Good afternoon, ladies and gentlemen. Sorry for the delay. Thank you for taking the time out of your day to join us for our Q1 update. We can report consolidated profit of EUR 260 million in the quarter in the core of the group, excluding Russia, for a return on equity of 7.3%. It is the case every year, we have booked a large portion, but not all, of expected governmental measures and other contributions in the first quarter. Our CET1 ratio, also excluding Russia, comes in at 15.9% with the implementation of the CRR3, some relief on operational risk, and very modest loan growth. I will cover all of these in just a minute. Looking at the main revenues, net interest income was stable in the quarter, whereas fees were modestly weaker, as we usually see it in the first quarter.
Compared to quarter one of last year, fees are up 8%. The cost-income ratio has increased compared to Q1 last year in part due to pressure on OpEx, but also due to some effects on the revenue side. Income from associates was lower, although this effect is offset by a release of impairments in other results.
Therefore neutral in the bottom line.
Therefore neutral. Trading income was lower due to tightening of our own credit spreads in the first quarter, but this has already partially reversed in April. Nevertheless, we remain committed to cost discipline, especially in head office, and we have kept our cost-income ratio target unchanged for 2025. Let's now move to our Russia derisking slide on page 6. In the first quarter, we have shrunk the loan book by a further 4%. We remain ahead of the schedule agreed with ECB and generally fully compliant with the requirements. The different measures taken to reduce deposits are starting to show now results, and we can report a 9% drop in the quarter. I would like to draw your attention to the 23% ruble appreciation versus the Q1, so in the Q1 versus last year. This means that our reported balance sheet figures have increased.
What is important, of course, is that our business reduction and derisking continues, regardless of any political, geopolitical developments. In parallel to this, we continue to work on a sale or partial sale of our Russian business. It remains to be seen if recent geopolitical developments might facilitate an exit from Russia. Finally, let me address the Rasperia court case. Two weeks ago, our appeal was rejected. The appeals court confirmed the initial verdict, including that damages could be enforced against our Russian subsidiary. Russian colleagues have filed an appeal with the next instance. In the meantime, the verdict was partially enforced last week, and the CBR has withdrawn the ruble equivalent of EUR 1.9 billion from our subsidiary's account and transferred this to Rasperia. The amount covers the damages, while the remainder, around EUR 170 million, which covers the accrued interest, may be withdrawn at any time.
Once the interest part of the verdict has also been enforced, we expect the ban on the transfer of the shares to be lifted. We are also finalizing our claim in Austria and will take legal actions against Rasperia in the near future. Please understand there is little more that I can say about the next steps, both from an accounting financial perspective or in terms of legal strategy. Let's now move to the following slides, starting with the core revenues, which is slide 7. Net interest income is again very stable despite the rate cuts in recent quarters and slow loan growth. We have benefited to some extent from hedges, as well as on the liability side from high deposit volumes, especially in retail. Fees are down versus Q4 2024, but as you know well by now, this is largely seasonal.
For both, and fee income, our guidance for 2025 is unchanged. Balance sheet on slide 8, where loan growth was muted. Demand in particular has been very sluggish, whereas retail demand is still resilient. On the liability side, I just mentioned retail deposit inflows, which continued in Q1. As mentioned a minute ago, deposits in Russia decreased noticeably in the quarter. On the next slide, liquidity ratios remain very prudent. In head office specifically, we continue to run a very conservative asset and liability matching. I'm referring to the second bullet, and as you might recall, our ability to maintain very high liquidity even in extreme scenarios. The slight drop in LCR is explained by a shift of liquidity from reverse repos to ECB deposits and to some extent net interest income optimization.
There are some costly surplus deposits which we were able to eliminate, which lowered LCR but do not affect our prudent liquidity profile. On slide 10, capital ratios for the group, including Russia, improved to almost 19%. The two main drivers are the implementation of CRR3, which Hannes will address, and the 23% ruble appreciation in the quarter. More important to you, however, is the price book zero scenario, where we show the CET1 ratio for the group excluding Russia, assuming that the Russian business has been deconsolidated with a full loss to the equity. This worst-case CET1 scenario now stands at 15.9%, with again CRR3 as a main driver, together with slow loan growth. I would simply flag that for the rest of the year, the Russian operational risk component was capped at EUR 2.8 billion, which equals 61 basis points.
Guidance for this price book zero CET1 ratio is unchanged at 15.2%. Please understand that we are early in the year and have not changed profitability or loan growth. I will skip our capital requirements on slide 13, as there is nothing noteworthy to report, and move to MREL on slide 14. For Resolution Group Austria, our buffer remains very comfortable, and all of our other resolution groups remain above the requirements. We issued a senior preferred note in February, and we still aim to issue a senior non-preferred this year. You probably are aware that we announced the call of one of our outstanding AT1 notes, the 8.67% coupon notes, together with the decision not to call the 4.5% coupon notes.
Here, I can simply say that we remain committed to refinancing these instruments at the first possible window, subject to the usual conditions, not least of which include a stable market window. Let's now move to our macro outlook on slide 15. Despite the revisions, which you can see marked with red arrows, we will be higher in 2025 in CE and SEE. Private consumption and investments are driving growth, and we continue to see strong labor markets and wage growth. Defense and infrastructure spending will, of course, help in the medium term, whereas U.S. derivatives are the most imminent threat. On my next slide, please find our key rate and inflation forecasts. Perhaps here I would only flag that over the past six months, we have cut our euro rate estimates while increasing our estimates in key CE markets.
Let us now turn to my last slide with our guidance for 2025, which is unchanged. There have been some moving parts since this was published, including headwinds which add some downside risk. These include the bank tax in Austria, a slow start to the year for loan growth. At the same time, we still have three quarters, and we will adjust the guidance later if necessary. With that, I now hand over to Hannes. Thank you.
Thank you, Johann. Good afternoon, ladies and gentlemen. Thank you for joining us today. It has been a busy start of the year for risk managers everywhere, and I'm happy to report that we have made good progress in Q1. We have further increased our overlays and have started an internal stress test on various sensitivities. We have brought our NPE ratio back below 2% and cleared up some of exposures in the head office. Given the volatility in currencies and rates, we have conducted reviews of our market risk exposure. On the regulatory side, we have now implemented CRR3 and are making good progress on the 2025 ECB stress test. On operational risk specifically, we have obtained relief on the Russian component in the price book zero scenario.
Allow me to run you through these one by one, but first let me simply state that I'm satisfied that we are well prepared for interesting times ahead. Credit risk in Q1 was very benign. We saw virtually no defaults and, accordingly, almost no stage three risk costs. Clearly, the outlook remains uncertain, and we have used Q1 to book additional overlays. The macroeconomic and geopolitical uncertainty also leads us to leaving the risk cost guidance at the moment unchanged, up to 50 basis points. Since the reciprocal derivatives were announced early April, we have launched an internal stress test on derivatives. On my next slide, I will share with you our initial thoughts and findings. For now, it appears that the impact is fairly limited, but as we go through individual exposures, we may decide to recognize some further overlays in Q2.
Our stock of overlays now stands at EUR 451 million available to us excluding Russia. Also, on the subject of credit risk, we made good progress on some of our non-performing exposures in head office. NPE ratio for the group excluding Russia is now back below 2%. As some of the write-offs came from well-provisioned exposure, the coverage ratio decreased in the first quarter. We remain satisfied with our provisioning levels, not least because of our substantial stock of overlays. Away from credit risk, we have seen big moves in currency and rates, especially in the U.S. dollar. We have been busy reviewing our exposure here and anticipating what these moves could mean to our balance sheets, our clients, and to our business model. For now, we are comfortable with our positioning and exposure and have not required any meaningful adjustments. Nevertheless, we continue to monitor these developments very closely.
With the beginning of the year, we have implemented CRR3, and this has provided around EUR 6 billion of relief to credit risk outdoors, excluding Russia, partially offset by a EUR 2.1 billion increase in operational risk-weighted assets. The day one impact is therefore around minus EUR 3.9 billion, whereas the transitional benefits are worth around EUR 1.2 billion. This means, after some countermeasures, the fully loaded impact of CRR3 on credit risk and operational risk would be a net relief of an estimated EUR 2.7 billion in 2032. We have excluded market risk for now, as the fundamental review of the trading book was postponed. Let's now move on to the next slide, where we can share with you our first thoughts on the potential impact on the U.S. reciprocal carries announced and suspended in early April.
First of all, we have assumed a blanket 25% rate on all exports from the EU to the United States. Secondly, we looked at the sensitivity of export volumes to the U.S., including elasticity and possible substitution effects. We have done this on both industry and on a country level. This allows us to capture cases where for a given industry, exposure may be more sensitive in one country versus another. Finally, we have quantified this estimated drop in volumes due to lower exports to the United States as a result from this 25% blanket rate and mapped it against our exposure using the same industry/country view. Overall, the initial impact on our book appears very limited, very important in a first round effect. Around 2% of our corporate exposure is to industry, which would suffer a drop in volumes above 3%.
We are reviewing our exposures going line by line. So far, we have reviewed over EUR 10 billion, and this has led to very few rating downgrades. Nevertheless, we are designing and conducting internal stress tests specifically on carries and trade disruptions. Depending on the outcome, this may be a driver for further overlay bookings in Q2. Having said all this, we are now happy to take your questions.
We may now start a Q&A session. If you wish to ask a question today, you will need to press hash key five on your telephone keypad. Please ensure that the mute function on your telephone is turned off. Otherwise, we will not be able to hear your signal. Once again, if you wish to ask a question, please press hash key five. If you would like to withdraw your question, please press hash key six. We will give it a moment just for the Q&A sample.
Yeah, dear ladies and gentlemen, as you see, I'm not sure if we totally have fixed the technical difficulties which we experienced today. Please apologize for that. What we kindly ask you is to send also questions by email, which we then can read and answer. Once again, please apologize and thank you for your understanding and patience. Yeah, we see some questions coming in. Okay. I understand there is one question by Robert Brzoza from, and I'm sorry if my pronunciation is not that good, so from PKO. It's a question on Rasperia whether the forfeited funds are in a blocked account or gone. No, they are gone. They have been withdrawn from the accounts at this EUR 1.9 billion, as this was a second instance ruling. I think like in most other frameworks as well, the money is gone.
How does this affect the sales process is a question which relates to that. This is a very difficult question as we are preparing a claim for damages. This is the one element and the way this develops and also the, let's call it the appetite of the potential buyers, how to treat with this to keep it within the perimeter or take it out. This is still open. As I indicated, the biggest part of the EUR 1.9 billion, but the interest on it, which had been also decided by the court, was, and I don't know why, have not been withdrawn. I have no news that the shares have been unblocked, but we assume that in a reasonable, but we assume, I have to repeat that over some time, the interest will also be withdrawn and then the ban will lift it.
That's my basic assumption. We tapped, and there was then a question also on the value in Austria. This is a valuation which is linked not to the legal entity in Austria, but it's still a group asset and within the IFRS perimeter. We, of course, do now a revaluation, but in Q1, there was no need to adjust. It was unchanged, and we will see over the next couple of weeks how the revaluation would, to what it would lead. Timeline was also a question for legal proceedings, quite difficult. It will take a couple of weeks till we have all the elements together and start proceedings. We will keep you updated as soon as we have significant steps achieved. Thank you for your questions.
Now there are some questions from Gabor Kemeny from Autonomous Research, and I will share these questions and answers with Hannes. One was, how much conservatism is built in the core NII guidance of EUR 4.15 billion in light of NII annualizing close to EUR 4.2 billion in Q1? I think, Gabor, that's a fair question. As I expressed there, we see some headwind from the loan growth, which was built in, and the core question is to what extent rates will come down. You're aware that in euro currency, this is usually a big impact, and we assume that the rate cuts will come, as shown in the presentation. I somehow touched it that maybe less will come in the CE countries. Yeah. There is one more, which was geopolitically potential facilitating Russian exit.
The question is, you know, the question is, who is the potential to get quite a number of approvals? Here the question is, if this, let's say, if a ceasefire and less of sanctions will happen, if this could also facilitate the approval of a buyer. The third question, Hannes, about the CET1 deconsolidation, what I understand is the question is the waterfall from 15.8% or 15.9%, what we have at Q1, to 15.2%, I guess this was the question. Because the technical part of it, the deconsolidation impact of the current Russian equity and the RWAs are shown in the slide on the Russian part.
I can take this over, Johan, thank you very much. I'm referring to page 12, Gabor, and here you see what are the main reasons for the change. RWA increase, Johann was talking about the organic growth, market risk, and operational risk as a potential updrift. The one is looking at the current volatility on the FX market. We would believe that we need more risk weights for market risk, open position out of our structurally fixed position with our subsidiaries. That's the number one. Number two is, of course, usually by the year end, you have these up risk bookings we had in the last three years, very strong and benign across income figures. Also on the way how the up risk is being calculated, we have to incorporate a little bit more.
The underlying substance, what needs to be incorporated in the up risk has changed, and that is the reason for us to believe that in other p ressing loan growth, but also more volatility on the market risk side and the way how up risk RWA is being calculated, leading to a consumption on the CET1 quota of 137 basis points. Thank you for the question. I appreciate it.
Thank you, Hannes. We have questions from Benoit Petrarque at Kepler. There was one question which is referring to what I mentioned in the presentation, a negative impact in the net trading income. Here, it's not the core of our capital markets business, but the impact comes from our own credit spreads. I should have mentioned that in the certificates business, we have issues which we have to mark to market, and it happens when the credit spread shrinks. This gives, as these are liabilities, a negative impact, what we have positively experienced earlier in the quarters. The second question of Benoit goes to Hannes. It's the question to the Basel IV fully loaded impact on RWAs. Hannes, please.
Thank you. Please follow me to page 22. We have, I think, two or three components. The goal life that they zero impact is the minus EUR 6 billion on the credit risk RWAs. Here, as we shared with you in our last calls, we have three main components why this is such a big amount. On the one hand side, the LGD has been reduced from 45% to 40%. The second one, since RBI Group is an IFBF bank, a foundation bank, there was always this scaling factor. Whatever you calculated on RWAs, it was multiplied by 106. The scaling factor is also being taken away, and there have been some adjustments on the conversion factor, on the credit conversion factor. That is the main reasons why we have seen or why we see this drop on T0 of minus EUR 6 billion.
I indicated and shared with you that at the same time, given the new definition of the up risk, we see an updrift of EUR 2.1 billion. The updrift on the one hand side, anyway, the classic calculation when it comes to the when it comes to up risk cross income, but nowadays, we also have to incorporate provisions. What are the big provisions we had to incorporate in 2024, 2025? This is because of the change of the new environment. This is on the one hand side, the legal provisions we have created for our Pollish Swiss franc situation, but also for our Rasperia situation. That is the reason why you see this updrift of EUR 2.1 billion on the up risk side. Means that the zero net effect is EUR 3.1 billion release.
At the same time, we all know that there is a transitional period, and in a do nothing scenario, we would believe that only EUR 1.2 billion would remain. Of course, you would also assume that we adjust our product offering accordingly. Therefore, we believe that our net relief, our net relief is EUR 2.7 billion. What is for me very important, dear participants, what is very important, this is excluding market risk topics for now, because you know that there is an ongoing discussion when it comes to the introduction period and introduction cut-off time for the fundamental review of the trading book. All these CRR3 topics is without any assumed adjustments on the fundamental review of the trading book. Thank you for the question. I appreciate it.
Thank you, Hannes. We have three new questions by Mate Nemes . I start with one which was a question to the interest sensitivity of the group for the main currencies and a question about the duration of the euro hedges. What do we have? What do we have? Talking about sensitivity, there are many ways to model it. Let's take the one of the interest rate shock of minus and plus 100 basis points. We would have for minus 100 basis points, a 12-month NII sensitivity to be very precise of around EUR 32 million in head office for the euros. In the other current countries, this is all without Russia, around 51 in total. Romania, Croatia, the local currency is similar to Hungary and Czechia. All these are around EUR 7 million to EUR 10 million per country.
We have Slovakia where it is around EUR 24 million. If I add up everything excluding Russia, then it is around EUR 66 million for a 100 basis point drop. If you take the sensitivity in the local currencies, the biggest one is of course Czechia with around EUR 30 million, Hungary EUR 7 million, Serbia EUR 16 million, minus Romania minus EUR 6 million, Ukraine minus EUR 14 million. I do not know if Russia at all is relevant, but there it is around EUR 70 million as you know on the deposits and on the accounts. In total, EUR 140 million in the local currencies. If you add up everything, then it would be around EUR 190 million. If we exclude Russia, as I mentioned before, this is a big amount, around EUR 140 million. The other way around, so rate increase, it is not linear in the same way. Here it would be around EUR 100 million.
Your question to the euro hedges, we have different kinds of hedges, mainly the model book, but then also partly the equity. If I add this all up together, on average, three and a half years is the duration. It spans between very short term to up to 10 years, but this would be the average. If I may answer the third question of Mate before handing to Hannes, it was the question on downside risk on the guidance for this year. Is it only costs or also NII? I have not mentioned it, but what is for sure and where we hopefully can compensate is the Austrian bank tax. When we came out with the guidance, which we kept unchanged, there was no additional Austrian bank tax. In our case, this was increased by around EUR 55 million for this year, which comes quarter by quarter.
We have only adjusted one quarter of this EUR 55 million in the first quarter. The credit spreads on our own issues, we will see if we see a widening again to the level we had been used to before this narrowing, and see if the EUR 30 million will revise. Yeah, the good thing, I think you could hear it from Hannes, was that he is rather optimistic on the risk costs as far as we relate to the guidance. This is rather here, we hope for a positive surprise. Relating also to risk costs, there was a question to the sensitivity of risk costs to weaker GDP growth. This I hand over to Hannes.
Johann, thank you. You anyway know how our models are being built, but just to reiterate for the big audience, our macro models are, of course, comprise GDP, GDP changes. What is the level of interest? Of course, unemployment rate on the retail side. Looking at the adjustments, as we have demonstrated on one of the previous slides, as of today, we would believe that adjusting our models and including and using these new variables, these updated variables, the impact could be between EUR 30 million-EUR 50 million. Thank you for the question.
There are two questions from Krishnendra at Barclays . Where would the loan growth come from and what is the competition for liabilities like? Talking about the loan growth and what we, is it should come as it is stronger interest where we have a good retail business, so Slovakia, Czechia, Romania. Here, probably we can achieve it a fast market in Austria, which is also part of the retail if the building society's account where we also see some good inflow. Yeah, probably as I tried to guide you is maybe six to seven, rather I would be very positively surprised if it can come close to the seven.
Now to the liabilities competition, what we see is competitors, and I will not exclude ourself, had been and are still going to offer special products with a nice interest rate. Of course, this has an impact on the overall pricing as well as a shift to specific product areas. It is more in this dimension. It is less on the account itself. On the accounts where the payments, the transfers are happening here, I think there is quite a discipline in the markets not to offer rates, but the restructuring of the liabilities by the corporates and more so by the retail is an issue. We see this in almost all the markets. Thank you for the questions. There are questions from Ben from KBW. These are questions for Hannes.
The one was overlays, Poland guidance for FX mortgages, and then the further regulatory CET1 impacts this year. Hannes, please.
Thank you, Johann. Ben, as I announced when walking through the presentation, I think we have to see how the entire geopolitical situation round about tariffs is working out itself. The 90 days would run off on the 4th of July. I used the term interesting times ahead. We would like to deep dive also on the second round effects on the affected portfolios. This is automotives, this is machinery, this is chemicals. In Q2 or Q3, we might be tempted to further increase our overlays. What for me is very important, as Johan said, we really clearly stick to up to 50 basis points guidance for the full year. That is very important for me. Let's see how the whole tariff deep for debt is working out.
As I said, this might be for us a good reason to see out and also the output of the stress test, the internal stress test, whether or not we would make use of further overlays. This is when talking about overlays this year, what is the full year guidance for provisions in Poland for FX mortgages? In our full year call, we gave a guidance of around EUR 300 million. At this period in time, we would still confirm this guidance. The last topic you raised as a question, Ben, is are there further regulatory CET1 impacts this year? Here on the one hand side, we could see the introduction of sector-specific countercyclic buffer, which might be applicable with the beginning of July 2025. Here we would assume that this is maybe a 2 basis points impact coming forward.
At the same time, I would like to share with you that we are finishing some of our IRB model approvals. Here also in total, we would expect that we would maybe see an RWA relief of up to EUR 500 million comprising all the different shifts from the standardized model to the IRB model. Hopefully, this is good enough at this period of time. Thank you for the question.
Thank you, Ben. I see an incoming question from Jill. This is referring maybe Hannes also for you. What did you do with the non-performing loans? Did you sell it or write it down?
Jill, what we have done, and you anyway would notice this is a typical toolbox deployed. We had there was one bigger case making its way to the Austrian news late last year. The insolvency procedure I applied for is this 30% minimum quota, but in a self-administrative way. It means as soon as the client defaulted, we have created a provision level of up to 70%. As soon as the court was confirming it, this provision level. The remaining outstanding exposure. This gives you quite a big lever on the coverage ratio. This is also one of the reasons why coverage ratio came down. The other thing is that we have sold two smaller exposures outstanding, which have been quite seasoned, also to further work on our [NP] exposure in total. This is the way how we have worked on in the Q1.
Can you please give some information on the countercycling to the effect that while Austria has been experiencing three years of GDP contraction and forecasting a third one in Austria, you only have overlays in Q1 and no stage three? That's an obvious question, Jill. I accept. I think on the one hand side, I think the companies have been very much challenged in 2022, 2023, 2022 because of the soaring interests. We have then seen the challenges and defaults in 2023. Some others have been challenged in 2024 because of this much more expensive liquidity. Many other companies have adjusted early on. Indeed, we have of course reviewed our portfolio. We also made use of our overlays in these two years I was referring to.
If we would see that the third year, the third year of GDP contraction now also would give us more stress on downgrades or even maybe defaults, of course we might be tempted in Q2 to think about overlays. At this period of time, again, for me, important to reiterate, we feel comfortable with the level of overlays. We will look who is being impacted by the tariffs in the first round and second round effect. We would like to take it from there. The last one, what is the trend from loans going from performing to non-performing corporate insolvency trend? Sorry, let me allow you to make one more statement on the second question.
What is also very important, Jill, when we talk about Q1, as long as you did not come up with the official publication of the numbers, you have this extended period where you would have to demonstrate certain defaults, let's say from January, still in the previous financial year. That is the reason why maybe the Q1 is rather a short quota for risk managers when it comes to reflecting risk costs. We have a certain seasonality in our risk cost guidance. I think at this moment in time, I think this is the best I can give you as answer the questions you have raised. Thank you very much.
Thank you, Hannes. Ladies and gentlemen, I see that there are no more questions. Let me thank you for your patience. Please accept our apologies for the technical challenges. Sorry for that. Thank you for joining us today, and we wish you a nice afternoon. Bye-bye.
Thank you. Bye.
Thank you. You may now disconnect.