Good morning, ladies and gentlemen, and thank you for joining our event titled Astec Group and its subsidiaries present their NPE strategy and future MREL issuing needs. This session will explain why Astec Group opted for the multiple point of entry resolution strategy and give clarity on the MREL issuances of each bank. My name is Thomas Sommerhauer. I'm head of investor relations at Astec Group, and I will be your moderator and will guide you through this session today. Our session will last one and a half hours.
And to make best use of everybody's time, we are going to break this up into three different parts. The first half will be handled by the group CFO and the local CFO. The group CFO will kick it off with an introductory statement, and the local CFO will present their respective country presentations. After each presentation, we will have time for a few country specific questions for our CFOs and also to lighten it up a little bit, short voting sessions. In this context, I kindly ask you to please post your questions regarding the specific country during the respective presentation.
I will tell you in a second how to vote and how to post your questions. The last part of the event will come from you, the audience, in a CFO panel discussion. We will answer all your questions. Now let's, do, one or two, minutes of housekeeping, how it all works. For voting and posting, the questions, please use your mobile phone or any other Internet enabled device and scan your and scan our conference QR code or open the following web page.
It's www.slido.com/mrel2020one. I'm repeating this once again. So it's www.slid0.com/mrel2020one. And you also need a password for this one, and this is, simply MREL. So m r e l.
Then you can post your questions, by going to the Q and A section. We will go through all of your questions, as I mentioned before, and we will address as many as we obviously can, within the time constraints, that we have. In case there are any unanswered questions, you don't need to feel shortchanged. We will simply supply the answers by email after this event. Now let's kick it off, by testing the whole voting system, whether it, works and whether everybody is on board.
And this we do with the first, trial questions. And I think a very timely question, of course. The first question is how often were your COVID nineteen tested in the last twelve months? And there are three options, zero times up to three times or three to sorry. Up to three times, three to 10 times, or more than 10 times.
So please, make your choices. Okay. K. There's still some votes coming in. I can see that.
28, 30. The road is still ongoing. Right. I mean, I'm cutting it off here. I think the system works.
The majority has voted or at least the relative majority has voted for up to three times. So it's working. And let's try it once again maybe with another question. And the question goes, when was your last flight? Three months ago, three to six months ago, or over six months ago?
And I'm not expecting any big surprises here. So I think that's a very clear majority. I'm I'm not waiting for much longer because, I I think the the the winning bid, so to say, is over six months ago, not a really big surprise. So, it works. I'm I'm happy, that you're participating as well.
It's a very good sign, just before we go into the deep, waters. And I'm closing here by, this, voting. The winner, as I said, is, over six months ago. Now, all right, ladies and gentlemen, this is the warm up completed then. We will now kick off the session with an introductory statement from Mr.
Stefan Werffler, Chief Financial Officer of ERZ Group. And before handing over to Stefan Werffler, I would, like to draw your attention to the disclaimer on page two. Stefan, please go ahead.
Good morning, ladies and gentlemen. Thank you very much for your continued interest in Erste Group. I would like to welcome you to our CE Investor Day. Again, due to the current circumstances, this will be held as a virtual meeting. Let's all hope that we can soon start with meetings in person again.
I guess you are all aware of our footprint in Central And Eastern Europe. Erste Group is active in seven geographically connected countries with a direct presence. Additionally, we are present via our savings banks in some more countries. The year 2020, obviously a special one for all of us, was finalized by Erste Group with I think a very solid operating result of €2,940,000,000 based on a balance sheet of total assets of €277,000,000,000 The net profit, strongly influenced by risk costs, ended up at €783,000,000 On the next slide you can see the overview of our resolution groups. All the respective CFOs are here today and are going to present their countries to you.
Why is Erste Group going to a multiple point of entry strategy? Our overall strategy is to have sound, self sufficient local banks. Ideally, they all rank among the top three in the respective country and are able to support the local economy, which is very much the case for all the countries that are presented today. Hence this rather decentralized governance model was more compatible with the MPE strategy. The banks are all set up as independent entities and are highly capitalized.
All the banks are long in their local currency and have very favorable loan to deposit ratios. Additionally, there is very strong support for the NPE strategy from the local regulators and believe me, they really want to be very strong local regulators. Another important aspect of our purpose is to bring prosperity to the CE region. It's our clear goal as one part and one strong element of this strategy to promote and in some cases still develop the local capital markets. We support the local debt capital markets in local currency in the region and have already set several examples with issuance activities in Romania and Croatia and also in Slovakia, which of course is a Euro country.
The Multi Issuer Programme was established for standardized international documentation for the issuing entities for local as well as Euro sub benchmark or benchmark transactions. On this slide you can see a preliminary issuance plan of the MREL issuances in the entities, which will be in local currency and again also some of them will have euro needs. That's all for a short introduction from my side. I wish you all an interesting event and hand over to Thomas Sommerauer for housekeeping and our CFOs for their presentation. Enjoy the day, stay healthy All and all the very
right. Thanks, Stefan, for this insightful introduction. And, obviously, now it's time to move to the countries. And the first country we go to will be Slovakia. And I hereby welcome Pavel Chetkovsky, chief financial officer of SLSP, Slovakian unit, and he will give you also a short presentation detailing interesting facts about SLSP in Slovakia, of course.
Take it away, Pavel.
Good morning. Let me introduce you to Slovenzka Sprottema, member of the Erste Group. The name of the bank itself is implicating that the bank is, operating in the Slovak market, which is the east part of the, Erste Group universe. Slovakia as a country is having population of roughly 5,400,000, people, and it is, deeply integrated in all European structures, meaning, European Union, of course, NATO and Slovakia is also a member of Eurozone. Slovakia is having good credit standing.
It is rated by all three major rating agencies and it is having single A rating from all of them. With that, I can move further to introducing the bank itself. Slovenska Spuritana is a dominating retail bank in Slovakia. Slovenska Spuritana has 2,000,000 customers, out of which roughly 1,100,000 being considered to be active or the primary customers of Slovenska Sporreterna. The bank as such is representing roughly 10% of the total asset group with total assets of €20,500,000,000 And on profitability, which was somehow hit by increased provisioning in 2020, we are roughly at €108,000,000 which translates into 6.5% return on equity in the last year.
Florence Gasprositana is having corporate credit rating at the level of A2 by Moody's. And we also have a covered bond program, which is rated by Moody's and it is rated by AAA. Slovenska's Predetana is having market share in Slovakia of about 25 to 22% in lending business depending on what part of the lending portfolio you're looking at. And we are having about the same market share in deposits. Solenskarsporitana is dynamically growing in its corporate business in the last three years and we are keeping our dominant position in Retail Banking.
In Retail Banking, our major focus and the biggest part of the portfolio is located in mortgage lending. With that, I think we can move a bit to the structure of the balance sheet of Svenska's Prelitena, which, as I said, is roughly €20,500,000,000 and it is vastly dominated by the loans, which are representing almost €15,000,000,000 Slovenska Spuriturna is primarily funded by the retail deposits, and the loan to deposit ratio of Slovenska Spuriturna stands at roughly 100%. Last year, Slovenska Sportetana took some additional funding from the ECB in the form of TLTRO program. We participated in roughly 1,500,000,000.0 TLTRO. However, this program, we did not take as a primary source of funding.
We took it more or less as opportunity to: a, increase our liquidity ratios and b, to support our net interest income, thanks to the fact that the program is very attractive from the pricing perspective. If I move to the development of the operating result of Florence Gasparitana in the last year. I already mentioned that 2020 was specific year due to the fact that the bank was in the need to create additional provisioning. The provisioning was not actually driven by the fact that we would be witnessing increased number of defaults both from the retail as well as the corporate segment. But the forward looking provisioning required that we try to estimate the level of provisioning we would need in the years to come.
The problem of 2020 from the risk management perspective was the existence of private moratoria and the public moratoria, which basically gave any customer with the potential payment difficulties to take moratoria and stop payments for up to nine months. If you look on the level of provisioning in 2020, one can say that we created 2.5x more provisions than we did in 2019 as well as in the previous years. For comparison, in basis points, it means that the risk costs in Slovenska Sporterna in 2020 were at a level of 72 basis points, while in 2019, we saw a level of 30 basis points in average risk costs. With that, I think I can also comment overall profitability, which was impacted by existence of the banking levy in Slovakia. And also as a part of negotiations with the government with the specific COVID situation in Slovakia, there was agreement reached between the government and the banks that the bank levy as such will not be existing any longer.
The bank levy was canceled and currently there is no bank levy applied in Slovakia. Just for giving you some feeling about how much money it represented in the year 2020. We paid roughly €36,000,000 in the bank levy. So this cost is going to be out of our P and L for 2021 and further on. If you look on the capital position of Slovenska's Protritena, the bank is quite well capitalized.
We are running at total capital ratio at 18.6%, and we are having core equity Tier one ratio at a level of 14.5%. With that, we are compliant with all regulatory requirements by the National Bank of Slovakia, and it is also obviously reflected in the quite fine credit rating of Slovenska Sporitana by Moody's. I already mentioned that Slovenska Sporitana is the bank which is primarily financed by the deposits. And we have also some, let's say, speculative ECB financing. Nevertheless, we are subjected to AML requirements by SRB.
And this is one of the reasons we need to go to the market and issue MREL eligible instruments. In our case, it will be mostly senior preferred bonds. We think and our projections are saying us that if we issue something between 100,000,000 and €300,000,000 annually, we will be gradually building up the MREL ratio to the level requested by the regulation, which in case of Florence Kafka Returna requires 28.6% of risk weighted assets being covered by these eligible instruments. We also assume that in 2021, we will go to the market with the first tranche of green bonds. At least we still have it in our plans and the budget.
Of course, the final decision will be quite dependent on, a, business development and b, on the monetary policy of ECB, particularly in terms of further existence of TLTRO. With that, I think I can stop my presentation of Slovenska Sporitena, and I am happy to take any questions you might possibly have.
Okay. So just to add that we had a small sound problem. So thanks, Pavel, again for sharing your insights about Slovanska and Slovanska and and Slovakia, of course. And before coming to you and answering questions of the audience, We will do a short voting session again. And the question, is the next poll question that is is, looking at Slovenscar Spolutelin, in which asset class might you invest in?
And the options would be covered bonds, senior preferred bonds, or senior non preferred bonds, or as a fourth option in all of the above categories. Okay. We can see the votes coming in. And there seems to be a good level of interest what I can charge here. Okay.
It's almost a tie, I would say, between senior preferred and whatever Slovanska has to offer, basically. So I think it's a comfortable situation for the CFO to be in. Alright. I think, yes, I think, we can see the results now, and I would close this. Some okay.
I think we can close we can close the voting. I think, as I mentioned before, it's more or less a tie between senior preferred and, and all of the above categories. Alright. Hi, Pavel. Good to see you live as as well.
In terms of question, unsurprisingly, have got a question on ESG, which seems to be the topic of the day, not just in Austria, but almost globally. And how do you see the topic for you? What opportunities do you expect from it? Or how do you prepare to basically, you know, be a ESG front runner?
Well, I don't know anything he's a front runner. In any case, we are now kind of putting together a program. However, I would like to stress that ESG, is a new topic from the framework perspective. I don't see it so much new topic from perspective, but individual individual components of it. Instead of this, Green Bond program, I was mentioning that we have prepared was established long before long before the before the ESG as a as a framework, become to be so often quoted and and and asked about.
So, yes, we we are working on it. We are kind of restructuring the program, but many components are already existing. And I think still there is a plenty of work to be done, especially on, rating of of customer loan portfolio vis a vis the, environmental, objectives. Okay,
Pavel. Thank you very much. I think, that's it for the time being. And I think at the end of the panel section, we will definitely have some, more question for you, I would guess. So, hang in there.
Stay with us, and, we are now moving on, to the next country, which is Hi. Is Croatia, of course. And, I would like to introduce to you Krasimir Baric, who is Chief Financial Officer of Erste Bank Croatia. And he, in turn, will introduce you, to the Croatian way of MREL issuance. And, I hand away to him I I hand over to him straight away.
Please, Kreyfem here. Give us an introduction into MREL, the Croatian way.
I've been working in Erste and Steinmetckiserbeh in Croatia for the last fifteen years, and I'm very proud of the path we shared so far. As for the beginning, to describe Erste, I have to say we have a stable and growing operations even in the times of the COVID crisis, strong capitalization and high liquidity, leading position in digital innovation on the local market, strongest client satisfaction position placed one on the market, active role in society. Let's start with a short overview. Our bottom line financial result in 2020 due to the impact of the COVID situation and significant effect of the risk cost was understandably reduced due to frontloading of the risk cost following EBA guidelines without NPL growth year over year. However, our business operations remained completely stable.
Despite COVID-nineteen influenced our operating income, leading to the lower net commission income and trading result year over year due to the absence of the tourist season and keeping a stable net interest income. We maintained the continuity of our regular lending activity. We achieved record deposit level on both sides, retail and corporate, having balanced loan deposit ratio. We further developed our digital solutions as a trademark of our bank as well as the entire Astec Group in the CEE region. As systematically important institution, we took proactive and socially responsible role at the very beginning of the COVID-nineteen crisis.
We established a set of activities we carried out to the support of our clients, falling into the three key phases: temporary suspension of a forced collection measures opt in Moratoria for up to six months or up to twelve months for the clients from industries mostly affected by the crisis, such as tourism and dependent activities. Loans aiming to preserve the liquidity of the business entities with adequate guarantee schemes and favorable financing conditions. Finally, the synergy of business, communication and social responsible activities in 2020 was rounded up with a contribution to the community through the donation initiatives to health care institutions. Furthermore, additionally, in total amount of C2 million dollars local bank and our shareholders, we directed towards cities and municipalities that suffered two strongest earthquakes in the last one hundred and forty years, causing large infrastructural damage. We have successfully passed the comprehensive assessment conducted by the European Central Bank comprising AQR and stress test.
We were ranked second among five of our Croatian banks participating in process. It was another confirmation of our solid and stable operating model. On the other hand, it should be also seen as a significant signal of the quality of the whole Croatian banking sector, which represents a strong pillar of the recovery of Croatian economy and further Croatian way to the Eurozone. We are grateful for the fact that the renowned credit rating agency, Fitch Ratings, affirmed our credit rating at BBB plus with a stable outlook. This is an investment grade rating, two levels above the one currently held by the Croatian Republic, at the same time representing the highest rating of any bank on the Croatian market.
We received our seventh Golden Kuna award, which is presented by the Croatian Chamber of Economy to the most successful bank on Croatian market in year 2020. We are the award significant recognition, not just of the quality of our business, but also of our active role in the development of Croatia's economy and fostering the prosperity of the entire community. Our capital position has remained strong despite of the pandemic and well above minimum requirements with CET1 of 17.5% and total capital ratio of 18.7%. Croatia is today a member of the banking union and has entered into the pre euro exchange rate mechanism, two. Accordingly, the SRB has become the resolution authority.
Further to that, Ester has had no binding EMERAL target under BRRD1. We expect to receive our first EMERAL binding target under the BRRD2 in the first half twenty twenty one. Nevertheless, our current MREL capacity is already significant, while our funding plan already reflects the draft joint decision on MREL determination. Having said that, we successfully completed a EUR45 million worth bond issue, the first one on Croatian market, eligible under the minimum requirement of the own funds and eligible liabilities. Other than regulatory compliance, we have successfully achieved two additional goals: an adequate diversification of our financial resources and an appropriate contribution to the further development of Croatian capital market in which our bank has been in the forefront in recent years.
To continue on funding plans, in 2021, we plan the potential in a Kural international transaction in senior preferred format and sub benchmark size. In the upcoming years, in an average yearly MREL issuance plan in amount of EUR 200,000,000 to EUR $350,000,000 is envisaged. Is there a way to shortly sum up the expectations for the future period? If so, I would conclude as follows: The period ahead will be very challenging and will primarily depend on the impact of the epidemiological situation on the overall Croatian economy. However, there are several positive elements that can be singled out when it comes to the Croatian economy's long term position.
For example, certain improvements can be seen when it comes to improving the general investment climate in Croatia and stabilization of public finances, which has also been recognized by the international credit rating agencies. Joining the exchange rate mechanism puts Croatia one step closer to the adoption of the euro, that is, to achieving a strategic goal that will contribute to the long term financing stability for citizens and overall economy. A positive grade in the process of European Central Bank's comprehensive evaluation and confirmation of Croatian banking system stability is encouraging not only when it comes to the contribution to the euro adoption process, but also in the context of the challenges with which Croatian economy is currently faced. The banks in Croatia will play an extremely important role in that regard because Croatia's robust, strong and adequately capitalized banking sector will serve as a backbone in the process of creating new economic growth. Through a joint coordinated approach of all stakeholders, Croatia can overcome the current challenges and minimize all their potential negative impacts.
We will continue to put a strong focus on digital innovations of our business with the goal to stay a front runner of digital innovations on Croatian market. We will continue to successfully monitor and manage our loan portfolio in line with the highest credit risk management standards. At the same time, we will respect all regulatory rules and adopt a balanced approach that respects the objective of the market situation and needs of our clients. We will further proceed with integration process of our current business. We will continue to be an active partner in seeking adequate solution that will enable the fastest recovery of Croatian economy.
Finally, we will put a strong emphasis and further develop our policies when it comes to the community overall. Considering our way of doing business impacting society, we have identified six fundamental sustainable development goals to which we want to contribute. Our end goal is to foster prosperity of our clients, of our employees, and of society as a whole.
Well, thanks, Krejser, for this, great introduction to Astepanc Krejser and Krejser, of course. But before we come to you and before we have a question from the audience, obviously, we do another round of voting. And we have prepared one question for the audience, one poll question that is, and I would read it out if I can see it on the screen. Yeah. The question is, would you require a euro benchmark transaction volume in order to be able to invest?
And you can see the three options in front of you: benchmark size required, benchmark size preferred, or no preference whatsoever. And, yeah, let's give ourselves maybe a minute or so, so that we can have a result. K. That's maybe another couple of seconds, but I think we have a clear leader in the meantime, which is preference for a benchmark size, EUR 500,000,000 plus transaction. Yeah.
And the lead is the lead is building as we speak. All right. Good. Okay. I think, I think the the winner is clear from your votes, based on your votes, benchmark size leads by 72%.
So, hi, Krejio from Vienna. Let's see whether we get a question. Hello, Francois. Do we get a question or oh, yes. Oh, yes.
Here it is. We have a question. It's about, unsurprisingly, two, exchange rate mechanism two. And the unsurprising add on question is when do you expect the euro to come eventually to Croatia?
Okay. Thank you for the question. Well, joining DRM2, we are one step closer to the And adoption of the for sure, the strategic goal is that this will contribute to the long term financial stability of the citizens of Croatia, but also the overall economy. And we see for sure from perspective that we would achieve a better stability but also reducing the, I would say, currency exchange rate risk in Croatia. However, there will be the effect also on profitability of financial system.
Croatia National Bank was communicating potential benefits and costs of the adoption of the euro in Croatia and some of the benefits would be, for sure, this elimination of the currency risk from the economy and also a reduction of the borrowing costs for domestic sector, lower transaction costs. Would be there will be also the stimulus to international trade and investments like all other countries that joined the monetary union. However, there were also a prediction of some costs and losses predominantly of the independence of the monetary policy after joining the monetary union, increasing price levels due to the conversion, but we consider it there would be a milder effect. There will also be some one off changeover costs. And for sure, we would also participate in providing financial assistance to the other European Union members.
At this point of time, there is not, I would say, it's not easy to say and predict when will be the timing. Everything is set according to the national plan that has been built that adoption would be first January twenty twenty three, and this will be the soonest possible date. We are aiming to that, but let's see how the pandemic will evolve. And based on that, it might come that the adoption would be later.
Okay. Thank you, Krezimiya. I can see that we have received the second question as well, and I would be happily reading it out to you if it would not be blurred on my end. So if if you can see it
Yes. Yes. I can see
it. Yeah. I think it's about the recovery and resolution resilience facility, how it will support the Croatian recovery, if I can make it out correctly. Maybe you can help me out here if you are seeing it better.
Yeah. Yeah. I see. I see the question. Well, referring to that this time compared to the February, this recovery in resilience fund will provide an important countercyclical capacity, for the supporting of fiscal potential, which is now scarce due to the public debt is significantly higher due to the COVID impact.
However, stronger than EU average GDP contraction we had in Croatia can, in large extent, be contributed to the exposure of tourism. But down the road, it's reasonable that we expect gradual normalization and above potential GDP growth rates. Though we should highlight that how we use the funds potential would determine the longer run growth. So we should spend towards more long term gains, and this would make more sense compared to traditional infrastructure spending till now. For sure, basic precondition of the National Recovery and Resilience Plan is that we present to the European Commission the plan, which will be April.
And I'm sure that the focus on fostering structural reforms and also support SME clients' projects would be crucial to be supported.
Okay. Thank you, I think we leave it at this for the time being, and then we return, obviously, at the very end of this, session, hopefully, with some more questions, for you. So thank you very much to Sagreb and to Krejimir. And now it's time to move to another country. And, of course, you know, I moved to Prague for The Czech Republic and to Wolfgang Schopf, is local chief financial officer at Ceska Spurgy Telna.
And I would hand over to him now for a brief introduction on Ceska Spurgy Telna and The Czech Republic.
Welcome, ladies and gentlemen. Thanks for your interest in Cesco's Positano and the Czech Republic. I want to brief you about the bank and the country. Let's start with the country, 10,700,000 inhabitants in the heart of Europe since 02/2004, member of the European Union since 02/2007, member of the Schengen Area. If you ask me if Czech Republic would move to the Eurozone early and soon, no, this will not be the case.
If we look at the macro numbers, 2020 ended at minus 5.6. The outlook for this year is rather positive, being between 3.5% to 4%. Of course, the disclaimer is always what will happen with the pandemic in this country. Inflation is at 3.2% for the year 2020. Current numbers for February are 2.1%.
The unemployment might rise this year towards 4.5%, towards 5%, but still under the best of the European countries. The public debt is at 43.7%, which is fantastic in the European context, and I perceive it still has enough firepower for the government to bring this country through the economic crisis. Let's have a look at Cesco's project tenure. We are in very much areas market leader. Is it mortgage lending?
Is it consumer lending? Is it asset management or deposit gathering? We run our business with four thirty branches. We are the largest commercial bank here serving 4,500,000 clients. And there is another phenomenon that the four biggest banks here in the country cover 70% to 75% of the market potential.
Total assets are at 58.6%. The net profit for 2020 is reported at €380,000,000 What is relevant is, and we will look at it later on, the operating performance and the risk coverage that I will talk about later. If we look at the balance sheet performance in euro terms, there is a bit of a disruption of the translation effect from Czech Koruna to euros. Our loan book in local currency has grown almost by 4%. Unexpected positive surprise was the loan growth in mortgage lending.
Otherwise, we have grown like the market. And in the corporate business, I think the corporate clients were hesitant in 2020 to invest, so the portfolio growth is rather flattish. Customer deposits, we have seen growth and deposit income above all expectations. So in total, in local currency, our deposit base has grown by 10.4%. There is one consequence out of it that our loan to deposit ratio is now below 70%.
If we look at the operating performance of Ceska Skorje Telna, of course, massive impact from the COVID crisis, I have to say. Our operating result declined by 9.5% in euro terms, by below 7% in Czech corona terms. We were hit by the fast reduction of interest rates by the Czech National Bank. We placed a lot of money with the Czech National Bank, so we moved from two twenty five basis points to 25 basis points. We got a hit on the fee income as there was no public entertainment, public travel allowed in 2020.
What we could do is we could manage down our costs by 4.2% in euro terms or 1.3% in local currency, is it in Parex, is it in operating expenses. So we were able to compensate to a large extent the negative impact we had to accept on the operating income. So the costincome ratio ended up at 47.6%. Now the net profit is reported at €378,000,000 We booked 300,000,000 more than €300,000,000 in risk provisions. This translates into 96 basis points related to the loan book, and we are confident that this will help us through 2021 as well.
Our NPL coverage is 115%, and our NPL stock as of year end 2020 is 2.2%. Our return on equity, of course, is a bit squeezed by the net profit but as well by our strong capital position, which I will talk about in a second. Our capital ratio, total capital ratio is at 25.6% at the year end 2020. Our core Tier one ratio is at 21.6%. It's influenced, of course, by the ban from the Czech National Bank to distribute dividends.
We didn't distribute anything from 2019 profit, nothing from 2020. So we are in permanent discussion with the Czech National Bank, but they will clearly follow guidances from European regulators. Now we have chosen the NPE approach. We are, so to say, a Czech resolution group. It's Cescas Borje Telne, and the most relevant subsidiary of Cescas Borje Telne is a mortgage saving mortgage lending subsidiary, and we form the most relevant piece of the resolution group.
We got the requirement from the Czech National Bank for full subordination. Our MREL target is calculated de facto on the risk weighted asset development. And our final MREL target for 2024 is 25.1%, might fluctuate, might be adaptive. We will see during this year, but it pushes us to do something in addition to cover the MREL requirements. Our funding plan is for this year, we want to go to the market with the EUR 500,000,000 senior non preferred issue.
For the next years until year end 'twenty three, we expect an issuance of EUR 400,000,000 to EUR 500,000,000 equivalent, all kind of products, which will help us to cover the MREL requirements. We are under the group's multi issuance program. The governing law is the Czech law and the German law, and we plan a listing on the Prague Stock Exchange and the North Vienna Stock Exchange. To conclude on it, The Czech Republic and the banking system in The Czech Republic is still extremely resilient. This is even confirmed by the Czech National Bank.
Jeskos Positelna is capital rich, liquidity long, but we have to cover our MREL requirements, and we are happy to tap the market, and we invite you to join us on this. Thanks for
your attention. Bye bye. So, thank you, Wolfgang, for this great introduction to, Ceska and, obviously, also to the Czech Republic as well. And before we come to you, with the first question, obviously, we do another round of, voting. And, I would kindly ask, for the voting the polling question to be shown.
Okay. I see we have the first question for you, but I think we have to do the voting. Yeah? Okay. And the the voting question, for Jessica, is, for an NPS euro benchmark issue from Jessica's.
How many ratings, would you need? Minimum one, minimum two, or minimum three? And, yeah, I think unsurprisingly, we have already an early front runner, but let's wait maybe. Oh, there you go. Yeah.
I think, the the the minimum one is is still in the lead, consolidating its lead, actually. Okay. I mean, I think I'm I'm I'm closing this. The result is, fairly evident and fairly clear. And I turn to, Wolfgang now.
First of all, welcome. It's good to see you almost in person, I'm I'm tempted to say, but, let's let's let's be happy that we can see at least each other on the video. Yes. And I would go for the first audience question, which is, will the dividend payment restriction from the CMP remain in place for 2021?
Yes. Thank you very much for the question. We just got last week updated information, official information from the Czech National Bank. They will undergo a decent review of our capital risk position, forward looking efforts, during the next couple of months. We have to deliver audited results.
During summer, they will do their homework, will make homework with us. And in their statement, they say, in autumn, they will take a decision. They gave us four indicators where they see limitations. It can be risk weighted assets. It can be other risk relevant ratios.
But, we have more or less clearance. In autumn, there will be the opportunity to distribute dividends. Let's see how much it will be, and I hope that this time we can keep it and say in autumn we have a decision about it.
I think everybody will be happy in Vienna about this report.
We would be happy in
Prague, Spain. And Prague as well, of course. So if there is no further questions at this time, which I think is the case, then I would leave it at this with you, Wolfgang, for the time being and then come back to you at the end of the session. So, you very much to you, Wolfgang, and thanks to Prague. And we are now moving to Romania.
And, of course, Elke Meyer is Chief Financial Officer Banker Pomaceliano Romana, our Romanian subsidiary. And as the other gentleman before, she will give you an introduction into the bank and into the country. Elke, take it away, please.
Dear partners, both the society and business environment have changed dramatically in the last year, and most importantly, is that the Romanian economy managed to adapt rapidly to the new reality. Adaptability and resilience were the key words of this pandemic. The banking sector has played a strategic role in providing financing for both companies and individuals, supporting the government initiatives by state guarantees in keeping the economy on the right track. GDP growth outperformed CE peers. And in the last quarter of the year, after the armor performance in the third quarter, likely backed by sizable fiscal stimulus focused on investments.
The Central Bank eased its policy stance during 2020, though the ROM still offers a significant yield pickup versus CE peers as currency stability is having an important weight in MBR reaction function. Large inflows of EU funds are expected on the medium term horizon and should support growth momentum with twenty twenty one to twenty twenty four annual real GDP growth likely average at 4.5% to 5%. Fiscal consolidation is already underway and should accelerate once the economy recovers. Reforms are needed to rebalance structure of the public expenditures. The banking sector has fueled the economy, reaching an increase by 6.4% in gross loans in 2020, retail and corporate segments.
Romanians have paid more attention to their financial health. As a result, customer deposits have increased by 15%. Learning from previous economic crisis, banks have taken the correct prudent measures in order to ensure the stability of the sector. Romania will register a slower advance in retail loan stock due to lower wage hikes in 2021, while corporate outstanding loans are expected to expand by low single digits. Banks have built significant capital buffers, allowing them to absorb economic shocks without tightening credit conditions.
What was our approach in 2020? We achieved extraordinary reinventing banking on fast forward and staying united. We were fully open for business, being a reliable partner for entrepreneurs and companies in their efforts to ensure jobs continuity. We continued to be a leader in local currency lending to private individuals. BCR accounts for about 20% of the mortgage lending in Romania, capitalizing on its strong expertise in this area.
We also gained market share in consumer and corporate lending. The stability of our customer deposits showed continuous strong confidence in financial soundness and strength as well as in our ability to support wealth creation through a wide range of financial investment opportunities. We achieved a good bottom line results despite the forward looking risk provisioning books. We have improved our operating performance due to continuous digital transformation and loan growth. BCR also managed to lower its cost base in 2020, becoming one of the most efficient banks in Romania.
The capital position improved over the last years in preparation for upcoming MREL requirement, Amortization and repayment of Tier two instruments has been replaced by higher quality CET1 generated by profit capitalization. Strong capital allows for long term business growth, while capital ratios remain comfortably above minimum requirements. Going forward, BCR aims to recapture market share, especially for private individuals and SMEs. One of the key means is to activate and deepen the share of wallet with our existing 3,000,000 client base through a new advisory approach, simplified and digitized customer journeys. The preferred resolution strategy for Erste Group is an NPE strategy, multi point of entry.
And BCR Group is forming separate resolution group under which the point of entry for resolution is BCR Bank. In this case, BCR must issue external MREL eligible liabilities. What are our funding plans and our MREL strategy? In December 2019, BCR pioneered by issuing the first round senior non preferred benchmark, not only for Romania but in CEE. Please allow me to remind those of you who attended our events from November 2019 that we have managed to have the deal coming to market despite uncertainty about the MREL requirements and the bank creditor hierarchy directive in local transposition.
The transaction was highly successful on the back of a strong demand from investors. The bank decided to tap the market with around €600,000,000 seven year issue, up from around €500,000,000 at the 90 basis point spread over Romanian government bonds. The investor distribution was well balanced between asset managers, pension funds, insurance companies and also EBRD. The total volume of bond issuance planned for 2021 is around €300,000,000 to be issued in RON, which means roughly €1,500,000,000 in RON. We will use a mix of senior preferred and non preferred instruments.
BCR is a resilient bank with an optimized balance sheet structure and a healthy business model. We strive to live by our purpose to support the real economy, promote financial education and bring prosperity to our customers. Thank you.
Thanks, Elke, for this great introduction, and welcome from Vienna. And hello to Bucharest, of course. Before we come to you and before we have the first audience question, we do our usual routine in the meantime. We have the next polling question, and we are asking the audience now, would you possibly invest in a local currency denominated, so let's say, Romanian late denominated benchmark? And the options are yes, the second option is no, And the third option is, yes if there would be a euro currency swap provided with this facility.
So let's give ourselves one or two, maybe not minutes, but maybe ten or twenty seconds to see what we can get a clear leader here. I think the local currency version is in the lead currently, but it's it's a tightening race. It's almost a tie now. It's a tie. I think we can close the Telkir.
I think the local currency option is a real possibility, and investors are interested in that. So thank you very much to the audience again for participating in this call. And let's see whether we have the first question for you. Okay. I think we have even two questions.
And if I can read this out correctly, then the question is, obviously, you did the issuance in 2019 that you were referring to already in your presentation. And the question would be whether it's MREL eligible.
Good afternoon. Because in Romania, it's already after lunchtime. From my side to everybody, yes, the issue which we did in 2019 is MREL eligible under the current framework. So, yes, the answer is a clear yes. And regarding the second question, what I can see here, the MREL target in terms of percentage of RWA, We have received last year an indicative target from the National Bank of Romania, and it's near to 30% of RWAs.
Okay. Thanks, Elke, for helping me out here and reading out the question as well as well as answering it. Sorry. No. No.
It's all it's all it's all good. It makes it easier for me because sometimes my screen is a little bit blurred, so I'm I'm I'm happy for every support I get. So, Eke, thanks very much for the time being. I think, these are the two questions, we had, and, obviously, we'll revert back to you, as soon as, sort of the final country presentation, is finished. So, goodbye and talk to you later.
Thank you. This take goodbye. And this takes me to the next, country, and that would be, Hungary. And, our CFO in Hungary is Ivan Wandler, and Hungarian presence was almost one of the first presences that we had in CE right from 1997 before we even expanded into Czech Republic and Slovakia and so on in a meaningful way. And, I obviously don't want to eat Ivan's lunch, so, he will give you a good introduction, to both the country and the bank, Astebank Hungary, and I would hand over with this to Ivan.
Ladies and gentlemen, a very warm welcome from my side. It's great to have you here today. My name is Ivan Wundra. I am a CFO in Erste Bank Hungary. And today, I will walk you through the preliminary results of 2020, and I would like to give you a flavor about our Emerald issuance.
But before we go to the agenda, let me just briefly talk about Hungary. Hungary is a country in Europe having basically roughly 10,000,000 inhabitants. GDP per capita is roughly €13,300 What concerns the credit rating, it's Baa3 with positive outlook and BBB with stable outlook. The capital city is Budapest. At the bottom of this slide, you can see a roadmap, convergence roadmap or transition roadmap if you want about conversion from the communistic country to the membership
Bank Hungary is the second largest lender on Hungarian market. Erste Bank entered the Hungarian market in 1997 and become one of the main players on the banking market. On the right side of upper part of this graph, you can see the market participants. What is typical for Hungarian market is that, know, OTP has very dominant position, but you can see that Erste Bank Hungary is basically positioned very well. What concerns the shareholder structure of Erste Bank Hungary?
We have three shareholders. The main shareholder is Erste Group, having 70% and the other minority shareholders are EBRD and the Hungarian government or Hungarian state having 15% stake each. Let me give you just a couple of numbers. And those are the key numbers from year 2020. Please take or bear in mind that those are still a preliminary numbers.
In 2020, we reached total assets of €10,000,000,000 The bottom line was €65,000,000 NPL coverage 109% NPL ratio 3.1% CET1 ratio 16.6% Total capital ratio nearly 20% Loan to deposit above 65% and ROE 5.6% and cost to income ratio 48.5%. I will give you a flavor of those numbers or breakdown of those numbers on the following slides. Let me start with the balance sheet performance. In local currency, meaning in foreign, loan growth reached 11.5% year on year. If we break it down into the segments, then in Retail segment, the loan growth was 17.3% and in the Corporate segment, we reached 9.5% year on year growth in local currency.
Moving to customer deposits, we recorded really a huge increase year on year, nearly 25% of customer deposits inflow. And again, breaking it down into the segments, in retail, it was 22% and in corporate, it was more than 30%. Let's move to the operating result and the bottom line. You know, we are very proud of the fact that we managed to grow our operating result over the last four years. And again, in local currency between 2019 and 2020, we managed to achieve marginal growth of 1.2%, which if you take the result in a life of the pandemic situation is, we believe, really extraordinary achievement.
Talking about the main contributors to that development of operating result, we have to mention core earnings, meaning net interest income and fee income. Cost to income ratio slightly deteriorated between 2019 and 2020, and this was basically a result of a bit higher expenses and IT investment. What concerns the bottom line, what you can see on the right side of this slide is a very similar picture, meaning that we managed to increase the bottom line starting from 2017 until the 2019. 2020, basically, as you can see, is reaching 65%, is substantially lower than in the previous years, but this is purely because of the pandemic situation. Let me briefly talk about our capital position.
We are well capitalized, that's the main message. So EBAH capital position has been stable in the previous years. Again, the CET ratio reached 16.6% and total capital ratio close to 20%. And capital adequacy was overall well respected above all the limits. Now the main part of my presentation, the MREL requirements.
You have heard already from the previous speakers that we are part of the NPE approach. Hungarian Resolution Group consists from two main entities. It's basically the bank itself, its investment company. And there are other non relevant entities like the building society, mortgage bank, and real estate company. Concerning the MREL under BRRD1 at the year end 2020, the capacity was 19.7%, MREL requirement was 26.6%.
It's fair to say that the AML requirement is still subject to further discussion with the National Bank and will be updated in our plan in the 2021. Now the funding plans. The funding plan for 2021 will have senior preferred bond issuance. The yearly issuance for 2021, we assume it will be at around €200,000,000 or Hungarian forints. And what concerns the program summary beyond 2021, you know, we assume that there will be debt issuance equaling yearly to a 100,000,000,000 forints slash €200,000,000.
And the governing law for the issuance will be Hungarian law, and, we plan to launch it on Budapest Stock Exchange. Ladies and gentlemen, thank you for your attention and I hope you will join. Thank you.
Okay. Thanks, Ivan, for this presentation on Hungary and the Astepanc Hungary and what you're up to in terms of IMREL in the future. And in the meantime, I got used to asking the polling questions. So before asking you the question, I will do the, the polling once again. And we've prepared the the following question for our audience, which is looking at the Bank Hungary in which asset class might you invest in.
It's senior preferred, senior non preferred or both. And please vote now. Okay. It's very reassuring so far for you, Ivan. Yep.
Very good. Yeah. So you can issue whatever you want. They will take it, hopefully. Let's see.
Depending on the price, I guess. Good. Good. Okay. Maybe let's wait.
Let's give ourselves another couple of seconds, and then we see what the result is. I mean, preferred is coming up a little bit now. But I think the trends are clear, so I don't want to waste anybody's time here. Investors would be happy to invest both in senior preferred and senior nonpreferred. I think that's the the good news.
And now let's see whether we have any questions from the audience for you. And I think we have, yes, whether, you intend to issue on the domestic or on the international, markets.
Right. Got it. You know, as I mentioned previously, the the final MREL requirement is still to be determined, ideally in the first half of of this year. And that's why, you know, we would like to keep both options on the table, so to say, meaning, you know, having an issuance in a domestic slash Hungarian foreign or in Europe. So it will definitely depend on the final capacity.
So, yeah, both options are in a place, so to say.
Okay. Thank you, Ivan. And I think with this, we have, at this particular moment, no further questions for you. So we can move straight to our annual q and a section, which I hereby do because I see we are also running out of time, rapidly. It's another ten minutes, that we are scheduled to be, on air.
And, yes, before obviously, going into the panel, maybe a little bit of housekeeping. If you have questions, to the respective CFOs, then, please go to the Slido app either on an Internet enabled device or on your mobile phone and and type in those questions. And we would be very grateful if you also make clear, to whom the question is directed, to which country or to which CFO, whatever we'll then, allocate accordingly. And, yes, before, doing the first questions, let's do a final sort of voting, again, to give you maybe a little bit more time, to post your questions. And the the final poll question, for the day, would be how much time would you need to evaluate or get internal limit approvals for our new issuers, in the group?
Is it less than three working days, three to five working days, or more than five working days? So it's let's wait a little bit longer because the the number of participants is just rising slowly. Okay. And while we see the votes coming in, I would like to once again draw your attention to Slido. And if you are logged into the Slido app or on on your web browser, you can go to the q and a section and, post your question there.
And if you do that, it would be very helpful if it's a short and crisp question and if you make clear, to who, this to whom this question is directed. So I think it's a fairly well, I wanted to say it's a tie trace. It's actually not a tie trace. It's a tie. So, I think the consensus here is that anything between three to five and more than five working days are necessary to get the internal approvals for an investment in the respective subsidiary bonds.
All right. Okay. And with this, I think we can move to the panel Q and A because time is rapidly running out. And, yeah, this is, once again a little bit of a challenge for me to read out. I can see the first question presumably is related to BCR.
Okay. Yeah. I I think, Elke, it's for you. And the the question, of course, is whether you are considering or whether you have future plans for issuing green and sustainable bonds.
Thank you very much for this question. Yes. We do think about issuing green, respectively, sustainable bonds. As we also because there was a question before to Pavel on the ESG, we are having it quite embedded in our strategy. And with this, we think we are able, probably not this year, maybe towards the end, but probably but most definitely next year to be able to issue green or sustainable bonds.
Okay. Thank you, Elke. That's very clear. And then the next question is related to Hungary, if you can yes. How do you see local capital market capacity to meet the ASTE Bank needs on MREL alongside other banks?
I think, Ivan, that's for you.
Yeah. Thank you for the for the question. You know, we are quite confident about the capacity Hungarian market. Know, in the first wave, we are talking about €200,000,000. And, honestly, we have a locally very experienced team, which basically ran program or a couple of programs for for issuance.
So, yeah, we are we are quite confident that, you know, for the first wave, this would be sufficient. For upcoming years, again, we are considering, you know, international issues as well. And, you know, I think the the mix of, local and international, is the is the is the way forward.
Okay. Thank you, Ivan, for answering these questions. And, let's go to the next one. And, that's for Slovanska Skolitelna, for Pavel. What measures did the government introduce in the fight, with the recession?
Or I I would guess, to phrase it correctly, to fight the recession.
Well, I think, it's
very similar like like everywhere. So what we have in Slovakia is a program of subsidies to businesses which need to be closed because of the lockdown. There is a program for, providing bridge loans or the loans to the to the corporates, which are, guaranteed by the government. And currently, there is, under development, this nationwide program, which is connected to, European Union funds. I don't think it makes much sense to go any deeper than this.
I think it's, perfectly fair enough, Pavel, because, as you correctly said, it's similar measures across the countries, including Austria. So, no tremendously different things happening from country to country. Okay. Thanks, Pavel. Let's move on to okay.
Okay. I saw there was a question on Cesca, but it has been ruled out. So let's go to Hungary again. The question, reads, any plans for the bank to also consider sustainable and green bond issuance? So once again, Ivan, also for you, the topic of ESG is being served up.
Yeah. Thank you for that for that question. To be very honest with you, we had this consideration, but, you know, it hasn't materialized yet because, you know, yeah, we have to be really firm and and convinced about that we can really put the label of green on on that issuance, and we are not there yet. Yeah? So, yeah, we are considering it, but it's not the firm plan yet.
That that's the answer.
Okay. Okay. I think that's fair enough. Thanks, Ivan. And I think the the checked question has reemerged.
No. Oh, we are, back to Slovanskaya, actually. No. I think we hit this question already, the the the fight against the recession. So let's move to the next one.
It would be, Ceska Spurdyteil. I think, Wolfgang, finally, you you you are sort of, asked to to come forward again. So what is your expectation on, monetary policy key repo rate development? I think this is always a very hot topic in The Czech Republic. Right?
It's very publicly discussed, and the current majority is definitely an increase, at the end of this year, 25 basis points. These are the cautious, careful, conservative ones. Others are saying second half and maybe more than 25 basis points. You know, the Czech government bonds, the new issuances are at 1.9, which is quite attractive. I'm very optimistic one.
I hope it will come earlier than November, December, and maybe we see even two. But I think we need to see what will happen further on with this health crisis and what does it do to the economy.
Thank you, Wolfgang. Thank you. Perfectly sensible answer. And, one final one to go because we are entering the final minute here. And it is, again, back to you to Budapest, Ivan.
How did the pandemic, affect the Hungarian economy, and what do you expect in the next period?
Yeah. Thank you for the question. You know, I have to say that the pandemic effect is developing better than expected. You know, the contraction of the GDP is lower than our expectations. Inflation oscillating around 300 bps, you know, it's as well better than than we expected.
So, generally, you know, our expectation, there will be v shaped recovery for Hungarian economy. What I can tell you that, you know, we had we had a really, a very good start of the of the year. I have been working in Hungary for five years, and, you know, we have never had such a good start of the year in spite of the fact that we have we have a pandemic situation. So moving forward, we are quite optimistic for Hungarian market.
Okay. I think on this positive statement, I would like to conclude today's event and also thank all of the panelists for participating. Of course, Pawel Chetkovsky, and Ivan Wanderer. And I would also, like to tell you, the audience, that sort of, the the whole video and all the supporting materials, be it presentations, etcetera, will be available on the following website. That's www.online.eu.
And on top of that, you can also find these materials, on our investor relations, website, on the airstegroup.com, website. And the respective local presentations will be obviously made available on the local, country subsidiary websites as well. So no excuses for not finding the info, guys. So, please go ahead and check out, the respective websites wherever you see fit. So with this, since we are one minute overdue already, I would like to thank everybody once again, the panelists, the audience, and everybody who was supporting and making this happen.
And I wish you a very good day from Vienna, and hope to see you soon. Bye bye.
Thank you. Bye bye. Bye.