Good afternoon, ladies and gentlemen, and welcome to the Q2 2025 conference call of Raiffeisen Bank International. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead, sir.
Thank you very much.
Good afternoon, ladies and gentlemen. Thank you for taking time out of your day to join us for our Q2 update. We can report a consolidated profit of EUR 567 million for the first half of the year in the core of the group, excluding Russia. This translates to a return on equity of 8.1%. Our Common Equity Tier 1 ratio, excluding Russia, stands at 15.7%. If we were to have to deconsolidate Russia at the end of June with a zero recovery on the equity, in the figures above, you can see the impact of the claim to recognition in Russia in the second quarter announced last week, which I will touch upon shortly. The consolidated ROE for the group here is annualized, with this claim to recognition considered in the first half year only.
Loans to customers continue to grow, and the first half of the year has been successful, with good volumes in retail for personal loans and mortgages, with corporate business showing signs of life. Main revenues are stable in the comparable period, while fee income continues to show positive developments. OpEx inflation, on the other hand, is visible year on year, resulting in a cost-to-income ratio of 53.7% for the core group, mainly driven by staff expenses. Moving to our slide on Russia and starting with the business rundown, which continues as expected. Our loan book in Russia has shrunk by 9% in ruble terms since the beginning of the year, and I can confirm that we are ahead of schedule here. Deposits have also started to shrink, also down 9% in ruble terms year to date.
You will recall the ruble appreciation in Q1, which distorted the graph on the left-hand side of the page. With a stable currency development in Q2, you now see the reduction in euro terms has resumed. Let me now briefly address the statement which we put out last week and which refers to the claim we have faced in Russia and our options to seek damages in Austria. You will recall that in Q4 2024, we booked a single provision, which was the net amount of the claim for damages to be paid in Russia and the expected proceeds from the enforcement of our legal claim in Austria. Unfortunately, the strict IFRS criteria for recognizing the value of our Austrian claim are no longer met, so we have to recognize it in Q2. A few important points.
First of all, this has no impact on the core of the group, meaning that neither our Price/Book zero CET1 ratio nor our ROE guidance is affected. Second, the strength of our legal recourse claim and our own expectations of. Success and recovery are unchanged. Our legal strategy is unaffected by this accounting change. Please understand there is little more that I can say here today, in particular with regards to our next steps and our litigation strategy. We will communicate in a timely manner when necessary. Let's move now to the following slide, looking at the main revenues in the second quarter. NI was stable compared to last quarter, despite headwinds from rate cuts in EUR and the Czech koruna. Better volumes were supportive, particularly in non-EUR countries.
NI in Hungary was affected by - EUR 22 million due to an adjustment in the reporting of interest rate differential on hedging instruments, which explains the decrease you can see here in the quarterly view. Our NI guidance for the full year remains unchanged. Fee income in the second quarter rebounded, up 8% quarter on quarter for the core group from the seasonally weak first quarter, which is usually a little bit weaker, mostly stemming from clearing settlement and payment services. Also, our fee income guidance for the end of the year remains unchanged. Next up are the developments on loans and deposits, which we show in slide 8. The EUR 1.4 billion increase in loans to customers in the second quarter was driven by continued expansion in Central and Eastern Europe, especially in Czechia and Slovakia, and partly in Southeast European countries.
We can also confirm our loan guidance of around 6%-7% expected by the end of the year, with the new corporate loans picking up more dynamically in the second half. As seen here on the liability side, we observe continued retail deposit inflows as in the previous quarter, especially in Czechia. Coming to the next slide. We now also show the liquidity ratios for the core of the group. One could think that high liquidity in Russia might skew the ratios very much in the positive direction, but here you can see that even without Russia, the liquidity coverage ratio stands at a comfortable 150%. Over the last quarter, our corporate deposit base continues to decrease slightly, which means we are close to our targeted levels of deposits. Across the countries and, of course, in head office, we can report, as usual, high liquidity.
On slide 10, we now show also the CET1 ratio development quarter over quarter, excluding Russia, assuming the Price/Book zero scenario. Out of the credit risk bucket, 39 basis point impact is exposure growth. On the other hand, of course, we see a positive impact of 24 basis points from retained earnings. On minimal FX effects. You are by now familiar with the Price/Book zero scenario on the following slide, where we again show the CET1 ratio for the group under the assumption that the Russian business has been deconsolidated with a full loss to the equity. As flagged in the previous quarter for the rest of the year, the Russian operational risk component was capped at EUR 2.8 billion, equal to 57 basis points. We keep the outlook for this and expect the ratio to land at around 15.2% at year-end 2025.
Moving to our core group CET1 ratio outlook on slide 12, the moving parts behind this, notably the expected increase in credit RWAs with the upcoming loan growth and natural positive impact of retained earnings for the second half of the year. Quickly covering also our capital ratios for the entire group sit very well above the requirements, which leads to ample buffers even after the recognition in Russia in the second quarter. On slide 14, we will note our MREL ratios for the Austrian and the other resolution groups are very satisfactory. We issued a senior preferred note in February, and we still aim to issue a senior non-preferred this year. Our resolution group in CEE was already flagged here with the MREL needs for 2026. Coming to slide 15, we outline the macro outlook for this and the following year.
The growth you can see across our markets is driven by rising consumption and an increase of investments. However, the picture is different for some countries where the growth is still sluggish. It is worth mentioning here that the GDP forecast in the table already includes assumptions on imposed U.S. tariffs. Jumping to slide 16. One can observe that inflation rates have stabilized on elevated levels in CEE, while in euro rates are on levels close to the targets. Our key rate forecasts expect that rate cuts in Czechia, Hungary, and Romania are on hold for the rest of this year. Finally, on my last slide, we show our outlook. As you can see, it is broadly unchanged, with the only tweak made to the risk cost guidance, which is now reduced to around 35 basis points for the full year 2025. With that, I hand over to Hannes.
Thank you.
Thank you. Good afternoon, ladies and gentlemen. Allow me to run you through a few key elements of our second quarter result. Starting with risk costs, we can report EUR 62 million of provisions equal to 23 basis points and broadly in line with the 20 basis points which we reported in the first quarter. This is, of course, a very satisfactory level, and it allows us to revise our guidance for the full year 2025 down to 35 basis points. Our stage one and stage two provisions were up mainly as a function of our portfolio development, as well as some minor adaptations to our retail post-model adjustments. We released a small amount of our overlays and still hold around EUR 439 million for the group, excluding Russia.
As I mentioned to you in the first quarter, we have been running reviews, internal stress tests, in fact, on our portfolio sensitivity to tariffs. Based on our analysis so far, there was no need to create additional overlays. With that being said, there are some parts of the book which, of course, we keep a very close eye on. We did see a big cup in stage three provisions in the quarter, also from extremely low level in the previous quarter. Asset quality continues to improve overall, with the NP ratio for the group, excluding Russia, down to 1.8%. Following some recoveries, our coverage ratio has slightly improved to 48%. Here, of course, I know that some of you will ask why our guidance is at 35 basis points with only 20 basis points halfway through the year.
I can simply refer you to the persistent high uncertainty, both in economic terms and also looking at the geopolitics. Let me move on to Poland. We booked a further EUR 167 million of provisions for litigation in Poland. By this, we leave our guidance for the full year 2025 unchanged at around EUR 300 million. In the second half, we do not expect significant model updates. Furthermore, as the law to accelerate the resolution of these cases is introduced, this should reduce penalty interest and court fees, which are part of our provision numbers. Before we take your questions, let me finish on a positive note. As you know, the 2025 EBIT stress test results will be published this Friday afternoon. Let me use this opportunity to say a big thank you to the whole risk team.
I am satisfied with our result, which will not contain any big surprises for you. With that, let's open up the floor to some questions. Thank you.
Thank you, gentlemen. At this time, we may start the Q&A session. If you wish to ask a question today, you will need to press the star key on your telephone keypad, followed by the digit one. Please ensure that the mute function on your telephone is turned off, or we will not receive your signal. Once again, if you wish to ask a question, you will need to press star one. If for any reason you need to remove yourself from the queue, you can do so by pressing star two. We'll pause for a moment in order to allow a queue to assemble. Our first question will come from Gabor Kemeny from Autonomous .
Hello. Thank you for the presentation. I have a couple of questions. The first one is on the dividend outlook. I mean, I understand that this Russian claim recognition would not impact your ROTE, your TBV. But I'd be interested to hear to what extent Russian results might impact your dividend payment capacity. In the sense of that driving further provisions potentially or losses in Russia. Could that impact the dividends? That's the first question. Second one, you are mentioning, I understand you have limited capacity to comment on Russian litigation, but you mentioned in the report this arbitration case with a, I believe, a EUR 1 billion penalty claimed from RBI. Can you comment on the moving parts there and possibly the likelihood of that being booked? Yeah, thank you. That's it from me.
Thank you, Gabor. To your first question. Dividend outlook with this negative impact what we had in the second quarter. I mean, you are aware that in our capital planning, what we have in and in the numbers in the outlook on the CET1 ratio. We have the core of our attention is. Also the core group. And here we use. The regulatory requirements what we have, which on. A full year basis would be around EUR 1.6 per share. And so half of it is, of course, already considered in the numbers we report. At the end of the day, it is a decision considering all developments what you have there. Our decision, and this is my full understanding, is based and was always based in the last three years on the performance of the core group.
I think the outlook what we have given is a strong understanding of the potential of the group. Now to the second question, the arbitration case. Indeed, what happened is that the Raspberry brought an anti-suit injunction against this case. There are a couple of moving parts. The first session of the court, which was mainly procedural, has happened. The next session, where it will be a material discussion, is end of September in the arbitration court. Three, if I may say so, three groups have participated initially, two have already withdrawn. We will see what else can happen. As you see from the provisioning part, we do not have any reason to assume that we will have to provision that. Of course, we will update you on the further developments.
Okay. Thank you.
Thank you.
Our next question will come from Máté Nemes from UBS.
Good afternoon. Thank you for the presentation. I have three questions, please. The first one would be on your consolidated ROE guidance for the full year, the 10%. In the first half, you achieved 8.1%. I am just wondering, what do you expect to improve the full year number to 10%? What would change in the second half drastically? Is that materially lower provisioning in Poland? Is that fair value gains, perhaps, or any other effects? Also, are there any changes expected in the core equity base ex-Russia that would increase ROEs? That is the first question. The second question would be on provisioning. Another good provisioning trend in the second quarter. It seems to have come entirely from stage three provisions. If Hannes, you could talk a little bit about the nature of these defaults, also, any industries, any geographies in particular. Related to that, the third question.
The uplift from 20 basis points cost of risk in the first half to 35 at full year, are there particular industries, geographies, or any other drivers that you have in mind that you assume will deteriorate that will drive this uplift? Thank you.
Thank you for the questions. Let me start with the ROE outlook. I think the positive elements are that the loan growth is expected to be good. From our perspective, this should more than compensate or at least compensate all what we see on negative impacts from the rate cuts what we have seen so far, or if there might one come in addition. In most of the cases, as you see from our macro forecast, we now assume a stable rate environment. This is the one. The second is that the net trading income is always a moving part, but we expect rather stabilization compared to the first quarter of this year. The third element I would touch here is the litigation provisions, what we have in Poland. We already have a high number in our forecast.
We believe we have good reasons to keep the guidance what we had earlier of around EUR 300 million for the full year. This gives us a good support. On the other hand, we have headwinds as well. There is banking tax in Austria, which came as a negative surprise. We have pressure on OpEx as well. What in this forecast is not taken into consideration, which might be also a headwind, is, of course, a potential windfall tax in Ukraine, what we have seen in the last two years. It is a mixed picture, I would say, but enough comforting factors that we gave this outlook. I understand Hannes would talk now to the risk costs as well.
Yes. Máté , thanks for the questions. When reflecting back on the Q1 first half year, what was the nature of the defaults in the industries? I think there is maybe not the perfectly clear pattern. The one was a bigger case, which was out of a restructuring case where we hope that they are going to make the turnaround. And seemingly this was out of the packaging industry. They faced troubles given the current macroeconomic environment, the economic interaction. Here, the turnaround was not progressing and proceeding as we have hoped for. The other one was the one or other increase in coverage out of the commercial real estate. On the commercial real estate, I have also to share with you, this was a mixed impression because for some, we had to slightly increase our coverage.
For some older cases, we have now found settlement with a full repayment, more or less. This is what I can talk about when reflecting on the first half year. Hopefully, this is sufficiently clear for you, Máté . The second one is, if I look at the second half to come and why we as an RBI board have considered, on the one hand side, reducing the risk cost guidance down from 50 basis points down to 35 basis points, but at the same time, leaving it up at this level. You all know, those who give us company for a long period of time, that Q4 is always good for the one or other surprise. The second thing is we must not forget, and I know if I look at some parts of the markets, one could believe that the market forgot.
We are still facing a situation with elevated geopolitic risks. We see also some leveraged finance transactions who have been structured in a bullet loan structure, that there is now the time to be refinanced. I am still looking to the FI and sovereign part of the portfolio. If you look, for instance, how many more issues are being placed in the market. This is my way of thinking when looking about the second half year geopolitics. Rolling over and refinancing. Sensitive structures. Let's see how the commercial real estate and the geopolitics are also finding their way to the FI balance sheets. Hopefully, this helps to the guidance, Máté.
Absolutely. Thank you very much.
Thank you.
We'll hear next from Benoît Pétrarque from Kepler.
Yes, it's Benoît Pétrarque from Kepler Cheuvreux. The first one is on the net interest income. You've kept your guidance on NI despite the reclassification of roughly EUR 50 million annualized to the other income. Is that correct to think that your outlook on NI is slightly improving versus where you were before? Are you more positive? You mentioned the rate cuts, which probably are not going to happen in H2. I just wanted to talk about your NI outlook for H2. It seems that your guidance implies a sequential improvement of NI quarter after quarter, Q2-Q4. I just wanted to confirm that. Second point is on the loan growth, 6%-7% guidance versus 2% realized. Sounds like a very big acceleration of loan growth. I wanted to check with you how confident you are on that pace of acceleration. Final question is on Russia.
I think you are getting to a point with this deleveraging and de-risking where we could get close to the scenario where you could think about an exit from Russia. Is that something you have in mind for 2026, for example? A situation where your loan book is small enough to just give the keys to the Russian authorities. Thank you.
Thank you. I can confirm your first question. Yes. Despite the Hungarian classification, we believe that we will achieve this. Of course, we had seen quite a lot of rate cuts. If we compare average rates, and I take here as approximate the key interest rates. They had been significantly, like in Czechia, 160 basis points, Hungary, 120. And also in the euro area. Nevertheless, what we see is that, yeah, part of this is hedged, of course. This adjustment does not immediately come through. Second, as I mentioned before, the loan book is developing good. What we can say is, also from the forecast to the markets where we are in, the overall development seems very good. The performance, what we see now in our organization, is also quite optimistic.
I think even if one might assume that one or the other regulator might put in some measures which make it less easy to borrow because of a concern of overheating in one or the other market segment, I think this part in retail is working nicely. What we see now, the new volumes in unsecured as well as in the mortgage business is very good. We can believe from what we see that this keeps going for a while. In corporate, which, yeah, the first quarter was not so good, we saw much improvement now in the second quarter already. With this pipeline, I think it will materialize also in the balance sheet. Here we are confident. Talking about the de-risking scenario, I mean, here I can only repeat that, of course, any exit needs quite a lot of improvements by various authorities. Of course, the Europeans, the U.S.
to find the right buyer, but also from the Russian side administration as well as the central bank. We keep continuing this route. I personally still hope that we will show some success, but given the setbacks what we have had over the last two to three years makes us cautious. Yeah, we would love to make some announcement here as well. When talking about giving the keys back, yeah, we'll see how the geopolitically and especially the Russian environment is developing. Currently, we think rather on other routes. Thank you.
Thank you very much.
We'll move next to Riccardo Rovere from Mediobanca.
Thank you. Thank you very much for taking my questions and good afternoon, everybody. A couple, if I may. The first one is, Johann, right at the beginning of the call, if I'm not mistaken, you mentioned that the risk in Russia is going according to plan or maybe even faster than expected. When you say something like that, are you referring to what you have agreed with the regulators, with the ECB, or eventually to what kind of plan you are referring to? The second question I have is, risk cost is true that comes better than expected in the quarter, but it's really, really scattered across the divisions. Some divisions are experiencing reversal, some others, like the large corporate one, are running on 65 basis points or 70 basis points, something like that. Fairly elevated, I would say.
Now, especially in the large corporate, is there anything you think is one-off in the risk cost that you have seen so far in the semester? Last but not least, from time to time, you used to provide us with some sort of NII sensitivity by country. Here, I'm referring especially to Czechia now that rate cuts seem to have kind of accelerated, and the euro area, given that the easing cycle may be close to an end. Thanks.
Thank you for your questions, Riccardo. The first question I can answer with a clear yes. I was referring to the plan. Which was, let's be more precise. We had some requests from ECP, and there had been some assumptions by ECP as well as by us. Of course, as we see, this runs better now than expected. Yes, according to ECP.
If I can take the second question, Riccardo, partly it refers back to Máté. As you rightly spotted, there have been some countries, e.g., Hungary, where we have really seen even writebacks in the risk cost perspective. These have been some seasoned commercial real estate workout cases, which turned out positive for RBI Group. The 60 basis points you are referring to on the corporate and large corporate division, there were no new defaults in a scale above EUR 5 million of risk costs to be added. The one was a turnaround case based in the packaging industry where the turnaround suffered, and we had to allocate a little bit more of risk cost. The second thing, and I am sure you have this anyway on top of your mind, Ricardo, in the first quarter, we have added some EUR 60 million-EUR 65 million as overlays in the segment of group corporates.
If you look at the stage three, it is not as pronounced as if you look at the overall risk costs. This is the main reason for the large corporates here in Vienna. We have allocated in Q1 some overlays of EUR 60 million-EUR 70 million . Furthermore, last argument, if you look at page 23, you also can clearly see that we have increased our coverage ratio out of season than the existing default cases. Hopefully, this gives you some guidance. Thank you, Riccardo.
Riccardo, I am back to answer your third question, which is about NII sensitivity by country, and you were especially mentioning the Czech Republic and our activities there. Let me start with what we usually share with you, which is this very simple NII sensitivity with 100 basis point shocks with all the assumptions on stability in the books and some others. Here I can say, and I only use numbers without Russia, of course, because probably all of you are less interested in that sensitivity. This would be in total around EUR 120 million, evenly split more or less between euro and the local currencies, what we have. When we now go to Czechia to add a little bit more detail, here the assumption is that it will be slightly above EUR 30 million, the biggest part, so let's say 80% or more, 85% coming from the local currency.
How come to that? Of course, current accounts will not be priced negative, so this leads to a margin drop. We have built up quite a lot of deposits, which, of course, have room for adjustments. The question is, what are the reactions of competition if it falls? If we assume it cannot be fully passed on, a bigger part comes there as well. What I said to the current accounts, this is evenly split. Part of this is compensated by the positive contributions we have from our mortal hedging books, however you might call it. Given the size of the Czech book, this is a significantly big one. This is actively managed, but it is between EUR 10 billion-EUR 12 billion with a duration of slightly above four years. I would say it is a good hedge.
Beware, it is a combination of bonds, fixed-rate bonds, and of receiver of interest rate swaps. This is where we have been mainly interested. Slovakia has to the euro another big sensitivity. I would say also in a similar size, slightly less, so maybe EUR 25 million. Serbia is meanwhile also a significant country. Here, I would also say around EUR 25 million. The others are then filling up the rest to the EUR 120 million.
Okay. Thanks. Clearly, when you were mentioning 25 in Slovakia and 30 in Czech Republic, you are always referring to a 100 basis point change in policy rate, of course.
Exactly. Assuming that this is the standard for you to then make your conclusions.
Yeah. That's fine. Thank you very much.
We'll hear next from Simon Nellis from Citibank.
Oh, hi. Thanks a lot for the opportunity. Just on the NIM again, particularly on the group corporates and markets division. I saw there is a bit of an increase in NIM. Can you just give us some color on where you see NIM there? Is it going to remain stable at that level in that particular division? Because I think it saw some of the highest NIM contraction. That would be my first question. Second, I saw a large increase in fee income in Romania. If you could comment on to what extent that is a one-off. And then last, I am just a bit confused on dividend accrual. I think you said that the full-year dividend you are guiding for something like EUR 1.60, but what was actually the dividend accrual for the first half? Thank you.
Yeah. Thank you. The question to the group corporate center, I mean, this is mainly driven by a business which is with very narrow margins.
No, sorry. I was talking about the group corporates and markets division, not the corporate center, the group markets.
Sorry. Yeah, yeah.
We're the markets and markets. Yeah.
Yeah. Indeed. You're right. This depends simply on the business you have and the structure of the business. Bringing in slightly better-priced products helps a little bit. This is, I would say, here the main topic. We will see. We have moving more and more, or there is some intention to move from the very short-term business to slightly better-priced, higher margins. This is a trend. Yeah. It's an ambition to improve it here a little bit. We have suffered quite a lot if you look in the longer term from the rate switch come down.
To your second question, in Romania, what we have is a combination of a very nice new business building up in some of the fee business, but like in some other markets, we had, you might call it a seasonality impact from some fee from our partners like credit cards or whatever, where we get an incentive-driven paydown, which comes one or twice a year. If I remember correctly, this was a higher single-digit number in Romania from that. This probably explains the sort of one-off, I would rather call it, it's a seasonality number, which, okay, this towards then the quarter in which it happens. To your third, indeed, we took half of it, which is EUR 0.80 per share, which was deducted when calculating the CET1 ratio. Half of the EUR 1.60 per share. Thank you.
Thank you. Thanks very much.
We'll move next to Robert Brzoza from PKO BP Securities .
Hello, everyone. Thanks for taking up my question. I'm a little bit confused, perhaps, if you could elaborate more on the ROE guidance. Namely, you maintained your around 10%, but this is the consolidated return. Are you also providing core guidance for ROE? I mean, I would be imagining that the core ROE guidance, given the better cost of risk outlook and the fact that the better non-interest income has been related to a reclass from the interest income, could be trending up for the second half of the year. Does this around 10% consolidated ROE guidance, does it already include this additional charge in Russia? Thank you.
I'm not sure if I really now understood the question. I was referring to the core group. This is without Russia. This is important. What I did not mention, obviously, is that in the first quarter, we always have to book this special regulatory requirements. The bigger part of it comes at the very beginning of the year. Therefore, the first quarter is also a little bit distorted, and most of it is booked already. If you look at the various components, for the rest of the year, this is little. This is a very positive development, and we expect this also for this year. Second, as I said, in the core group, there is the big expectation that we can keep the EUR 300 million negative impact from BON, from the Swiss franc, and meanwhile also the euro book.
These are the two main components where we have to say this is front-loaded in the first half of the year, and this supports, of course, the second half. Now, the non-interest income, what you see usually, there is one element where the first half year, the first quarter, was already negatively influenced, was impacted, was our own credit spread. Part of our liabilities, which comes from a special business part where we have to value the parts of our liabilities, from the certificates business, where we have mark-to-market and have to use our own credit spread. Under the assumption that this is normalized, gives also some tailwind, if I may say, also compared to what we have. Now, to your question, what is the impact on Russia? Now we're talking about the full group.
The assumption here on the full group is that we have only this one-time write-down of EUR 1.2 billion. There is nothing built in, further lawsuits or whatever negative impacts. One cannot exclude it, but what we want to say is in the core group, this does not have any negative impact. All this is within the consolidated part. Of course, we have in the core group also a very small amount of value for the Russian entity, but this would only occur if we have to fully deconsolidate, and this would also have on the AG a negative impact, not on the consolidated group. There is what you have seen. I hope this answers your questions.
Maybe just one final word here, if I may. Because I'm seeing that essentially against the guidance of 13%. Core group ROE, you didn't change this figure. Although you're talking about sort of tailwinds to, if I understand correctly, NII, liability, certificate valuation, and the risk cost. So why then didn't you change upwardly the core ROE guidance for the group? Or are there any other factors that sort of stopped you from doing that?
Now, this is a very simplified approach, what you see here. This explains what is the negative impact from the Swiss franc topics, what we see in Poland currently. If you would add to what we expect, some EUR 300 million or a little bit more of maybe additional cost, what you have from Poland, then you would move up from this 10% to around 12.8% if you have it very exactly calculated. Around 13%, given all this uncertainty, is what we have. The difference between the 10%, what is our outlook, and the graph where we see the current underlying strength of the business, this is then this gap of 3% from this part of Poland.
Right. I'm actually referring to the time difference. You're talking 13% as of today. And the quarter ago, you were also talking about 13%. So essentially, I don't see any upward impact on the ROE from the positives, which include the risk costs and other elements. But I understand maybe this is more sort of complicated than this. Thank you.
Yeah. Here maybe I, as we have such great people in our investors' relation, I propose that they give you a call and run with you through the last two or three quarters to the various numbers and explain where have been the improvements from the, yeah, from the risk costs and the negative developments and the relative improvements also from Poland and how they were compensated. As you are rightfully saying, there are a couple of other things like extra taxes and then, then. I think it's worth to take 15 minutes in detail with my colleagues to run through it. They welcome such a call. Thank you.
Thank you very much.
We'll move next to Ben Maher from KBW
Hi. Thank you for taking my question. I just got a couple of quick ones. You have seen some very strong fee performance tracking ahead of guidance. I am just interested if you expect momentum to slow in the second half of this year and the reasons for that. That is my first question. The second one is just on the legal claim that you were guiding to make in the second quarter in Austria. Are you able to give a bit more color about when you expect to file this claim now and the reason for the previous delay? Then just the final question is on the geopolitics. Just interested if you have any thoughts as we look ahead to the Czech elections, which is scheduled for October. Thank you.
Yeah. Thank you. Let me outline the numbers. The fee for Q2, and then you can see what you would expect also in the next quarter. Let me dissect a little bit. If you look at the cross numbers, we have to say that Hungary is usually distorted because of their special bank transaction tax, what they have. If you have a year-on-year comparison, then this has an impact of EUR 24 million. This is what has to be considered. Of course, it depends on this transaction tax regime as well as on the transaction volumes, what we have seen. One has to also say that the transactional activities, especially in debit cards, have improved. I have already mentioned that we had done some payments out of the incentive schemes, which are only calculated once or sometimes twice. This also had quite a positive impact.
On the other hand, I can also say that the underlying business is also good. Probably it would not be—I would not advise to use the Q2 as the new base of a run rate. I think if you just look at the six quarters or so, then five, six quarters, then you see a nice improvement independent of this special effect. Now, to the claim in Austria. As I said, we believe that the strength of the claim is not disturbed at all. This was not the reason why we made the adjustment in the IFRS. It is only that the requirements for IFRS are quite strict in this special case, and therefore we adjusted.
I do not like to comment at this point in time on our tactics and the strategy, as this is moving as well, but as I said, let me confirm the strength of our case is there. First, second, we will update you in due time when we have new developments. To your third question, the Czech elections. Maybe Hannes wants to comment. Usually, I do not comment on elections.
Honestly, what I would have to say, Ben, is that we would not see any material impact foreseen from our side. Listening to our researchers on the market side, they are currently having some 2% plus minus as a cross potential on top of their mind. We see a super solid employment locally in Czechia. We truly believe that also the German fiscal measures could also support the Czech economy even further. Thanks for the question.
Ladies and gentlemen, as a final reminder, that is star one if you have a question or a comment. Again, star one. We'll take a follow-up from Riccardo Rovere from Mediobanca.
Thanks for taking my quick follow-up. With regard to overlays. I understand the amount you have related to Russia. I understand the amount you have for Ukraine. I am a bit more surprised by the fact that you still have EUR 350 million, if I am not mistaken, to EUR 340 million of overlays related to the rest of the group, which more or less accounts for 35 basis points of the loan book. That would cover more or less a full year of your underlying risk cost guidance. I was wondering what is going to happen to that. Do you think, considering the GDP in the euro area has come out a little bit better than expected, same story for the U.S. in the second quarter? I was wondering why, what is the reason of continuing to have this amount of overlays?
Should we expect you to take a decision here at year-end? What kind of discussions do you have with your auditors with regard to these EUR 340 million? Thank you.
Riccardo, I truly appreciate the question because this is anyway in the room. So give me the opportunity to talk about this. We must not forget today, as of the 30th of July, we feel or we sense that we are again in a decent environment. If you look, for instance, at the uncertainty indices, after the second or the third or fourth of April, they have been jumping upside down. Our main part of the allocated overlays has currently two or three main pillars. The one is, as I indicated in the Q1 call, the entire leveraged finance part of the portfolio. Some of these refinancing will be rolled over this year or next year. I was talking about politically and geopolitically uncertainty. Let's see whether or not all of these rollovers will go just super smoothly. This is one big part of the whole story.
The second one, what of course we also had on top of our mind, was the entire discussion round about tariffs. We have done a stress test. I was sharing this stress test with you that only for 2% of our clientele, they would have a 3% impact. This is a first-order impact only, and the first-order impact anyway we would have covered in our models. I would like to see how the second round and third round effect are playing out. You're completely right. If none of those things would materialize, so neither the refinancing risk nor the geopolitical stuff, we will be challenged. For good reasons why we keep the level of overlays in the amount what you can see currently. Hopefully, this gives sufficient guidance and way of thinking, Riccardo.
Yes, yes, yes, and no. Just to be clear here, are you basically saying, Hannes, that at the moment these EUR 340 million have been, if I may say, rebranded under the name of tariff uncertainty? It was COVID, then became Russia, then became inflation. And now those have been kind of rebranded tariff. Because we do not live in a stable world. We have never lived in a stable world. There will always be a reason to keep these overlays. This time it is tariff, it was inflation, then Russia, then COVID. I mean, is this the new way of, let's say, of accounting for something that the model just cannot capture? Because models look at the past, they do not see the future. I am just wondering to understand whether that is capital or not, or is there to stay forever.
Would you like to move to the next caller? Hello. We'll move to the next caller, Joseph Kalwoda with Will Asset Management. Please go ahead.
Hi. Good afternoon. Thanks for letting me on. Just a quick clarification. In case the arbitration case in Amsterdam gets withdrawn or thrown out altogether. If RBI prevails at the Austrian court system with the damages claim of EUR 2 billion plus, is there from April this year onwards the Austrian commercial interest rate of 8% applicable?
Please stand by, Mr. Kalwoda. One moment.
Sure.
Ladies and gentlemen, please remain on the line as we are experiencing interruption in today's conference. Please stand by. In the queue, we do have Joseph Kalwoda with Will Asset Management. Please go ahead.
Okay. Hi. Good afternoon. Thanks for letting me on. Just a quick clarification. In case this arbitration case in Amsterdam gets thrown out or withdrawn, and RBI prevails at the Austrian court system with the damage claim of EUR 2 billion plus, is there from April this year on the Austrian commercial interest rate of 8% applicable?
Good question, which I have to say I cannot answer now.
Okay. Now, maybe you will prepare for the next call.
Yeah, yeah. I will do so.
You just let me know. You just let me know. Also.
I'll let you know. We know what to do.
Yeah, sure.
Yes.
Yeah, yeah. Sure. No problem. In the beginning of the call, you pointed out that two have withdrawn the holdout. Is that the foundation in the Amsterdam arbitration court?
I said two have withdrawn, and the foundation is still in.
Okay. Okay. Excellent. Okay. Perfect. Thank you.
Operator, I would still like to answer the question to Riccardo because seemingly our line here in the conference room was not working. Riccardo, so my answer and my colleagues are already smiling at me because I was telling it to myself already 3x in a row. Now I have sufficient time to practice. The reason why we still have some EUR 300 million of overlays booked is on the one hand side, of course, given the current geopolitical environment. Secondly, we would like to see how the role of refinancing for leveraged finances is working out. We must not forget that in some of our countries, we still have, compared to through the cycle, slightly elevated interest rates.
If all those three things would normalize, rollover working out, geopolitics coming down, and interest rates being back on long-term averages, I think we would then rework and review our overlays. Thank you very much for the question.
Excellent. At this time, we'll take your final question. We'll move to Krishnendra Dubey from Barclays. Please go ahead.
Hey, thanks for taking my question, I guess. I just had one question, sorry, on the medium-term ROE guidance, I guess. I look at your guidance, you've been guiding for more than 13% for next two years. You guide for more than 13%, even this for an underlying basis. When I look at consensus, I guess it still remains below 10%. What is that consensus missing in terms of is it the revenue growth or is it cost is too high or are we modeling in too much of provisioning or other things which you think is being not modeled right, I guess, in your view? Thanks.
I'm very sorry to create with this presentation such confusion. What we wanted to show is that the impact from our Polish Swiss franc and euro mortgage business was very negative. This is a very simple graph, which—now I try to find my page. Sorry, give me one second so that I can guide you then on the right page. It's page 17, I guess you are referring to that. If you look then at our numbers, what you can see is that the litigation provision in—so what we took here is we have taken out for comparison the contribution what over the years we had from Russia and Belarus, so it's like for like. What you might remember or what you could look up is that it started negatively significantly in 2022. The Swiss franc provisioning in Poland, and this increased in 2023 and in 2024 significantly.
You see the gap of around 600 basis points. We had provisions of EUR 600 million-EUR 800 million in all these years, and this explains the difference. Now in 2025, we assume still a negative impact, P&L impact of around EUR 300 million, which then would explain again, very simplified in the presentation, would explain the 300 basis points difference. The question is, when will be—and the expectation is that maybe over the next one or two years, we will see if we are done already or if there is a smaller impact. Sooner than later, we will move in this area and this time phase where we don't have—where Poland, the mortgages are fully provisioned and settled hopefully to a large extent, and then you will have no negative impact anymore.
Therefore, we then believe that—and I call this the underlying business of the core group—is then from today's perspective, 13% ROE. Of course, we have to work to improve that as well, but this is what we see currently in our midterm plan and in our strategy. I hope it could reduce the confusion I created. In case it was not fully possible, then again, I would also refer you to my colleagues from the investors' relation because they could then refer to the historic numbers and explain where the difference is. Then probably it's much easier to understand the underlying thoughts from this graph. Thank you for the question, and please don't hesitate to call the colleagues. Thank you.
Thank you. Thank you.
As there are no further questions at this time, we will now conclude today's conference call. Thank you for your participation.
Thank you, Operator. Thank all participants. As this is summertime, I hope reporting season ends soon for you, and you will enjoy your holidays as we plan to do. Thank you.
Okay. Goodbye.
You may now disconnect.