Ladies and gentlemen, welcome to the Erste Group first quarter 2026 results conference call. I am Sandra, the conference call operator. I would like to remind you that all participants have been listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star 1 on your telephone. For operator assistance, please press star 0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Thomas Sommerauer, Head of Group Investor Relations. Please go ahead, sir.
Thank you very much, Sandra, for this kind introduction and also a very warm welcome to everybody who's listening in from my end. We follow today our usual conference call procedure. That is that management, Peter Bosek, CEO of Erste Group, Stefan Dörfler, CFO of Erste Group, and Alexandra Habeler-Drabek, CRO of Erste Group, will lead you through a brief presentation highlighting the financial achievements of the past quarter. During this call, they will make forward-looking statements, and accordingly, the disclaimer on page two fully applies to those statements. With this, I would hand over to Peter for the presentation.
Good morning, ladies and gentlemen. Welcome again to our first quarter 2026 conference call. I'm on page four now. Today is the first time we present to you financials, including the contribution of Erste Bank Polska. Financials that will show the business momentum in Erste's business, excluding Erste Bank Polska remains good, and that the consolidation of our new Polish unit has only added to the financial attractiveness of our franchise. To allow for better insight into how our business is actually doing, and for the simple reason that we have no comparable segment data for Erste Bank Polska, we will mainly talk about the performance excluding Erste Bank Polska throughout this presentation. In addition, we will highlight the special effects related to first-time consolidation and where relevant focus on reported figures that already include Erste Bank Polska.
With this housekeeping note out of the way, let's now move to the actual financials. We made a good start to the year. Year-on-year net interest income and net fee income, excluding Erste Bank Polska, increased by 6.5% and 7.3% respectively. Cost inflation was driven by staff and IT costs and included Polish integration costs in the amount of EUR 30 million. Operating result, excluding Erste Bank Polska, hit a new quarterly record at north of EUR 1.6 billion. Just for reference, operating profit, including Erste Bank Polska, now sits comfortably above EUR 2 billion. Risk costs ex-Polska at a mere of 16 basis points were pretty much on par with the level we saw a year ago.
Other results improved somewhat year-over-year as higher banking levels, mainly in Hungary, were more than offset by one-off income from the sale of our card business in Croatia, as already guided a quarter ago. All in all, we posted a net profit including Polska of almost EUR 900 million in the first quarter of 2026. With this, we have a good foundation to achieve our financial goals for 2026. Most importantly, a return on tangible equity of around 19% and earnings per share growth north of 20% on net profit, adjusted for extraordinary items related to the consolidation of Erste Bank Polska. Let's now move on to some key P&L financial indicators on page five.
Net interest margin ex Polska increased to 237 basis points compared to a year ago, but was down vis-à-vis the fourth quarter of 2025 on slightly weaker net interest income and somewhat higher interest-bearing assets. The margin figure of 264 basis points you see in the upper left-hand chart represents the best estimate of a margin stand including Erste Bank Polska. It's a similar story for the cost-income ratio. Irrespective of whether one looks at the efficiency ratio ex Polska of 46.5 or the report, the reported figure shown on the slide of 45%, both are already fully in line with the guidance we have given.
Just a minute ago, I mentioned just the risk cost ex-Polska were only 16 basis points in the first quarter, and on this slide we showed 68 basis points based on our reported figures. This includes more contribution from Erste Bank Polska, which lifts risk costs to 21 basis points, but also the one-off ECL provision we already flagged of EUR 302 million. With the latter now out of the way, the provisioning ratio will converge towards our guidance range of 25-30 basis points already from the next quarter onwards. Banking taxes spiked this quarter, not only due to the inclusion of Erste Bank Polska, but also due to the increased extra profit tax in Hungary.
Finally, reported earnings per share and return on tangible equity were in line with our expectations and, as already mentioned, put us on a good track to deliver our full year guidance. When we analyze the development of the balance sheet on page six, the impact of consolidating Erste Bank Polska is immediately evident. We are now a bank with a balance sheet total of EUR 450 billion, and the focus on customer business has been further reinforced. Our loan book exceeds EUR 275 billion, while customer deposits amount to more than EUR 314 billion. Business strengths, excluding Erste Bank Polska have also been healthy in the first quarter. Customer loan growth amounted to 1.5%, while customer deposits grew by 3.2% year to date.
In both, the main growth driver was the corporate and the markets business, while retail had somewhat softer start to the year. The latter is mostly explained by the exceptionally strong print in the previous quarter. The increase in intangibles by more than EUR 4 billion is a direct result of the acquisition of Erste Bank Polska. Roughly half of this amount is allocated to goodwill, the other half to customer stock. The latter will be amortized over the next 10 years, as already guided. Another noteworthy effect on the asset side is the significant increase in financial assets, which simply reflects the deposit overhang in the Polish business. On the liability side, we saw an outsized increase in equity, which is attributable mainly to the inclusion of Erste Bank Polska related non-controlling interests.
As far as the loan growth outlook is concerned, based on our continuous robust volume momentum, we confirm all targets we set a quarter ago. It's more than 5% growth ex Polska, and in total a loan stock in excess of EUR 285 billion by year-end. Balance sheet metrics were also impacted by the consolidation of Erste Bank Polska . I'm on slide seven now. The loan to deposit ratio of about 88% came down by a couple of points as a result. Year-on-year, loan and deposit growth was lifted. More importantly, growth in excluding Erste Bank Polska was absolutely satisfactory too, with customer loans advancing by 7% and customer deposits growing by 6% year-on-year. Asset quality remained rock solid despite the higher locally reported NPA ratio.
On group level, the inclusion of Erste Bank Polska actually had a positive effect as the Polish assets were consolidated at fair value. The latter had the opposite effect on the NPA coverage ratio. The impact on regulatory capital ratios is also clearly visible. The consolidation of Erste Bank Polska led to a drawdown in CET1 ratio of 450 basis points, which explains the quarter-on-quarter decline. Mind you, the figures you see on this slide represent reported figures that include interim profit. Including the first quarter profit, we would already stand above 14.8%. This figure includes a dividend accrual assuming a 45% payout ratio. Nonetheless, we will retain flexibility as far as distributions are concerned in order to be able to take advantage of opportunities that may benefit shareholders more.
To conclude on this slide, liquidity and leverage ratios were strong before and remain strong following consolidation of Erste Bank Polska . Let's now briefly examine the macroeconomic environment in our region on slide nine. Since we last reported at the end of February, quite a few things happened, most notably a crisis unfolded in the Middle East that once again put energy security and energy prices in the spotlight. Unsurprisingly, our economists have slightly trimmed their growth forecasts, but they still do predict better economic growth for five, a quarter ago these figures were at six, out of our eight core markets than we saw in 2025. Healthy growth is expected in Poland, Czech Republic, Croatia, and Serbia. While Romania, Austria, Hungary, and Slovakia are expected to grow more modestly. Nonetheless, the environment for doing profitable banking business is fully intact even in those markets.
Another macro parameter that saw some revision since the end of February is inflation. Across the board, our economists raised their inflation expectations for 2026 by some 20 basis points. Even with this, we are still talking about low to mid-single digit inflation rates, so levels that will not impede growth. When it comes to external and fiscal balances, the picture is as mixed as it was two months ago. Neutral or positive current account balances are projected for Austria, Czech Republic, Poland, and Hungary, while the other countries have to contend with deficits. In terms of fiscal stability, the Czech Republic continues to excel. Interest rate expectations also changed in light of global energy dislocations. Our economists now expect no further rate cuts in the Eurozone, Poland, Hungary or Serbia in 2026, while the expected rate cut path was reduced significantly for Romania.
On the long end, rates also have moved up in most markets, notably expectations being Hungary and Romania. This is slightly changed interest rate backdrop. This slightly changed interest rate backdrop will further support bank profitability. Talking about profitable banking business, let me share with you a couple of performance highlights of the retail business in the first quarter of 2026. In short, retail loan growth continued at a lower level than we saw last year, while retail deposits were broadly stable. Here again, we are talking about figures excluding Erste Bank Polska . Retail loans were up 7.77% to EUR 116.5 billion year-on-year. Growth was somewhat better in housing loans than consumer business, and particularly strong in CEE.
The 1.2% increase quarter-on-quarter was well balanced between housing and consumer loans. With most geographies doing better in housing loans, but Czech Republic, Erste Bank Austria and Serbia enjoying better trades in consumer business. The quality of the retail book remained good. Retail deposits consolidated in the first quarter at a level of EUR 171.7 billion. Not a big surprise after the exceptionally strong growth performance in the fourth quarter of 2025. Both overnight and term deposits slipped slightly, while saving deposits saw incremental inflows. At 6%, Hungary posted the best deposit growth in the first quarter. The slight decline in Austria was mainly due to the strong print a quarter ago.
Security savings plans that enable customers to build long-term wealth in an easy-to-manage digital format surpassed the 2 million mark in the first quarter, resulting in steady inflows of customer assets. George, our digital platform for retail clients, continued on its growth path. The number of onboarded users climbed to 11.7 million by the end of the year, and the digital sales ratio in the retail business moved upwards to 72%. Going forward, we will develop George further into a fully integrated financial advisor in order to facilitate broader advisory coverage of our client population. In the corporate segment, excluding Erste Bank Polska, and I'm on page 11 already, loans were up by 6.1% year-on-year and 1.8% quarter-on-quarter.
Growth was registered across all business lines, even though this is not visible in the upper right-hand chart, as some exposures were re-segmented from the SEB to other corporate business lines in Erste Bank Austria. In terms of loan types, investment loans were in higher demand in the first quarter of 2026 than working capital facilities and overdrafts. Corporate deposits grew by 14.1% quarter-on-quarter, mainly in the Czech Republic on higher inflows from public sector clients. Overnight deposits outgrew term deposits year-on-year, while it goes the other way around quarter-on-quarter. The market business again contributed to our fee performance. The ECM and DCM teams successfully executed 107 transactions with a co-arranged issuance volume of EUR 82 billion.
In asset management, net sales of EUR 1.4 billion contributed to Assets Under Management, which overall slipped slightly this quarter on market volatility. On the digital front, we are continuing to roll out George Business across the geographies. With this, 80,000 corporate clients across our region are now using George Business. At the same time, we expand our product offering, making George Business even more useful to our corporate customers. With this, I hand over to Stefan for the presentation of quarterly operating trends and the reporting segments.
Thanks very much, Peter, and also warm welcome to this call from my side. We move to page 13 now, please. I will keep my remarks short in respect of loan volumes today, as you already heard quite a few details about it. Excluding Erste Bank Polska, we grew net loans by EUR 3.5 billion to EUR 235.5 billion in the first quarter of 2026. Add to this Poland, that's another EUR 40.1 billion, and you get to the grand total of EUR 275.6 billion shown on the slide. In terms of geographic highlights, Hungary enjoyed the best growth momentum among all countries quarter-on-quarter as well as year-on-year.
In both relations, growth was driven by housing loans, as the outgoing co-government launched a subsidized mortgage program last September. In the Czech Republic, year-on-year growth was well-balanced between retail and corporate loans. The former housing loans were growing fastest. While in the latter, there was good demand for investment as well as working capital loans. Quarter-on-quarter growth slowed somewhat, Demand was intact across all products. Finally, in Romania, the quarter-on-quarter decline was exclusively attributable to the repayment of a co-government loan, while retail and corporate loan demand was quite solid.
Thanks to the continued healthy growth momentum in the first quarter of 2026 and a still robust macro outlook, we confirm our 2026 organic loan growth target of more than 5%, both for the Erste with and without Erste Bank Polska, resulting in a net loan stock of higher than EUR 285 billion for the enlarged Erste Group by year-end 2026. Let's now move to the highlights of our deposit franchise on page 14. Our deposit base, excluding Erste Bank Polska, grew by almost EUR 8 billion to EUR 261 billion in the first quarter of 2026. Including Erste Bank Polska, we now have a deposit base of EUR 314 billion. Customer deposits growth ex-Polska was attributable to three factors. First, we saw strong public sector inflows in the Czech Republic.
Secondly, in our usually volatile markets business, or in segment terms, in the other Austria segment, we also had significant inflows. Thirdly, our core deposits in the retail, SME and savings bank segments trended sideways after a very strong previous quarter. As on the asset side, we saw strong growth momentum in Hungary, which was spread across all business lines. Finally, in the Austrian retail and SME segments, we experienced a slight quarter-on-quarter decline, which was mainly attributable to the strong performance in the previous quarter. Having discussed volumes, let's now see how Net interest income developed in the first quarter of 2026. With this, I'm on page 15. Year-over-year NII was up 6.5% for all the reasons you are well aware of.
Good volume momentum, successful deposit repricing, continued income tailwind from the replication book, and generally speaking, let's call it an interest rate environment that is supportive of bank profitability. Quarter-on-quarter, net interest income slipped quite slightly, not an unexpected development due to the lower day count in the 1st quarter. The start of amortization of positive fair value adjustments related to the consolidation of Erste Bank Polska and due to missing income from the last quarter we still earned on the purchase price of Erste Bank Polska, EUR 7 billion just as a reminder. The letter explains the decline in the other segment. I would also like to highlight the good performance of the Austrian retail and SME segments, which confirmed the good performance of the previous quarter.
Taking all of this into account, I guess this is a very strong print and bodes well for the rest of the year. Net interest margin, NIM, very much mirrors the NII development. If we exclude Erste Bank Polska, Net interest margin was up by 2 basis points year-on-year, but down quarter-on-quarter to lower NII and higher interest-bearing assets. Including Erste Bank Polska, the picture of course looks different. The Polish business is generally operating at higher margins, consequently, this also pushes up Net interest margin to north of 260 basis points. As this level for the first quarter reporting was calculated only on end first quarter interest-bearing assets, I believe the NIM will oscillate around 270 basis points rather during the remainder of the year.
When it comes to our NII sensitivity, very important these days of course, the consolidation of Erste Bank Polska actually made little difference. You may remember that we were pretty neutrally positioned versus 100 basis points instant rate shock, and this remains the case including Erste Bank Polska. For the outlook. A quarter ago, respectively reported end of February, we told you that we target Net interest income north of EUR 11 billion 2026. This incorporated an organic growth assumption of about 5% for Erste excluding Erste Bank Polska, an NII contribution of around EUR 3 billion, or even better from Erste Bank Polska.
Obviously, on segment level, this figure needs to be adjusted for the fair value amortization of about EUR 170 million gross, about EUR 60 million net, and the non-recurrence of interest earned on the purchase price of Erste Bank Polska as mentioned before. All of this is fully valid today, we are confirming the guidance of above EUR 11 billion Net interest income for 2026. Talking about guidance confirmation, Net fee income comes to our mind, I'm with this on page 16. Including Erste Bank Polska, we almost posted quarterly Net fee income of EUR 1 billion. This is all the more remarkable as FX transaction fees that Erste Bank Polska locally reports under fees have to be reallocated to group level to the trading result. I get back to this in a couple of minutes.
If that were not the case, we would have already surpassed the EUR 1 billion mark in the first quarter, which usually is seasonally the weakest or one of the weakest. Even without Erste Bank Polska, fees performed very well. We saw an increase of 7.3% year-on-year, with the usual drivers again delivering the goods. Payment service fees benefited from more transaction and repricing, while security business fees grew on higher asset volumes. Insurance brokerage also did very well. A small decline quarter-on-quarter from an all-time record fee print was attributable to performance bonus payments from our insurance and payment service partners, which usually lead to a fee bump in the final quarter of any. Last time round, we have guided to organic fee growth in excess of 5% in 2026. We fully confirm this outlook.
We also said that including Erste Bank Polska, combined fee income should be around EUR 4 billion in 2026. This remains our ambition, even though we know today that around about a third of Polish fees will actually show up in net trading result. Over to operating expenses now, page 17. In the first quarter of 2026, we experienced the usual twofold seasonality. First, quarter-on-quarter, costs including Erste Bank Polska came down by 6.7%, sorry, excluding Erste Bank Polska came down by 6.7% as the final quarter of any year tends to be heavy on costs. Secondly, upfront regulatory payments, such as deposit insurance contribution, always burden first quarter costs disproportionately.
In addition, this was also the first quarter when we started to amortize Erste Bank Polska related intangibles, that is customer stock and the residual brand value. This will expire with the second quarter already. This amounted to EUR 66 million. Finally, we continued to book integration costs in the amount of EUR 30 million in the first quarter, 70% of which booked locally, while the remainder was booked on parent company level. All of the above explains the year-on-year cost increase of just above 5%. This tracks somewhat above our guidance of 3%, with Polish integration costs being well anchored at up to EUR 180 million, we are still optimistic that we can achieve this goal.
Consequently, we confirm our absolute cost guidance of around EUR 7 billion for 2026. The consequence of operating revenues growing faster than costs is record operating profit and improved operating efficiency. With this, we are on slide 18 in the meantime. Excluding Erste Bank Polska, operating income again exceeded EUR 3 billion, helped not only by good momentum in net interest income and fees, but also by a strong contribution of net trading and fair value result. Costs ex Polish business were just above EUR 1.4 billion. That quarterly operating result for the first time surpassed EUR 1.6 billion, and the cost-income ratio came in at an excellent 46.5%.
Including Erste Bank Polska, operating income reached almost EUR 4 billion in the first quarter of 2026, with a sustainably higher contribution from Net trading and fair value result as the Polish FX fees of about EUR 200 million or so a year are on Group level allocated to Net trading side. Therefore, the quarterly run rate of Net trading and fair value result is lifted to, I would definitely guide for north of EUR 150 million. Somewhere EUR 150-200 is realistic to be expected, in contrast to about EUR 100 million previously. In aggregate, quarterly Operating result, including Erste Bank Polska, hit almost EUR 2.2 billion. In light of all this, our cost-income ratio guidance of 45%, and with it significant positive operating leverage, looks eminently achievable in 2026.
With this, over to Alexandra for details on credit risk.
Thanks, Stefan. Also good morning and welcome to this call. I'm now on page 19. As far as risk costs in the 1st quarter of 2026 are concerned, I have 3 key messages for you. Firstly, the underlying risk performance in our franchise continues to be good. This is evidenced by a risk cost trend of 16 basis points excluding Erste Bank Polska, and 21 basis points including Erste Bank Polska. This vis-à-vis the respective full year guidance ranges of 20-25 basis points and 25-30 basis points. Secondly, this quarter we did not release any additional overlay or FLI provisions. Instead, we added some EUR 32 million, EUR 10 million of which came from the consolidation of Erste Bank Polska. In the remainder of 2026, we do not expect any further releases from FLI or portfolio overlays.
This is a result of the already mentioned volatility in global geopolitics and its downstream effects on energy markets, as well as growth and inflation expectations. Message number three, the one and only reason why you see a huge increase in reported risk costs and the corresponding spike in the provisioning ratio, this is the one-off ECL provision in the amount of EUR 302 million that is a requirement under IFRS 9 upon first time consolidation of Erste Bank Polska. This topic we had already flagged before. In terms of country highlights, the Czech Republic, Hungary, and Croatia continued to do very well. We actually posted net releases there. Erste Bank Österreich improved both year-on-year as well as quarter-on-quarter on fewer defaults. In Romania, we increased provisioning for both the retail and corporate portfolios, while in Slovakia, higher provisions were required in the retail business.
When it comes to the outlook, based on the solid first quarter performance, we confirm our full year guidance of 25 to 30 basis points, including Erste Bank Polska and excluding the already mentioned one-off effect of EUR 302 million. Let's now turn to asset quality on page 20. If I had to characterize asset quality in the first quarter of 2026 in one phrase, it would be all round stability. The group NPL ratio was stable quarter-on-quarter at 2.4%. Year-on-year it even improved a touch. Both statements are true irrespective of whether we include or exclude Erste Bank Polska. They are also true for our Austrian operations, which have been in the focus of attention over the past couple of quarters.
Group NPL coverage, including Polska, declined slightly to 67.9% year-on-year and quarter-on-quarter. While year-on-year this was mainly due to the release of overlay and FLI provisions, quarter-on-quarter it was exclusively a result of consolidating Erste Bank Polska. I will talk about it in a minute in a little bit more details. If you look at individual geographic segments, the Czech Republic, Hungary, and Croatia were leading the way, as did the other Austria segment, which comprises our large corporate business, as you know, including also a part of commercial real estate across all regions. In Slovakia and Romania, we saw an incremental deterioration in asset quality, in the former mainly driven by the retail business, while in the latter it was more broad based and aligned with the more challenging economic backdrop.
Nonetheless, even in these countries, asset quality metrics were satisfactory. Coming back to how the inclusion of Erste Bank Polska impacted group asset quality metrics. On the one hand, it contributed to lowering the group coverage ratio. On the other, it led to a visible divergence between the locally reported NPL ratio and the one shown in our Poland segment. Both effects result from fair valuation of the entire portfolio, including also non-performing loans, which push down the NPL stock and dampen segment as well as group coverage. Over time, these effects will fade, meaning the NPL and NPL coverage ratio will converge towards locally reported levels also in the segment view, and consequently will have an incremental positive effect on coverage, while the opposite is the case for the NPL ratio. All in all, and this is very important, impacts will be negligible though.
Based on 1st quarter performance, we see no reason to change our asset quality outlook for 2026. We expect the group NPL ratio will stay more or less at the current very satisfying levels, while the NPL coverage is projected somewhere around 70%. With this, I hand back again to Stefan.
Thanks, Alexandra. After some exceptionally strong quarters in other results, the first quarter performance was more in line with what we and you are used to. We are on page 21. We had the usual seasonality in regulatory payments, most notably upfront payments of all kind of banking taxes in Hungary. No less than EUR 120 million to be concrete. Also upfront regulatory resolution fund contribution, which these days are less significant at EUR 13 million. To offset some of this pain, we had a positive one-off Croatia one-off in Croatia from the sale of our local card business that I already told you about a quarter ago, in the amount of EUR 116 million.
On top of that, we consolidated Erste Bank Polska, where the other result in Q1 mostly comes from the local balance sheet banking tax and the expected local Swiss franc bookings. If we add to all of this, these effects up, we pretty much came out at the same level as a year ago for other results. Deterioration quarter-on-quarter was mainly driven by the significant positive one-offs we had a quarter ago. When it comes to the outlook for this line item, I've been clear at the year-end call, and I already confirmed the statement. 2026 won't be a repeat of 2025, where all the one-offs we had were more or less one way positive.
All the more because we hear noises, and this was already a topic on Bloomberg as well, that in Romania there is ongoing investigation into the fixing of interbank rates ROBOR, which may result in fines for local banks. This may or may not have an impact already in the second quarter. Let's see the outcome of the respective hearings. How all of this, all of the reported developments translate to our bottom line result we show on page 22. Based on what we presented to you about operating performance, risk costs, other result, and the various impacts of first-time consolidation of Erste Bank Polska, we believe that a quarterly net profit of almost EUR 900 million is quite a strong achievement.
It means that already after the first quarter, we are right on course to deliver all financial targets we committed to, and that's a higher than 20% uplift in earnings per share based on net profit adjusted for extraordinary items in 2025, and a return on tangible equity of about 19%, 18.1% for the first quarter, and EUR 2.15 is the number for earnings per share for the first quarter. With this, let's turn our attention to wholesale funding and capital. Page 24, the respective slides start. I will focus here on how the consolidation of Erste Bank Polska changed the liability structure of our balance sheet. As all of you know that prior to entering the Polish market, we always had very strong deposit franchise across all markets, and that highly granular and well-diversified retail deposit constituted our main funding source.
This profile is now further accentuated with the inclusion of Erste Bank Polska. We are now even more deposit heavy and less wholesale dependent. That's only one of the reasons why Erste Bank Polska was such a perfect fit for us, and the charts on this page perfectly reflect this. We continue with looking at our long-term wholesale funding activities on page 25. As usual, we started the year very actively, and in hindsight, that was a very good decision. In January 2026, we issued Tier 2 paper in the amount of EUR 750 million, which was followed by a senior preferred issuance in the same amount. In March, we proved that despite geopolitical dislocations, we have competitive access to capital markets when we issued a EUR 1 billion mortgage covered bond.
Parallel to those activities, on group level, several subsidiaries executed successful transactions in the first quarter. A breakdown of the updated MREL issuance plan and activities you can find on page 40. Now we move to regulatory capital and risk-weighted assets on page 26. Once again, I will split my comments into two parts. First, I will focus on the overriding impact coming from first time consolidation of Erste Bank Polska. Second, I will share a couple of highlights how the business excluding the Polish business was doing. In CET1 capital, there were four main effects. The first one, as in any first or third quarter, we did not include interim profit in the calculation. The remaining three drivers were all tied to the consolidation of Erste Bank Polska.
We had additional intangible deductions for goodwill and customer relationships, as well as a negative OCI impact, which were only partly compensated by the inclusion of capital belonging to non-controlling interests. This explains the quarter-on-quarter net decline in CET1 capital of EUR 2 billion, exactly as we expected it. In risk-weighted assets, the lion's share of the increase also came from Erste Bank Polska, as 100% of their RWAs were added, impacting primarily credit risk and operational risk. Over and above that, excluding Polska, we also saw growth in credit RWAs north of EUR 3 billion as both customer loans and exposure grew. Let's tie capital and risk-weighted assets together on page 27. The reported CET1 ratio, which you see on the right-hand chart, excludes first quarter profit. It amounted to 14.5% at the end of the first quarter.
Even at this level, it is already above our management commitment towards the regulator of 14.25%. If we include first quarter profit, the picture is even brighter. We are already at 14.83%, and this includes a full quarterly dividend accrual, assuming a 45% payout ratio. As Peter Bosek already said earlier, accruing dividends at the midpoint of our payout ratio that we employed prior to the Erste Bank Polska acquisition demonstrates our full capacity to return to such a payout ratio or even more. However, very clearly, should other options promise higher shareholder returns, such options will be preferred. Any final distribution decision will therefore be made in the full context of all available capital allocation opportunities at the time. With this, over to you, Peter Bosek, for concluding remarks.
Thank you, Stefan. Let me now summarize our first quarter performance and the output for the remainder of 2026. I'm on page 29. There were many positive data points in the first quarter. Excluding Erste Bank Polska, we had a strong NII and fee growth. We had solid loan and deposit growth. We produced record operating profit. We had low risk costs and posted, and other results were positive and negative extraordinary items mostly compensated each other. With the consolidation of Erste Bank Polska, we incurred some extraordinary items which sooner or later will fade away, some already next quarter. As far as regulatory capital ratios are concerned, we have already far outperformed what we promised to our regulators.
We produced a quarterly consolidated profit that is already right on target for an annual print that starts with a Big 4, and we can then discuss whether this is on adjusted or potentially even on a reported basis. Let's see. What does all of this mean for the 2026 outlook? It simply means that the start of 2026 was encouraging, but that it would be probably not be smart in the current geopolitical environment to do anything other than fully confirm our guidance. Not because there aren't developments in the current environment that wouldn't benefit banks, such as higher interest rates. Clearly, there are also developments which can be detrimental to banks, such as weaker macroeconomic growth and higher inflation, resulting in lower volume growth and potentially higher risk costs down the line.
Consequently, if the global environment relaxes in the next weeks and months, and the effects from current energy markets dislocations prove manageable, we will certainly review our outlook in the second quarter. Until then, we will grow further, print good profits, and accumulate capital, all of which should enable us to take the best decisions in the interest of our shareholders. This, ladies and gentlemen, concludes our presentation remarks. Thanks for your attention, and we are now ready to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Mate Nemes from UBS. Please go ahead.
Yes, good morning, thank you for your presentation. I have two questions, please. The first one would be on NII. We've been seeing really good volume growth, but clearly there's some erosion in the net interest margins in a number of countries. Could you give us a bit of color to what extent this erosion is coming from asset spread compression? Perhaps, for example, in Czech Republic or in Romania. What extent this is the result of competition on the liability side, i.e., somewhat of a upward pressure on deposit margins. The second question would be on Poland and generally capital allocation.
I was wondering if you could perhaps share your updated thoughts on what extent you see an avenue to stepping up your stake in Poland in the next, you know, couple of quarters. I think you've been assessing the options to do this economically in a clearly shareholder efficient way as well. Any thoughts on that? Any updated thoughts would be appreciated. Thank you.
Morning, Mate. Yep, it's an interesting development overall on the NII front and the interest rate front. We have to look at it country by country. Let me start with the big picture. As I said in the presentation, we are very optimistic. Of course, you can never be 100% sure. We are quite confident that the overall NIM on the group level consolidated will rather slightly drift upwards from this 2.63 we reported this time. Has to do with all the effects, so to say, factored in step by step and over time. This is a relatively safe forecast. On the other hand, volumes you mentioned, volumes were very good in the first quarter. We see a good development also in April.
However, it's very clear that the geopolitical environment is a certain threat for all the players in the market when it comes to growth. Assuming that the growth holds up well, the overall NII guidance looks very robust to us. Yes, there are pressures in some of the markets. It's a mix of deposit and asset pricing, so namely Romania. A drift downwards in the both the NII and in the NIM in the first quarter compared to year-on-year level. We are very closely looking at also the developments of other players. It seems to be a trend there, tough pricing conditions, tough competition around certain products. In Czech Republic it's a little bit different.
Here we saw a fantastic result on the one hand. There is a certain slowdown on deposit side. Hence, let me say the Czech NII and the Czech performance is expected to be very strong. Maybe not with such a outstanding momentum as we saw it in 2025. The other countries have performed very well, even above our expectations here. They're namely also Austria was quite satisfactory. The discussions with our Polish colleagues show that there is even more potential from Poland to be expected. Concrete, I think what learnings we will only have in the second and third quarter.
If I may answer your second question about capital distribution. I think for us, the most important part is that we are going strong in building up capital. I think our numbers really are a big proof to the robustness of our business model. Therefore it's a little bit too early to be very clear how to distribute. I think we have proven last year that we are able to find a decision which is really adding value to our shareholders.
I think a follow-up or the gist of the question was, Peter, like where do we stand with Poland?
In terms-
Okay. Stop us.
Yeah, I think this is, this is very much depending on what kind of decision we take, because we are now in a situation where we have all capabilities in our hands.
Okay.
Thank you.
The next question comes from Gabor Kemeny from Autonomous Research. Please go ahead.
Morning. Thank you. A few follow-ups and another question on M&A, please. On Polish NII, you mentioned you see more potential later this year. Can you elaborate a little bit on this, please? I think the Q1's performance hasn't yet reflected the potential of this business. There was negative seasonality, the later consolidation. Also, there's a recurring fair value adjustment, I believe. Any thoughts on how we should expect your Polish NII to evolve would be helpful. The other question I had was on the provisions.
I mean, I understand that you don't expect overlay releases this year, which is a helpful guide, but can you perhaps give us some sensitivities, where your provisions may have to increase if the oil price remains around the current elevated levels, $120 or so? That's the second one. Finally, on your thoughts on inorganic growth, now in light of the Hungarian election outcome, to what extent do you see the chance increasing, the chances increasing, of Erste scaling up its presence in Hungary? Thank you.
All right, Gabor. Look, Polish NII, I keep it super short. We know exactly how the read-through is to the group. The difference in the first quarter, and this is due to all the filters that you are very well aware of, is a little bit north of 30 basis points. The local NIM is about 33 basis points, 34 basis points higher than what we report in the segment. That's just the technical explanation that you anyway can follow very closely. Second thing is, we think that about two thirds to three-quarters of the drive for NII should come from a very good growth momentum.
I would say balance between retail and corporate, but maybe leaning a little bit more towards corporate growth, as our colleagues are telling us on the ground. Definitely volume drive. Thirdly, a certain element, but let's see how this goes on, could also come from a little bit higher than expected rates. Colleagues are quite neutrally positioned, but naturally there is a little bit of, let me say, cream on the cake possible from rates drifting a little bit higher than originally expected. This combination. The major part is simply the strong business model on the ground and the growth, which should be driving NII.
Yeah, Gabor, on your question, let me answer in a more general way. Yeah. We are since beginning of this war, again, in very close constant contact with our clients, and of course, we are closely monitoring the portfolio on a daily basis, especially cyclic industries, including chemicals, metals, transportation, automotive. Everything which is more depending on energy price development. So far, we have not observed a deterioration in the risk profile given the higher energy prices, nor have we seen, but we also monitor on a daily basis, noticeable drawdowns of lines. You can also see this, and I repeat, our very good risk cost print in the first quarter of 16 basis points and 21 basis points, including Poland respectively.
As of today, there was also no trigger for building industry specific stage overlays. However, as you, as you rightly mentioned, we do realistically, yeah, no longer expect releases from FLI updates or overlays as we had anticipated previous to the Iran crisis. Any sensitivities, is a theoretical exercise, which I do not deem very meaningful. We stick to the 25 basis points to 30 basis points guidance despite we do no longer expect the releases. You can, if you add the EUR 30 million that we even added in the first quarter on FLI, and also overlays, this should show you that we are sufficiently confident that even with this deterioration compared to our previous expectation, we stick to our guidance. Yeah.
Take it as a sign of a strong portfolio quality, but still, of course, we all know how volatile the environment is.
When it comes to Hungary and the question about potential, in-country consultations, I think, we have proved more in the past that we are able to manage these kind of situations. We have a very strong and experienced management team in Erste Bank Hungary, and our view has not changed. We will always look at in-country opportunities in our existing countries.
Just to add, this holds true for all the countries. I got this question on Provident Polska. Gabor Kemeny can tick it off for the other countries. We have, as Peter Bosek said, experienced and very well-educated top management teams on the ground. We have a couple of opportunities. Some we let go, some we look at closer. That's what it is. In terms of cross-border, there's also to mention that, and Peter Bosek said it a couple of times, now the focus is 100% on a good integration of Poland. You cannot expect, or you should not expect some crazy adventures from us.
I hear. Thank you.
The next question comes from Gulnara Saitkulova from Morgan Stanley. Please go ahead.
Hi. Good morning. Thank you for taking my questions. My first question on capital target. You're targeting more than 14.25%, which implies a buffer of 1.3% above the requirement, performance period to guidance. Can you elaborate on why this is considered the appropriate level for Erste Group, particularly given that some of the upstream peers operate with a lower CET1 target levels? Looking ahead, do you expect any changes to regulatory requirements? Maybe related to that, following the announcement of Sberbank Polska acquisition, you lowered the target to 13.5%. Should we take and consider 13.5% as a floor, or is there a scope to operate below this level on a temporary basis? That's my first question.
Okay. Thank you for this interesting question. I split it, Gunara, into first, the target is 14.25% for our CET1 ratio, and we feel absolutely comfortable with that. If you compare us to peers, it's for various reasons, the buffer regimes as it adds up, is our requirements are a little bit higher, which we, to be honest, only find appropriate in parts. We are adding, let me say an ADM level, which is as you described it, and we are completely happy with this level. You saw that we have been delivering our commitments to the regulator in full. I want to just make a small correction to your statement in the question.
We did not lower the capital target as such to 13.5. We just flagged in the course of the acquisition that there is room, and this is always in the dialogue with our regulators very clear. There is always room for, let me say, corporate development, typically M&A, to make use of the management buffer for certain activities. We were flagging that in case there would have been, which that was not the case, you saw, we had a great development in 2025. If there would have been need a couple of basis points between 13.5 basis point and 14 basis point, that would have been our way forward. We never needed it. The actual CET1 target was 14%.
It's now in the course of 2026, lifted up to 14 basis point and a quarter due to the changes in the buffer regime. The 13 and a half was the level that we never wanted to go below. As you know, from all our reported numbers, we were way above at every single point in time. Just to be precise on that, way forward, I think Peter said everything with regards to potential growth opportunities. We will keep a very strong capital ratio at any point in time. In the same moment, We will seek opportunities for good capital returning growth opportunities.
Thank you. Another question I wanted to ask on the Polish banking market, because it's widely seen as quite competitive. Could you outline your plans to grow and develop your business there? What are your market share ambitions and which levers can you pull to decide market shares and address competitive pressures across both the retail and the corporate segments? Thank you.
Yeah. Point number one, when it comes to competition in the Polish banking market, I think it is a very similar situation compared to other markets. I know there are a lot of discussion about competitiveness in Poland. When you look at NII margins, I think the competition is not on the same level compared to other countries we operate in. Point number two, I think where we definitely can add value is in terms of asset management. We see a lot of potential in asset management. The whole country is still under-penetrated in asset management. It is something where we believe there's a trend for the upcoming 20 years to 30 years.
Thank you.
The next question comes from Ben Maher from KBW. Please, go ahead.
Hi. Thank you for taking my questions. Just coming back to Czechia, and something you looked at the flagged western deposit competition. I think you mentioned earlier you were seeing similar trends. I'm just interested in what you believe is driving this competition in Czechia. My second question, just coming back to overlays, and apologies if I missed this, you talking about it earlier, but I'm just interested how you see the stock evolving this year. Just a separate question on which countries you think are particularly exposed to the current situation in the Middle East, or at least ones you're maybe slightly more worried about relative to, you know, your wider footprint. Thank you.
Mr. Dörfler.
Yeah. Thanks, Ben, for giving me the opportunity to be a little bit more specific on the Czech situation. There have been developments around the deposit base, but that's not so much due to elevated competition on deposit pricing. It's rather that the whole market, and not only our very successful local bank, Česká spořitelna, but also other market players have, I would say late, but now very strongly identified the attractiveness of investments asset management business. You can allocate this, the lion's share of, let me say, some shifts in the market, out of the typical deposit base of the traditional banks, mostly to this trend and also the sales activities of Czech banks.
It's not a competition on the deposit side as you would see it in comparable, let me say, situations. It's more a drift into, I would say, future-oriented asset management allocation that explains some of the volumes there. Thank you.
Coming back to your question on which countries we do deem the most exposed to, from the current Iran conflict. Apart from the analysis that we're doing on a constant basis, which I've commented just previously before, we of course also do stress testing in various in various frequency. All our internal analysis and stresses have not shown any specifically exposed country in our region. Just to name one which seems to be especially resilient is Poland, but no one standing out in a negative sense.
I think, Ben had the question on overlays developing in the rest of the year.
I can only come back to what I already commented to Gabor's question. As of today, we do not expect any releases. If additional overlays will be necessary, so the FLI update, as you know we do on a regular basis, will be done in Q2. We will see, and it will depend on the macroeconomic environment.
Great. Thank you.
The next question comes from Amit Ranjan from J.P. Morgan. Please go ahead.
Yes. Hi, good morning, thank you for taking my questions. The first one is on coming back to capital institution flexibility, please. Last quarter, you talked about potential share buybacks being part of the toolkit. Is that still the case, please? The second one is on costs. You have talked about efficiency gains. Are you starting to see some of the benefits of the investments made in prior years come through already, or is that more back-end loaded in the year? Lastly, can I ask on George, please? Do you have any early thoughts on any potential to roll out George to Poland? What are the opportunities that you see there? Thank you.
Thanks for the question on the capital as more. I don't remember exactly what wording we were using. We have not been adding or taking out anything of the potential, so to say, capital distribution tools, in the last call, certainly. We have to see also where we stand. I, that's why I was making the comment on the dividend in my presentation. We are accruing for the ordinary dividend, right? The capacity is there comfortably. I'm absolutely convinced to get back to at least the former dividend policy.
What will then happen in the course of the year in terms of A market situation around us and pricing and opportunities, and what is the best use of an excess capital that we are about to be building up is the second question. We don't take any of the tools off the table. We're not adding any. It's the clear, always reiterated order of events. First, we are investing into the growth. This is something I just have to really emphasize once more. Look at all the comparables. We are here to grow, and we are even under difficult environment, under difficult circumstances, growing, and this is, of course, absolutely necessary to have the necessary capital. As we are producing good profits, we will decide later on how to distribute this.
Nothing has changed, and share buyback are maybe an option or maybe not, later in this year, not being discussed these days in the boardroom.
Yeah. Let me answer your charge question. Our priority number one at the moment is very clearly to have a smooth integration for our clients. We don't want to have any kind of impact and change too much of the client services because this is extremely important for us in terms of our client satisfaction. We have absolutely no time pressure to jump on a new online banking solution in Poland because the existing online solution is doing quite great.
I was jumping over the cost question in my getting excited about the capital as I'm always, and I think there's good reason if you look at the last two years, I guess. Okay, on costs. Look, two things. I split the answer into two parts. First, we have been confirming all the lines today, that's, there's nothing to add to this one. Yes, we are already, harvesting quite some efficiencies. In some countries, there were really impressive achievements in terms of automation, use of customer journeys and optimizing there. We are progressing very well on that, on that track.
One cannot ignore, and that's the second part of the answer, with an environment that could become more inflationary around us, the item line cost itself might be under a certain stress. If this should develop though, this will certainly also have an element of tailwinds on our top line. If you look at the last two, three years, whenever inflation was elevated a little bit more and we had a little bit higher costs than expected, then usually in the overall operative performance, this was rather positive for us. That's the way I look at it. Would I make any forecast on how inflation in this very, very shaky environment nowadays will develop throughout the year? No. Maybe last comment on that, and not to get too long, but this is very important for you.
On wages, I can tell you that in all the countries except for Austria, where there are still negotiations going on, the respective agreements for this year have already been done. They are at or slightly below our expectations. Austria collective bargaining is still ongoing.
Thank you very much.
The next question comes from Robert Brzoza from PKO BP Securities. Please go ahead.
Good morning, everyone, thanks for taking my question. I have one on asset quality, namely, there was a substantial rise in the management attention exposures, +20% in Austria, 15% Czech Republic, almost 30% in Romania. There was also a jump in substandard exposures. I'm talking about quarter-to-quarter change, obviously. Again, almost 90% in Austria, 90% in Romania. I'm just wondering, has there been any change in the modeling approach or other issues that have been driving these reported figures and how these numbers are being allocated per sector? Is there any specific sector that stands out or they are broadly based? Thank you.
Yeah, I can answer this very quickly. No change in the underlying credit quality. This was influenced by the group-wide PD methodology update, which led to a reallocation of exposures from low risk to management attention in some substandard categories, which reflects a refined risk differentiation. No change in the underlying credit risk quality.
The question still remains, why did you decide to change those perceived risks or risk weights? Was it simply due to the overall macro situation, or there was something else? Thank you.
It was simply an overhaul of an old methodology, which was put in a more refined risk differentiation. There was no trigger from any deterioration, be it an industry or be it a country. It was an overhaul of an old methodology.
Right. Just last one. Why wasn't all categories more or less proportionally affected? There are differences between the countries and the two splits between the attention at substandard has also sort of yielded different results.
I cannot give you now details on the, on the methodology itself, but as usual, when you overhaul a methodology, it affects the parts differently. Maybe we can do this in a, in a catch-up session as it's really, and let me stress this again, a technical topic and nothing of an underlying worsening of the-- not for the quality.
Mm-hmm. Got it. Many thanks for the explanation.
The next question comes from Jovan Sikimic from ODDO BHF. Please go ahead.
Yes, thanks a lot. Good morning. I have two questions, please. One is rather macro-related or interest-rate related. In which markets would you see, let's say, the highest chance of rate hikes in the current environment, and how this would change, let's say, the NII outlook going forward? Maybe if you can elaborate a bit on the situation in Austria, in general performance, given still weak macro and some, you know, fiscal tightening, weak Germany data coming and also kind of weak domestic demand. How this should kind of drive, especially the volume growth going forward?
Maybe the one short on Poland, maybe it's too early, but have you experienced any client moves, especially in the corporate business, like be it attrition or even new clients, if you maybe can add a couple of words on that. Thank you very much.
All right. This is of course the multi-million or when it comes to banks overall, the multi-billion dollar question around where rates will go.
Yes.
Thanks very much for that one. We are discussing it very intensively. Peter made a couple of comments on that. At this point in time, rate cuts have become much more unlikely, if not completely unlikely for the rest of the year. There are many discussions, as you saw from today's discussions also on Bloomberg and CNBC around how the ECB votings will go today and so on and so forth.
Mm-hmm
Our position is very clear, as we stand in terms of 2026 effects. We are positioned very neutral, adjusted for the savings bank sector in Austria, which would certainly benefit. It's in the area of EUR 100 million per 100 basis points, which, as you know, is very limited given the overall exposure. Mid to long term, a certain up drift in the rates environment, also not to be considered the shape of the curve is net positive for us. This is quite clear, and I made this comment also in the light of the Polish business. It's not so that we are sitting here and hoping for rate hikes.
The probabilities in terms of hikes for each and every central bank, we can now discuss for the rest of the day, and we will not be too much smarter at the end. The likelihood of rate hikes, as we would both agree, has significantly increased.
If I might take your question related to Austria. I mean, you are absolutely right, Austria is not in a fantastic situation. You know, we are far away from being in a fantastic situation. Having said that, at least there is some kind of positive momentum when it comes to our government now, seeing a huge opportunity when it comes to Hungary and the cooperation with Hungary. There will be a delegation going to Hungary over the next weeks to come. Also our Polish acquisition changed the sentiment when it comes to Poland, there's a lot of interest of Austrian companies going to Poland. In general, we also put some efforts when it comes to costs in the Austrian budget for this year.
The budget for 2026 for Erste Bank Austria is quite an ambitious one, and we have no reason not to expect our Austrian colleagues to deliver on that. When it comes to Polish clients, especially in the corporate area, there is a very positive momentum because we have a lot of clients within our group who are reaching out to us, being happy to do their banking in Poland with us and vice versa. You know? We have above 2,000 clients in our group which are also operating in Poland, which is for us a huge business opportunity.
Okay, great. Thank you very much.
The next question comes from Riccardo Rovere from Mediobanca. Please go ahead.
Good morning, everybody, and thanks for taking my questions. Just a few clarifications from my side. The guidance on NII that was constructed a few months ago when the rate environment was different than today, can you just confirm to us that this is based on the EUR 11 billion, I'm talking more than EUR 11 billion, is based on a rate outlook that was compatible with the times when you issued this guidance? Even if the ECB doesn't do nothing today or next time, if rates stay where they are, probably, is not exactly what you had in mind when you put out the EUR 11 billion guidance. This is the first question. The second question I have for Alexandra.
Alexandra Habeler-Drabek, if I understand correctly, your words when you say we stick to 25, 30 basis points, despite the fact that the start of 2026, we're running a bit less than that. Is it somehow embedded in keeping the guidance unchanged despite the start of the year being a bit better? Is that a right way of reading your words? I have a couple of questions on Poland, if I may. The NII this quarter, correct me if I'm wrong, is this affected by a knock-off effect on debt securities? I read some EUR 54 million, maybe EUR 55 million. Is EUR 680 million the run rate going forward or is it affected by some one-offs?
Stefan, I completely, honestly, didn't understand. At the beginning of the call, maybe you gave a sort of indication, I'm not sure it's a guidance, but an indication of where the trading revenues could be. What I understood was EUR 100 million or maybe EUR 200 million, I honestly, I completely missed it. Last, another question on, you mentioned something on other result with some investigation in Romania. If you can clarify a little bit. Sorry, there are some headlines I see here from Bloomberg. This is we just received from Bloomberg. Erste ready for bolt-on M&A deals. Is growth the main way you want to use your capital rather than returning capital to shareholders?
There was another statement maybe it's like Erste ready anytime, anywhere for domestic M&A, CFO says. This is the headlines that I have just received from Bloomberg. If you can clarify a little bit on this. Thank you.
Yes.
I will start Riccardo because I can be reasonably short as you almost perfectly phrased it. Yeah. The simple and short answer is yes. To recall again, when we set up our budget as the guidance, we expected some EUR 60 million releases. This we do no longer expect. The 25-30, including Poland without the one effect was not overly prudent, I think very realistic. In this environment, don't take it as overly prudent, but overall, yes, you can take my words exactly as you explained.
All right. I will now run through the list of your questions, but we will manage. If you help me, together we will cover all the stuff. Let me start with. I combine the first and the third one. I think what you're referring to, very rightly, is what we discussed with the market, yeah, six , seven, nine months ago. EUR 2 billion realistic run rate quarterly for my Erste. EUR 750 or so, quarterly run rate to be expected. At that time, we had not too much visibility, but this was our expectation, quarterly run rate from Poland. If you look at our NII in the first quarter, we are very close to all of that in all components. That brought us to this EUR 11 billion.
However, let's not forget, and this is then part of your number three question already, there is about EUR 300 million which is to be deducted from this normal run rate for the reasons that I presented already. One of them is this PPA debt securities effect, which was amounting to exactly EUR 47 million in the first quarter. The other one is that we don't have the EUR 7 billion anymore to create interest, and then a couple of other filters which add to that. That's point number one, how we explain the NII. I believe that the clean run rate, if you look at the core of the business, is more than satisfactory and very actually promising. Net trading fair value. Thanks for getting back to this.
Look, we have now clarity in terms of accounting rules. For various reasons of IFRS rules here and there, we have to account for around a third of the fee income in the Polish business on group level with net trading fair value. This is, I would say, entirely due to FX business related. The amount of this lifts our expected, and you know that trading fair value having a run rate is a little bit tricky given the volatility, but our expected average run rate from formerly around about EUR 100 to EUR 150 plus, I would be even a little bit more optimistic, around about EUR 200. That's what I said about net trading fair value, if this hopefully clarifies this point for you.
If you look at it in the light of fee income, it's actually a very good news of the earnings capacity. Are we good on this? I go on to Romanian question and acquisition questions.
Yeah. Just a quick follow-up, Stefan. The PPA on the debt securities, that is something that is gonna stay for a while. It's not gonna go away next quarter.
It's not-
It's gonna continue and continue and continue.
Not for ages. I give you the duration of all the effects. First thing, what goes away immediately is the ECL booking that Alexandra was explaining. This is a one-off.
Mm-hmm.
EUR 2 million gone off forever. Which was removed very quickly naturally because we are, as of today, already Erste Bank Polska. That's why the effects from writing down the brand, the former brand us-utilization of Santander is over with, I think, May. Yeah, that's over and out as well. What remains the longest is the write-down and the amortization of the customer list in depreciation. Can you just go on mute, please? The amortization, this is 10.4 years, this stays with the same amount linearly more or less linearly over all this period. In depreciation, it's about EUR 200 million per year. In between, we have the amortization effects on the NII. They are slowing down step by step.
Honestly speaking, the way I look at it, we have to talk about it in 2026. I will personally not talk about the NII effects in starting from 2027 again because every small move in the market, interest rates, volume, is much more material going forward. In 2026, we have to talk about it and explain it. Going forward, frankly, you will not hear me explaining this at that on that matter anymore. Okay. Romania I can keep super short. You can look at the public communication of many banks in Romania. There is, I don't wanna comment qualitatively. There is an investigation by the Competition Council around setting of ROBOR.
This is the local, the local index, where there are investigations which now will be discussed with banks in a hearing in May. We have to flag it because we don't know what the outcome could be. It is a market effect. It has nothing to do individual with our bank. The outcome is still completely open. Last but not least, I think Peter and myself have been very clear. Yes, Bloomberg produced a nice headline. I'm happy with it because what I said there on the question: Do you look at M&A in Central Eastern Europe? My answer was in bolt-on local consolidation, domestic consolidation, we are looking anywhere and any time with our excellent local management teams. That was the answer.
It creates a nice headline, but it's not more, not less than this.
Thanks. Very clear. Just to get back 1 second on NII, the guidance was, the EUR 11 billion is built with the rates of few months ago when, whenever you disclosed that guidance.
Yes, yes, it has not materially changed so far. There was a period where the market was a little bit more on the rate cut direction. We are more a little bit on the rate hike direction. We have discussed the sensitivities. So far, I would say, to the original assumptions, there are very, very small deviations. Obviously, if the rate environment is more supportive, let's never forget, Riccardo, for 2026, we have been building our NII, so to say, momentum and dynamics mainly on growth of the volumes. That's positive so far for Erste. In the market overall, I think it's fair to say it's questionable. I'm completely happy with what we have we've been guiding for. Let's deliver on this.
Perfect. Thank you, Stefan. Very clear. Thanks.
The next question is from Simon Nellis from Citi. Please go ahead.
Thanks very much. I do have two last final questions. Romania, I see that risk cost was a bit elevated. You mentioned new defaults. Just wondering if certain sectors, is it idiosyncratic, or is there trouble brewing in Romania? On Serbia, I see that the margin fell quite a lot in the quarter. Just wondering if that's a one-off or if there's something else going on there. Thank you.
Yes, I start with your question. Risk costs, as I said, are slightly elevated. We do not expect that this elevated level will continue over the year. The reasons other than in the previous year, where when you recall, we had a handful, even less than a handful of bigger defaults. This is not the case this year. Rather it's an increase in risk cost for the unsecured consumer loan business. There we had, as you remember, some campaigns in the last year which boosted the overall volume, which also results in higher risk costs. We have already, and colleagues in Romania already tuned the underwriting standards, so we do not expect this elevated level for unsecured to continue over the year. Some cases have been downgraded also given early warning, but no specific industry.
On the, on the other point, you heard me talking about countries where we have a little bit of a pressure either on competition on the asset side. In Serbia, it is a little bit competition on the deposit side. There was in March a little bit of stress in the local currency, what I heard. I didn't mention it before, so thanks for checking, because it's not so material for Erste. Yes, there was a slight decrease of both NII and NIM due to the competition on deposit side locally.
Thank you.
The last question comes from Kishan Radia from Barclays. Please go ahead.
Thank you. Thanks for taking my question. I just have couple, actually. Just first one confirming, I guess you talked about NIM with an upward drift into the last nine months of the year from 263 basis points. Does that apply even to the ex-Polish business? Your guidance of 5% NII growth implies that growth in it, right? Growth as well as the slight margin expansion. Second is just a modeling question on the levies. Have we seen most of the levies booked in now or should I expect a bit more further coming into the next, in the next nine months?
Okay, Kishan Radia, here on the, on the first one, thanks for giving me the opportunity to explain this. I said there's only one observation point simply because we built an average there on the, on the NIM, and that's why, we are very confident that from here it should rather, on the group overall, drift slightly upwards towards our expected level of, say, 2.7-ish area. Yeah, that was what I was explaining more. We anyway look at it as you see from a discussion in the call, everyone looks at it country by country and then sums it up in the respective models. It's simply the fact that we only have one observation point yet, on the Polish segment in the consolidation. 2.63, I would see it as a starting point, and from there, slightly upwards.
I think the second question was around the Hungarian financial transaction tax or something like that, right? Thomas, did you understand?
Uh, I think you-
No, no, I was just asking about the levies actually.
Oh.
I see a lot of levies being one, is that like most of it or there'll be follow up?
Look, I take it technically. If Peter wants to add something, please follow up. Yes, I also see a lot of levies, I agree with you. That's why unfortunately the case. We have a prolongation in the Austrian banking levy. Nothing that changes the 2026 numbers. The government decided to prolong the currently existing one. Not a deterioration, also not an improvement. In Poland, just to remind everyone, we have to distinguish. On the one end, we have a balance sheet banking tax, which was there for ages. This hasn't changed. The corporate income tax is up to 30%. Nothing new. This was decided in summer last year. It's due for all the banks.
That is the major element of lifting our tax rate from last year, 20.5%, to currently expected 24.5%. I think no changes in Hungary, by the way, neither to the better nor to the worse so far. Let's see whether the new government will change something. I will cut it off here because in all the other countries it is unchanged. No improvement, but also no deterioration so far. I don't know, Peter, that's basically it, right?
That would be politically correct.
Okay. Rather, rather not add something.
Thank you. Thanks a lot.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Peter Bosek for any closing remarks.
Thank you so much for listening in. Let me just share with you that we will tell you the results of the second quarter of 2026 on the third of July. Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.