the run rate over the last kind of five quarters has been around EUR 110. In one of your slides, I think you mentioned that it was affected by the markets business. My question was, is this a one-off or is the new NII a run rate? Isabel, let me double-check that. I do not want to shoot from the hips here. I have a certain view what that could/should be. It is nothing that you or anyone should be worried about by any means. I would assume that it could very well be due to the issued securities and the respective, the way you need to book for debt being issued, since the hedging part goes through derivatives. But again, I want to look at it, and Thomas or Peter will get back to you with a two-liner explaining that. Definitely, it is not something which can be of any worry in terms of recurring or one-off effects, which are concerning by any means. That I am absolutely sure of. Perfect. Thank you very much. We will now take our next question from Johannes Thormann from HSBC. Please go ahead. Good morning, everybody. Johannes Thormann, HSBC. Three questions, please. First of all, looking at the risk cost, the still existing guidance of up to 65 basis points. What is needed, just help me understand, what would be needed to get to the level of 65 basis points this year? Like several larger corporate defaults, jobless rates rising to a certain level, because you have already done some management overlays last year. Just to understand this. Secondly, coming back to the deposit wave, which you see flooding into your balance sheet. You not only feel this via the NII, but also via higher regulatory to us. The conversion into fee income is nice, but do you need to take stronger countermeasures to limit these deposit inflows? Johannes, last but not least, if you talk about the long term, do you think your old target of 10%+ return on tangible equity is achievable post-crisis again, or is this now in a post-COVID environment less possible? Thank you. Johannes, let me take the second two questions. I am sure Stefan will also home in. Last question, our target level of return on tangible equity, double digit after crisis, certainly maintained. Absolutely, there is no reason why we shouldn't achieve that. On the last but one question, on the deposit inflow and do we need to take more countermeasures? Yes, and we do. If you look on the corporate side, we are already charging negative interest rates, for larger corporate deposits, and we will go further down the ladder. This is again, then building a bridge towards corporate customers going for alternatives, again, switching to, as I said, money market funds and the likes, which is generating fee income and doesn't burn cash. On the retail side, we find it presently very hard or impossible to pass on negative rates. This is on the basis of a little bit dated high court judgment, on the question, are we allowed to pass on negative interest rates for savings accounts, which is negative in Austria. So this is something where we presently are constrained by the regulatory environment. So where we can pass it on, we do. Where we cannot pass it on, it is depending on our success to convert the inflow to other products. Let me also say this, I do think that if you take a more forward-looking view in terms of when does this wave stop or when does this wave sort of come down, I do think that there is a very strong correlation to the recovery. Once the economy opens up, once people can spend again, once people can go on holiday again, can travel and can invest, they will use their savings. So I think that will be a very natural also mitigation against this deposit inflow. Absolutely nothing to add from my side. I can 100% confirm the answer. Then I come to your question, what needs to happen to come to the 65 basis points. Johannes, you yourself, you mentioned a lot and I will repeat it. One is, of course, larger corporate defaults. Second is the development of job rates. When you look at Austria alone, there is still, although on a decreasing trend, still almost half a million people in the so-called Kurzarbeit, and it will be decisive. A lot of them, of course, coming from tourism and entertainment industry. And we will see very soon how this will either increase the unemployment rate or really will be taken up again from the opening economy. The second is how consumption will pick up and consumer confidence will develop. Let's take tourism as an example. For the time being, yes, it's tough because the hotels need to be closed. On the other hand, there is a strong support from the government. When the openings will be allowed and this government support will fade out, it will be decisive how many clients and people come back and how consumption will pick up. These are the biggest question marks, and in case these things do not develop all positive, this would then rather indicate towards the 65. Okay, understood. Thank you. We will now take our next question from Benjamin Goy from Deutsche Bank. Please go ahead. Yes, hi, good morning. Two questions, please. First on loan mix, and then secondly on risk migration. To your loan mix, I think very positive comments on the consumer loans you mentioned. I am just wondering about the confidence you have given you see all of these deposits that any, so to say, lifting of lockdowns directly leads into consumer loan growth, any expectations you have there. Then, you are positive on large corporate loan demand. Just wondering whether you expect it trickling down and also to SMEs in the second half of the year, or is that more uncertain? Then the second question, you had a modest impact on your RWAs from risk migration in Q1. Was just wondering whether there could be more to come in your base case or anything material in remainder of the year. Thank you. Let me take the first one and a half question, the loan mix on, A, consumer loans and, B, large versus SME customers. I think If this can be answered in one, there will be a certain time lag between the opening of the economy and the return to normal and a picking up of consumer loans and also SME investment loans. As for both, the prerequisite is an increased certainty that stabilities can be expected, both when it comes to order book, both when it comes to business development, as well as when it comes to job security. I would say, for both, we are based on our outlook for the vaccination success, very confident that consumer loan demand will pick up in the second half of this year, and that SME investment loans will also normalize and will pick up again by the second half of this year. Now on the development of credit risk RWAs. In the first quarter, as Bernd was already outlining, the major impact was business growth and not rating migrations. However, we had some impact from rating migrations, and also updrifts, but those were overcompensated by increasing collateral values. Some risk transfers and residential real estate collateral. Overall, it was not so visible. For this year, we still and unchanged, expect a low to mid-single-digit increase in credit risk RWAs, where still some effects from rating migrations are factored in. Also compensated by then- Very clear. Thank you. -closed into NPL. Yeah. Understood. Thank you. We will now take our next question from Riccardo Rovere from Mediobanca. Please go ahead. Good morning. Good morning to everybody, and thanks for taking my questions. Two or three, if I may. The first one is for Bernd. I just wanted to have a better feeling, a better understanding on capital return. If M&A, in your mind, comes before shareholders remuneration or before organic growth, just to shed a little bit of light on that. Second question I have is, I'm not sure I understood it correctly, one of previous comments from Stefan on maybe on rates, possibly moving higher in other countries, which are clearly not Euro area. I'm not sure I got it and I understood it correctly, aside from Czech Republic, of course. The third question I have is on risk cost. I sense that in the message you are giving today is a kind of orderly retreat from your guidance of 65 basis points, without holding positions that cannot be kept. But in this context, when I look at NPLs cover ratio at 90%, and probably this is even higher, because if you are experiencing recoveries in written-off positions, which are by definition covered 100%, technically, the NPL coverage ratio would be even higher than 90%. Can you shed a little bit of light of why the LGD should be so high on these positions? Are those positions all unsecured, or are they secured by something that is worth technically nothing? Can you also shed a little bit of light on the functioning of courts? Have they been working regularly, normally when it comes to work out NPLs or have they been slowed down by the COVID-19 situations, working from remote or something like that? Have they been working normally over the past few months? Thanks. Good morning, Riccardo. Thanks for the questions. Let me take the one with the capital returns versus M&A. Philosophically, I don't think that this is an either/or. I think they go both hand in hand. We're looking at acquisition opportunities under the context that they would be capital accretive and earnings accretive. This is a use of capital, which again, will be sort of for the benefit of the shareholder. It's not something where I would say, "Let's keep an acquisition opportunity because we want to pay an extra dividend." I think this is not the way how we look at it. I think what you can count upon is that we want to expand our core business in a way which supports our capital position and which supports our P&L, and therefore, supports our dividend distribution capacity. Yeah. Riccardo, on rates higher, I think we are all following on a, if not weekly, then at least monthly basis, commands from the different representatives of the local central banks. I guess, Czech Republic, you mentioned yourself, there's a lot of talk about when the Czech National Bank will consider rate hikes. I think the question whether or not is relatively clearly answered by their overall commitment. A recent indication, what we always said for 2021, we do not expect too much of a positive contribution for us. Even if they should act in the third or fourth quarter, that will not turn a needle for our NII in a relevant dimension. Certainly for 2022, this is a very important factor, if and how much the Czech National Bank will raise rates. We believe that there is a good chance in some other countries. In particular, when you look at the Romanian situation, and against all odds, if you want, we have seen an upgrade in the rating of the country recently, other than a downgrade, which frankly speaking, was not to be expected. The overall environment, while always a little bit shaky from a political front, I don't want to comment on that too much. But that's of course always a question mark. But overall, the situation is robust, and I think that's also represented in our operating trends in Romania. I think if the environment in Romania on the inflationary front and on the public households allows, I think that we could very well see a turnaround, or at least a stabilization. That's very likely, but even maybe a slight turnaround, and that is also a question behind Hungary. I think these three countries, with regards to their overall macro situation, offer a certain opportunity. We are not counting on that in our forecast in detail, with the exception of Czech Republic, and I'm sure we will talk about 2022 the latest in summer. But that's the picture I would draw here. Of course, and you mentioned it yourself, just to repeat that, no whatsoever expectation of higher euro rates or even a reduction of QE in Europe is built into any of our assumptions. Now to your question on risk costs. Let me guide you back to page 23 of our presentations, to the table on the right-hand side, where you see the risk provision by stages. Let me start with one basic comment. We do not assume that LGDs, because we have less valuable collateral on the new loans, is prone to become worse compared to the past. But what you need to take into account when you look at the current coverage ratio is the provisions on the Stage 2 loans. It is only under brackets. It is a single digit from the amount, but it is EUR 1.2 billion. This also flows in the high coverage. When these loans, what we assume after the expiry of the various support measures are at least partially flowing into Stage 3, this will then increase the losses and create the risk provisions. So this is on the first- Okay, Alexandra. But on the NPL, on something that is already defaulted, is in court and all these things, what is the collateral? Is completely unsecured? Probably not. No. The NPLs are probably not 100% unsecured. It is not just consumer finance to buy a TV. Probably not. No. It's not. No. You're definitely right. A part of that it must be secured. It is secured. Secured by what? Because with 90% coverage ratio, with recoveries of written-off positions, as you have stated today, probably this is not secured by, sorry for the French, potato land. Yes. Because otherwise you would have no recoveries. You would have a top-up. You would have an increase of the coverage ratio to 100%. No, it's not, but again, when you look- Which is not the case. When you look at the table, and this fully reflects what you say, of course, this is not uncollateralized. This is a mix of unsecured consumer loans, of secured mortgage loans, very low level, and of corporate loans with a normal mix of collateral. When you look at the table Stage 3, this is why the coverage of Stage 3, with which we still feel very comfortable, is 54% only. This is due to the collateral that we have. Also the new loans that we were giving and granting and bridge loans and the new NPLs that we are expecting, they will not be different from the stock that we know. So a very good mix of collateral. Not only unsecured consumer loans, for example. For sure not. Right. The courts, are they working kind of normally? Or have they been slowed down? Normally. This was in fact, as I indicated Sorry a very positive surprise that the recoveries, not only on the written-off, they are the smaller part, but the recoveries on our own books NPLs are really strong. As strong as compared with 2019, for example. This is also due to that there are no restrictions apart from, of course, as long as there's a statutory moratorium in place. We had different restrictions in the different regions, but they are fading out. Basically, courts work normally, and workout recoveries and workout activities are also performed normally. Of course, within the boundaries of local legal restrictions. You cannot sue a client who is still in Okay. Very clear. Thanks. That's clear. Thanks We will now take our next question from Alan Webborn from Societe Generale. Please go ahead. Hi, thanks for all your answers today. Just a couple more from me. What were the nature of the written-off loan recoveries? Are they specific? Is it Hungarian real estate? Or was there a specific issue, and was there a specific timing? Would you see any more of that as we go through the rest of the year? That was the first question. You mentioned insurance brokerage as one of the areas that you see driving fee income growth. You've shown us what the, I think the investment brokerage amounts could be. How material do you think the insurance brokerage business could be going forward, and is that linked particularly to mortgage demand, or is it more general? That was the second question. The third question was, are you using already pricing differentials in your ESG business? Is that attracting more customers, and is that becoming Do you sense it's becoming more important? I just wondered whether that was something that you were doing. Then finally, you talk about branch attendance recovering strongly. I appreciate fully your hybrid model. But at the same time, you say customers are increasingly using digital and remote channels for investment advice. Other than mortgages and to have a chat, what are they coming to the branches for? Have you seen, now you've experienced 12 months of increased digital usage and so on, does it make you feel about shifting further along that hybrid model to perhaps reinforcing more of your indirect channels and reshaping, readjusting at all the way the branches work? Thanks. Let me start with the famous written-off portfolio. We have been seeing recoveries on the written-off portfolio over the last few years. The written-off portfolio overall is now down at roughly EUR 1 billion. The recoveries that we have seen, also over the last years, and which continues so far also this year, is roughly 8%-10%. This would equal roughly EUR 100 million per year. In the first quarter, we have seen EUR 22 million. Very much in line, and also well-distributed throughout the countries. A little bit more than half in CEE and a little bit less than half in Austria. But no country now significantly standing out from the regular developments. And on the insurance brokerage, let me just share with you facts, and then I leave it to your interpretation of how material you regard that. Round about 10% of our overall fee income is related to insurance products. And we had a year-on-year growth in the area of 7%. I think it's on the right track. It's not, of course, comparable to asset management or payment fees. But I think it's the right way. We move together with our partner, VIG, across many jurisdictions, many countries. And we see that we can connect it more and more to our core products. Not to forget, and this brings you over then to Bernd, who will answer your question also around digital and branches and so on. We are working very much with our insurance partner also on digital solutions to be offered to our clients. So that's the situation. There we are. We're working on it constantly. It's a very important part of our offering, but it's of course not the biggest block in the fee income. By the way, I missed to answer before, I think it was Izabel's question about whether there were any significant one-offs in the first quarter, which we should point to. The answer is simply no. Nothing significant. It's something that you could take as a very strong, however, hopefully quite probably recurring level that we can deliver. Thank you. Good morning, Alan. Let me start with ESG and the relevance on the customer side. I think that the relevance presently is twofold. One, of course, the demand for green bonds and the demand for sustainable investment products is very much on the rise. So our asset management company has been, for a very long time been already in this market and has been very successfully placing these products. I wish I had participated some 10 years ago when they came up with their first green bond or green fund product. I think we're very active on the asset management side on that. And this is going to be a continuous demand overhang, which I see. The second thing which I tried to mention was on the advisory side, on the corporate business. More and more corporate customers require advice when it comes to respecting sustainability targets, when it comes to reaching carbon neutrality. So this is something which in terms of offering competence in the client coverage is something which is picking up and which we quite significantly put attention to. I think these are the two elements which I see and which will grow over time. On the hybrid business model and the branch versus digital and the behavior of the customers, all what you say is true, and what we're trying to do is on the one hand reflect our customers' behaviors and desires. It's not only mortgage business which drives branch visits, it's also investment advice when it comes to larger investments on the retail side, which requires face-to-face interaction. But of course, also customers are wandering through the branches and picking up their cash and doing self-service transactions, which we more and more offer. And we're also starting in Austria quite significantly, piloting remote advisory services. So more and more, I would guess, and looks to be quite successful, customers will also accept that kind of service. So I don't think that we will see a very drastic reduction in branches very soon, but we will see a reduction as we have done so for the last couple of years, as we go along, reflecting customers' behaviors, and moving them towards cheaper channels. But as I said, I still think there is significant value in being also physically accessible. Super. That's very kind. Thank you. We will now take our next question from Olga Vasila from Bank of America. Thank you. Good morning. Thank you for this call. Several questions. First of all, which regulatory changes do you anticipate once the COVID-19 is over? Do you think that the Czech Republic will bring back its capital buffers? Maybe anything else similar? My second question is how does the fiscal stimulus year to date go versus your expectations? And this question I ask because of the strong deposit inflows which continue. Is this stronger than you expected? In which regions and maybe in which forms? And my third question is about the normalized cost of risk. Thank you for updating us on that. How long do you think it will take for Erste to return to the normalized levels? Could it happen reasonably quickly, let's say next year? Or we talk about much longer period, three, four, five years? Thank you. Let me start with your second question on cost of risk, how long will it take? Of course, the idea of the prudent front-loading was to return as quickly as possible to a normalized risk cost level. That is the reason why I can answer you, yes, this should be on a reasonable timeframe. Not over more years, rather earlier than later. The second one on regulatory changes. If I knew. But of course, the one that you indicated with the countercyclical buffers, of course, these buffers, and they have been reduced and there has a lot has been done from the regulators also to support the banking industry. To what extent this will bounce back remains a question mark. On the other hand, regulators, I think, can see that the banks also prove to be very resilient, that the capital ratios have been held up. Overall, I would be confident that banking industry and regulators would proceed on a constructive and economy-supporting path that they are currently walking. Maybe I can take up this remark and reaffirm it. Couple of elements here. The regulators have understood that they should not act procyclically in this crisis and have allowed banks to use their buffers. Factually, we did not use the buffers, so we have made no use of that. I do think that forward-looking, I think somewhat, there is more clarity when it comes to how will capital requirements develop over time, because since the global financial crisis, capital requirements have gone up and up and up, in an absence of knowing would the banks survive the next crisis? Now, a century crisis has come. All the banks managed the crisis really well. Capital levels were more than robust enough to respond to a very deep economic collapse. I think there is some certainty now for the regulators for the first time after 10 years, what an adequate level of capitalization can be. So I am reasonably confident that we have got now a calibration point which was missing for the last 10 years. This makes us confident that, yes, we will see possibly the one or other buffer coming up when credit demand is moving up much more sharply than economic development, but this will not change the picture overall. So we are reasonably confident on that. Secondly, on the fiscal stimulus packages and their development and their impact and our expectation forward-looking, I think it is very important to still memorize that with the exception of Austria, all of the other countries mainly relied on moratorium programs. Austria was the one country which had a very, very massive package with direct contributions, with grants, with guarantees, with short-term work, which were all employed at the same time. While most of the other countries mostly relied on moratoria, which were put in place in short-term sort of work schemes. I think forward-looking, yes, these support programs will phase out. I don't see any kind of cliff effect because of them fading out. I expect 2021 will be a year where most of these packages will just phase out. Perfect. That's very useful. Thank you so much. We will now take our next question from Gabor Kemeny from Autonomous Research. Please go ahead. Hi. Thanks for taking my questions. A few quick follow-ups. One is, can I just confirm that the EUR 90 million TLTRO catch-up is included in the guidance of flat NII this year? Secondly, can you give us an update on your Czech NII sensitivity to interest rates, given that your balance sheet has grown quite a bit in the last few quarters? Finally, what is going on with the securities accounts? You showed there is a strong momentum in the accounts opening, opened almost half of the 2020 full year accounts just in the first quarter. What is happening now, which did not in the last few years, and to what extent do you see the new clients being traders, and to what extent do you see them being longer term investors, I guess? This would imply the volatility of your fee income going forward. This would have an implication for your volatility of your fee income. Thank you. Gabor, since we are pretty advanced already in the hour, I take the privilege to be very straightforward in answering your three questions. TLTRO, yes. That is the short answer. It is included, and fully reflected, and up to 90, as I said, I just repeat it, because, of course, it needs to be evaluated by respective legal entity, and since it was not only holding or Slovenská sporiteľňa or savings banks taking up TLTRO directly, it is a measure to be looked at by legal entity. Czech relations and run rate exactly as always. No changes there. You do not need to factor in any changes there. Only if the shape of the curve should really substantially and sustainably change, we would need to have a look at whether run rates and changes and sensitivities on key rates might change fundamentally, but so far you can work on the same assumptions as always. The third one was on securities. This is a very simple question. The answer with regards to whether those are traders or even short-term traders is a clear no. I would say it is fair to assume that probably rather 99% than 97% of the customers who are opening securities accounts with us are long-term savers. This was in a question before, we had that already. If you look at the average share of our clients, especially in CEE, which have already securities accounts and compare those to Western European levels, there is a huge gap still to be closed. It is people who simply want to save for long-term retirement preparation, building up a certain amount of wealth. Really, this is the goal, and this is also what we are managing for those clients, and that remains our key function there. That is very clear. Thank you, Stefan. We will now take our next question from Riccardo Rovere from Mediobanca. Please go ahead. Yes. Thank you again. Very quick follow-up. I just wanted to be sure on TLTRO, the EUR 90 million is an addition to the NII, is not the total contribution of TLTRO. That would be on top of what you already account for- Yes, Riccardo. if I understand it correctly. Just to be sure on that. Yes, Riccardo. Let's call it- Yeah, okay, fine. Okay, thank you. The run rate that we have been accounting for is relatively small in 2020. We discussed it in earlier calls. It's always a little bit difficult against what do you calculate. The numbers I give you is always against the -50 ECB rate, -50 basis points ECB rate, and what we have been accounting for in 2020, if you remember we talked about it, was like EUR 15 million to EUR 20 million in total. The big chunk would come with the catch-up. That's basically representing most of what we connect to the TLTRO, but it's not including the relatively small run rate. I hope this helps. Okay. Yeah, this helps. Then again, a number I think I missed in one of the previous answers from Alexandra. When you were asked about possible normalized risk cost after COVID-19 disappears, I'm not sure I got the number. Could you be so kind to repeat that, if possible? The number is- In terms of basis points, I think. It is still the range, 30-50, but I am confident that we can be very close to the lower end of the range. Not only in a few years to come, but rather sooner than later. Okay. Thanks. Very clear. Thank you. We will now take our next question from Simon Nellis from Citi. Please go ahead. Thanks very much. Just two quick questions left from me. On Croatia, I see that the management attention exposure went up quite significantly over the quarter, I think over EUR 1 billion, but you have not changed your reserving there. If you could just elaborate on that. Then my second question, maybe it is a bit too early, but just on dividend policy this year, I guess you will start accruing some kind of dividend in the second quarter. Can you give us any outlook there? Thank you. Yeah. Bernd is nodding. So very clearly we will comment on that in July. We will then also comment on further out on whether there is any kind of adjustments required with regards to our payout guidance and so on. July is the time to comment on that. Of course, also we will then inform you about the level of dividend that we will accrue for the year 2021. We have not yet taken this decision, and will discuss it until the July analyst call. I think the other question was to you, Alexandra. Yeah. Yeah. This is on Croatia, and I hope I got the question correctly. Overall, yes. Of course, strongly dependent on tourism. Summer was fairly okay, not as good as expected, and the moratorium still is in place until end of June for the tourism industry. Also, quite a significant part of the clients did take this opportunity. This is also the reason why when we compare the countries, the cost of risk in Croatia is planned to be comparatively higher. When it comes to the amount, being in the tourism industry, and second, that we also tried to have quite a harmonized approach also when it comes to the overlays, depending on PD, this is also a reason why Croatia may look higher. This has a fundamental reasoning, and I think it is a very appropriate provisioning plan. Okay. Thank you very much. We will now take our next question from Robert Brzoza from PKO BP Securities. Please go ahead. Good morning, everyone. A quick question from me on the Other Austria business unit. I see that the assets of this unit went up by EUR 16 billion, or about 30%, mostly driven by a huge uptake in deposit base. My question is, what was actually the business rationale for this movement, and whether this was the main reason why the NII of the Other Austria declined 10% over the quarter, and whether that's sustainable, this new run rate, whether that's the new run rate going forward. Thank you. Yeah. The first answer is no for your second part of the question, because that was not really related. I think it was the same question that Izabel was asking early on. We looked it up in the meanwhile, by the way. It's really, as I said before, I can confirm it's nothing that is recurring in any form. The other question with regards to volume, is an expected one, Robert. This is where we took advantage of taking up volumes, especially in our New York branch. And there we could convert, of course, it's a basis point business as you can imagine. We could convert the liquidity that we take up there throughout our operations into some profitability adding features. And that is something which we perform throughout the year, very low margin, but also very low-risk business, which simply adds to our profitability. Our money market people are very successful in that field. And that's something which can go up and down depending on market environment, as you can imagine. Hope this answers the point. Okay. Yes, thank you. I think with this I would hand over to Bernd Spalt to close the call. Thank you very much, ladies and gentlemen, for your interest in our earnings call. Let me announce that our Q2 earnings call will take place at the 30th of July 2021 for the half-yearly financial report, and we are very much looking forward to meet you then. Thank you very much, and stay safe and healthy. Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.