Good afternoon, dear listeners. Welcome to Šiaulių Bankas Investor Conference on the results for the first quarter of 2024. I'm Emilia from Nasdaq Vilnius, and I'll be moderating today's event. We'll start with the presentation from the management, which will be followed by the Q&A session. Please be informed that this webinar is being recorded and will be available on Šiaulių Bankas website and the Nasdaq Baltic YouTube channel. I encourage everyone to submit questions in the Q&A section on the right side of your screen. With that said, I'm pleased to introduce today's presenters, the CEO of the company, Vytautas Sinius, Chief Economist, Indrė Genytė-Pikčienė, the CFO, Donatas Savickas, and the Head of Investment Management Division, Tomas Varenbergas. Please, the floor is yours.
Dear investors, good afternoon. Hello, everyone. It's my pleasure to welcome you to Šiaulių Bankas webinar for the first quarter results, and really thank you for your time dedicated to Šiaulių Bankas. So, let's go with the highlights. So glad to mention that the year started firmly. We have a strong quarter of Šiaulių Bankas with 70% year-on-year growth compared to 2023 first quarter. And successful period, I would say, for net interest income and net fee and commission income. So the main drivers is continuous loan book growth, also relatively high base rate, and also the merger transaction within the house. So those you will see reflected on our P&L for the first quarter.
We maintain pretty high capital adequacy ratio, close to 21%, and despite that, we've demonstrating strong return on equity ratio of 17.6%, and also better than planned cost-income ratio, which stands at slightly more than 42%. Continuing monitoring our asset quality, and despite that, we still living in the higher interest rates and rather turbulent markets around us. But with asset quality situation remains good. And our cost of risk, which stands at 0.36%, is better than I would say average of our budgeted figures in 2024. So far, so good with the asset quality.
Also be glad to mention that the dividend policy executed as was planned, and all decision has been made and dividends were paid out. And we now, I would say, in an active mode on buybacks. And recently we approached the ECB regarding their decision on that, and that was publicly announced as well through the market. During the last AGM, the new governing bodies were elected, so some changes in them. We have some also international representatives attracted to the board of directors, and also we extended our management board team, so I'm really glad about that as well. And we're intensively working on our strategy implementation.
So definitely it's a marathon, not a sprint, and we are laying a solid background for technological uplift and, now we're working in a diagnostic phase of the project. Let's go to the next slide. And as we presented during our strategy meeting earlier this year, we've splitting our business lines now into the corporate, private, and investment clients. Therefore, we're bringing the news and key information also split it in that way. So talking about corporate lending, I would say the volumes rebounded.
The first quarter is pretty strong in the corporate lending, and I would say up to previously two rather moderate quarters, the new lending is up by 33% if we compare quarter to quarter, and it again reached more than EUR 200 million of the new agreement volumes. Talking about our investments and work on the green agenda, I would say we're rather successfully moving towards renovation platform replications, and previous platform before it was EUR 275 million. The first quarter, we've launched the new platform of EUR 200 million together with European Investment Bank and other investors who joined the efforts to finance the renovation projects in Lithuania.
With that, we will be able to renovate more than 300 multi-apartment buildings and more than 11,000 Lithuanian households. Also, from the green agenda, we have recently funded wind power plants of 16.5 megawatts, and that's one of the successful investments. Okay, let's move on. Private individuals block, and that block, I would say, is more as a preparation for our further development in the retail area. So we revamped our sales network to drive growth and with a more focus of empowering sales force of people. So just, you know... We working how to train them, how to make them higher performance compared to the previous years.
So, another area is a streamlined operation, so we're moving some technical work from the salespeople to the centralized functions and also working on enhanced performance. That is also important how we incentivize our staff for the new sales and also, you know, making the right metrics of employees and et cetera. So it's a lot of preparatory work for the retail development, for the, you know, next periods and next quarters. And the last block presented in the slide is the investment client block. So with that, we, I would say, also working hard on practical stuff.
So, the good thing is that, assets under management growth is continuing to develop upwards, so we reached EUR 1.25 billion assets under management, and also working on a new product, area, so it's a new alternative investment fund to be launched shortly. And on debt capital markets, I would say we continue on the strong momentum with this business line. So 13 DCM transactions during the first quarter shows that we continue to be the leading player in domestic markets. Okay, so thank you for that. I'll be returning shortly to my colleagues.
Good afternoon. Good afternoon, and first of all, I would like, also to thank you for being with us here today. I will present a short, macroeconomic, snapshot of Lithuanian economy, and I sincerely hope that it will help for you to, to keep the finger on the pulse of, Lithuanian economic dynamics and, it will add, a bit of clarity on the outlook. Yeah, and, moving forward, since, I would like to start with the, major macroeconomic categories, and so looking, at the dynamics of, country's GDP in the context of the Baltic region, we can see that Lithuania experienced, the negative, phase of the cycle, pretty good and, dealt, with the challenges, resiliently.
Actually, it stands out in the context of other two Baltics, as the most resilient economy because the contraction of last year was only minor, 0.3% contraction of GDP was the organic and natural cyclical effect after a very strong chapter during 2021 and 2022, given the exceptional performance of our externally oriented sectors. And now our economy is starting to prepare for the recovery, given the bottoming out and improvement of the sentiments of our export markets. And, actually, talking about last year's developments and this year, we can see that our economy was somehow.
The contraction was somehow softened by the countercyclical effects of the new structural funds, which came into the economy at a very good time and helped to, well, to balance and counterbalance the negative cyclical effects. Looking at the labor market indicators, we can also state that labor market sustains resilience, and the unemployment rate proceeds at the more or less sound levels. And the good news is that the number of registered unemployed is constant and stable, and we don't see any negative trends there.
The number of new vacancies are pointing out at the recovering demand of new employees of our businesses, providing our businesses are preparing for the launch of the new business cycle. From the consumer's perspective and from the household's consumption perspective, it is good news that the monthly wages are proceeding to grow pretty swiftly at double digits. The flash estimates for the first quarter of this year show that this trend will be with it in the first half of the year because of the increase in minimum wage from the start of the year by 10%.
Also, the public wages have been increased significantly, and the active labor market also provides tensions, and wages proceed growing. These trends, in addition to the evaporated inflationary pressures, set the proper stage for the consumer confidence. And as you can see, the consumer confidence is for a number of months, the highest in the context of our target markets, and actually is the highest in the EU. On the other hand, we also have a pronounced inflation indicator now in the context of the EU, as the inflation is the weakest at the moment. In March, it stood at 0.5% annually.
Hopefully, and it is expected to remain well above 2%, talking about the average annual inflation indicator. And these circumstances set the proper stage for the purchasing power recovery. It has already been compensated the losses the inflation has left during last year and in 2022. And the real wages have reached the peak we see at that time.
Yeah, and so moving forward, we can see that this recovery of purchasing power will help our domestically oriented activities a lot because last year our retail trade sector caught the wave of inflation and managed to increase and register the record highs of retail trade turnover at current prices. However, this year this inflation wave is in a low tide, and the hope is that the real volumes of retail trade will start to increase soon. Recent indicators from the retail trade points to that and backs that expectation.
Also, looking to the construction sector, we can see that the cyclically affected and sensitive subsectors, residential building constructions as well as non-residential building constructions, we are pretty affected by this cyclically. However, as I mentioned before, the timely injections of the EU structural funds into civil engineering structure projects, energy structures, helped to balance the results of constructions. For this year, another injections of EU funds are planned, so the gross fixed capital formation pillar of GDP will perform positively. Looking at the manufacturing dynamics, we also see the slight recovery, the numbers already above zero.
That's thanks to the energy intensive sectors, which managed to recover after suffering in last year. Hopefully, in the second half of this year, given the rebound in our key exports markets, our exporting manufacturing industries will gather momentum and add to the economic developments positively. Yeah, and that's the final slide of mine, which promises the positive developments of the economy. Despite the fact that it will perform below its potential, our economy will expand by zero... by 1.8% this year, and gather the pace the next year. Also, the slide promises pretty sound labor market indicators and very low inflation.
This trends together will strengthen the consumption pillar of the GDP performance this year. Thanks a lot. Thank you, and providing the rallies to my colleagues.
Great. Let's come back from macro back to Šiaulių Bankas figures, and now we can look to the financial performance highlights, like a snapshot of our P&L and some balance sheet metrics. Just a note, in the presentation that we will share with you later, you will have more information in our annex, so, due to the time limits, we will not expand too much into that field, but at least you will find some more interesting information added into the annex. Well, from P&L perspective, net interest income continued to grow, mainly from expanding our loan portfolio. Big change in our commission income, grew by 40%, comparing quarter-over-quarter, so with the first quarter 2023.
With that, we've managed to make a growth of operating profit by 10%. As I mentioned, cost income remained pretty low, 42%, and that led to the final result of an amount of EUR 22.5 million euros of net profit. Return on equity, already mentioned, 17.6%. From a balance sheet and all balance sheet parameters, I would say that we have, you know, 4% growth in loans. Deposits followed more or less in the same speed, about 3%. The balance sheet grew at 2% and the assets under management grew by 7%, I would say, reflecting strong investment performance and new inflows.
Also worth mentioning that after the merger with Invalda INVL, we've managed to reach our non-interest income part, which now is about 30%. Historically, we were more exposed to the net interest income. Now, this part is diminishing, and the other income, which are less capital intensive, starts to prevail. Let's go deeper to portfolio. Loan portfolio dynamics, I would say, positive during the first quarter, so 4% from the beginning of the year and 13% during the last year. I would say the main driver is the corporate lending. So from EUR 113 million of additional increase in our portfolio comes to EUR 73 million to the corporate clients. Others are mortgages and consumer loans. So all the sectors grew.
But, as I mentioned, the key driver for growth is corporate lending, which was rebound, as I mentioned, from a bit lower two previous quarters. And it seems that the loan yield has peaked already from 7.5%, slightly decreased to 7.4%. But I would say it's a minor change, and it still remains on pretty high levels. I would say strong pipeline for the corporate portfolio to grow further, both from the new clients and from the current clients with additional needs. Private individuals is less elevated compared to the corporate side, still due to a bit higher Euribor than expected, and still the sentiments in the real estate market that potentially flattened or even could go down.
But people not willing to make those decisions as fast as it was in 2022 and 2021, and during those years. Okay, let's drill a bit deeper to the net interest income as our main source of income. So 12% growth compared to the first quarter of 2023. So last four quarters remain on the same level, about EUR 40 million per the quarter. And despite that the growth of the portfolio continues, but as you can see in the graph, cost of funding also is catching up. Since we are attracting our local deposits and we're providing really good rates for depositors, it start to grow.
Our net interest margin has slightly decreased, compared to the fourth quarter and the first quarter of the previous years. That's natural, and that was expected to be like that. So we see already the trend that interest rate for deposits started to decrease in some banks. So we're also observing the situation and we'll consider what our strategy in that field, knowing, as I said, that we need to attract deposits mainly locally in the market. All right, so let's move to the net fee and commission income. So first of all, just to emphasize once again, that 40% growth year-on-year from EUR 4.6 billion to EUR 6.5 billion.
Also good to mention on the right side, you see some shifts between the lines. So first thing that we have a pretty strong renovation growth by 45%. Also, debt market solutions also grew extremely well, by 85% year-on-year. And this 40% is coming back for the bigger figures, 40% total growth of net and fee and commission was strongly influenced by the asset management income after the acquisition. However, if we exclude that, still we have a healthy 7% growth only on the historical bank's platform, so on the figures.
So with current distribution of our net fee and commission income, I would say we become even more resilient to the different trends in the market. As you can see on daily banking, we have some decline, and that's mainly driven by the lower cash transactions and restrictions on some international payments that have been imposed during the year. Right. So with that, I will pass the word to colleague Donatas.
Good afternoon, dear investors. Talking about operating expenses and if we compare changes over the years, so the main factor of 25% increases caused by merger with INVL, INVL Retail. Therefore, we how to say enter a new level, so average quarter. First quarter of this year is in the range of EUR 20 million. Probably in the coming quarters, it will be as a benchmark for treating whether expenses increased or not. Of course, I could remind that previous quarter was influenced by quite significant expenses related with merger itself, and therefore cannot be taken as a benchmark.
The structure of operating expenses consist of the main source or salaries to the employees, and this will remain as it is. The other important factors which increase quite significantly is IT expenses. As bank owns more property, tangible and intangible, therefore depreciation and amortization expenses goes up as well. Despite growth in expenses, we maintain cost discipline, and therefore, cost-income ratio stands at a very comfortable level of 42%. We can move on to the next slide. Talking about funding, the key message is that cost of funding is still going up. Colleagues already mentioned that we already reached the peak of net interest margin as the assets went under repricing process.
Funding, which mainly in our bank is consist of from the deposits, term and demand deposits, are still repricing, and affect our interest expenses negatively. The structure between these two source of funding, demand and term deposits, is changing, and more and more term deposits, which gives depositors higher interest yield, is more attractive for them. But also we see the changing environment, and probably it's approaching the time when these deposit ratios, rates will be reviewed with the downward trend. Another factor is the wholesale funding, where our borrowings from ECB and also the bonds, which is more eligible and other quite expensive, they affect our total cost of funding also in the increasing rates.
The bank maintains a well-balanced loan and deposit portfolio, and loan-to-deposit ratio is 94%. It was the reason but why we, you see, were not affected by these changes in interest rates in the last few years, and therefore we were not subject to suffer from this windfall tax. Talking about loan portfolio quality, we see stable, how to say, trend both in absolute figures of NPE and also in percentage. Despite, we see a small increase in absolute figures in NPE, but this due to the growing loan portfolio, so this percentage expression stands at 2.8%.
When we try to, how to say, forecast, and it was already mentioned that first quarter we had a slightly lower cost of risk expenses than we anticipated. And probably this is the factor that this provisions that we made in the last two years, probably, or even more so, despite the fact that it was no any visible problems with the particular individual borrowers create a quite good caution in case of environment deteriorate significantly. And we will use this buffer that we accumulated during the last period. And last but not least from my section of presentation, so capital and liquidity position. We have sufficient buffer above target for capital adequacy ratio despite the fact that we distributed a significant amount for dividends.
From this graph alone, it could be read as the bank still has the capacity to share some equity with the investors. However, we should monitor not only capital and equity ratios, but other ratios, which requires capital or similar funds. This ratio relates with MREL. As you see from the graph in the bottom right-hand side, so increase in first quarter requirement for this ratio leaves us a little room for maneuver or to share extra capital with investors.
Our target is to be slightly above the ratios and any extra, which is capital, which is not optimal, will be used. This according to our plans, and Tomas probably later will disclose it more. Talking about liquidity positions, we stand significantly above the target of 150%. Just to remind that this 150% is well above the minimum required by the regulator. So both capital and liquidity stands at safe level. Thank you.
Hello, everyone. I will continue our today's investor webinar. That's the last part before we'll go to the Q&A session. We will have important update on capital allocation, and we have already received several questions on that topic, so try to elaborate more on on this topic. Actually, shareholders at the annual general meeting approved new buyback procedures and extended the term for share buyback execution. In April, the bank submitted an application to the ECB for a share buyback of up to EUR 11.5 million. We do expect that the permission will be received within the third quarter of this year. Afterwards, the management board will be able to decide on particular term or specific details, how this buyback will be executed.
Actually, as we keep communicating to maximize shareholders' returns, we believe that the bank will continue to use share buybacks as a strategic capital allocation tool going forward. Regarding the dividends, the commitment to the dividend policy is in place. Record high dividends for the last year were paid last Friday. Unfortunately, due to some Nasdaq Central Depository error, not all financial institutions managed to credit dividends to the shareholders' accounts on Friday. So we do see that early in the morning all the financial institutions settled dividends, and so apologies for any inconveniences for our shareholders.
The first full quarter with the operating asset management company delivered strong momentum, and our assets under management reached a new high mark of EUR 1.27 billion at the end of the first quarter. We are glad that the increase was largely driven by the strong investment returns. Our second pillar, pension funds, delivered almost 7% return in the first quarter alone. And actually, looking to a performance since the last pension reform, we do see that almost 10% annual return was delivered to our clients. As the demand for the investing solutions keep increasing, we are getting ready to launch a new alternative investment fund later this quarter, and it should bring more diversification to our growing assets under management.
This quarter, we also want to put more emphasis on our unique solution for renovation financing. And last quarter, we launched EUR 200 million new modernization fund that was launched together with European Investment Bank. The fund aims to finance renovation of 300 multi-apartment buildings, and it means that living conditions for 10,000 Lithuanian households will improve. And the bank, being a pioneer of innovative financing instruments, actually is well positioned to play a key role in achieving Lithuania's aim to have most of its multi-apartment buildings renovated by 2050. Benefits for the bank by participating in such kind of a CMBS is twofold.
So value is being created that the bank, as a fund manager of a servicer of a fund, earns base management and performance fee from the fund's assets. And secondly, the bank invested into the platform its own funds in the amount of almost EUR 30 million. Invested funds will generate interest income going forward. So that's it from us. We are ready to turn to a Q&A session. And well, meanwhile, please subscribe to our investor relations newsletter for the latest news and insights from the company.
We will now proceed with the questions. Before that, I would like to remind everyone, you can submit your questions in the question box on the side of your screen. The first question is regarding INVL Retail. Could you please give us an update on the integration process?
Great. Thank you. Thank you for the question. So the integration went smoothly. I would say the key moment was beginning of December when we've made or completed the transaction. So the transition went smooth, and one of the indicators, I would say, is it's employees that together with the business, we integrated to the one organization about 160 people. So the success, I would say, of colleagues that has joined Šiaulių Bankas group is substantial. So obviously 96%, if I recall correctly, decided to move along with the business together and joined already has joined Šiaulių Bankas, and we're working together as one team. So one other success, I would say, is the preparation.
So we've used this time during the sign-off and the closing between those two dates, we've used quite, quite successfully, this time of working together on strategy. So the people who has joined already were becoming the part of the new strategy of the bank. I would say the integration on the IT side was also smooth, and starting from the December when the transaction was closed and going forwards up to date, we haven't faced any major problems on IT side, which is important those days when we talk about financial industry. And now I would say, as I said, we are as a one team, working together on the strategy implementation.
All the initiatives that has been presented, our strategy call and strategy presentation moving forward. So, so far, I'm really, really happy how we are operating as one large team of more than 1,000 people. Yeah, so that's it.
Thank you. Could you please add a bit more color on the branch network transition into a sales-oriented organization? Does it imply a certain optimization of the network?
All right. Yeah, so part of the change and part of the transaction, I would say, was preparation for more active work in a retail area. And to do that, we've segregated two business lines, with one is a corporate client and another is a private. So that was one of the parts to prepare for more focus on the retail as well. Since the retail is a complex business related with many processes, many products, special know-how of people who are dealing in a retail area. So the first quarter was already very practical, so we worked a lot on efficiency or on the, as I already mentioned, on the you know, putting the right roles of particular employees to you know, making some career planning, some career paths for them.
How to make a competitive compensation for the colleagues in the retail. So it's a lot of, you know, a lot of number of interactions which are needed to be taken care in order to prepare for the well-functioning, smooth retail organizations. So we're working intensively on that, and we're expecting that in the nearest future, it will provide needed results in this field. Talking about branch network, it's one of our enablers and one of our also competitive advantages of being close to the clients.
So along to the technological upgrades, we want to have a close relationship with the clients also physically, and how it will end up in a future, you know, changes in a branch network, it's still a bit early to say. So currently, we're focused on the better preparation for the retail strategy, and that's our focus as of today.
Thank you. It seems like deposit rates in Lithuania have peaked and might be gravitating slowly down. When do you expect your funding costs to ease?
So thank you for, for the question. Actually, yes, we do see signs that deposit rates have already peaked, and several banks already decreased their interest rates for the term deposits. Looking to our funding cost dynamics, we do see some flattening as well. And well, we do follow our competitors' steps and well, the interest rates is on our agenda going forward.
Thank you. When do you expect to finish with the banking core update?
As during our strategy meeting, we mentioned, it's obviously a rather long horizon of two years. So talking about core banking's systems, it takes even longer, but we put a tight schedule to make it happen in two years' time.
So far we've working according to this plan. So most likely, the you know first part of 2026 is our expectations to be to go live. And yeah, we'll see how it will develop. But so far, everything goes according to the plan, and till the autumn, we're planning to finalize our diagnostic base. So when we'll better understand the system, we'll put our requirements to the changes with our processes and products, and then we'll be more visible. Is there any change needed for that or not during in terms of time? But we are committed to do as fast as possible, and we see it's in a range of 2 years period.
Thank you. Given the strong pipeline in corporate lending, which sectors would you expect to show the best lending growth?
I would say it's hard to say which other sectors show the best way. I would say we're working pretty dispersed along the sectors and seeing some public initiatives that we've heard about EUR 1 billion investments that would come from the state to the different type of sectors that are applicable to those funds. We see as a possibility to impact the corporate clients' development, and we see that partially we will be, you know, player in this field as well. So in some syndicated loans or in some co-financing, we will operate with those public funds that are coming this year. So I would say from a sectors perspective, energy would be the one to be mentioned.
We see some areas of the transportation with better performing also, you know, pretty strong, so we're working on that field as well. Still, I would say residential construction, we have a good pipeline of strong partners, strong clients in that field, and we see the continuous growth in this area too. And then there will be minor, you know, areas of industry that's showing signs of interest to grow, especially on the second half of the year. They're already projecting some new orders, new plans, and we see that, you know, the second part of the year could give more energy for different type of sectors.
So I would not name, you know, particular ones, but overall, I would say industry is willing to show the signs of growth later this year.
Thank you. The cost of funding is still going up, putting pressure on margins. Where would you see the NIM floor for 2024? Can you defend the 300 BPS level once the ECB rate cut cycle starts?
I will take this question. Yes, it's related with the previous one that Tomas answered, but trying to answer directly what to the questions what was mentioned here. Net interest margin flow for 2024, we believe that we will be above this 30 basis points level. We are quite sure for that, taking into account that this repaying of TLTRO loan to ECB will give us positive impact to net interest margin, as it is right now providing lower net interest margin for this part of assets. Regarding ECB rate cut cycle, it depends how weak and severe it will be.
So we more believe that this reduction of interest rates will be gradual and not as weak as we saw increase in this interest rates. Therefore, we could adjust, and the fact that we already mentioned several times during this presentation that we see that a reduction of interest rate for deposit approaches, so gives us more, how to say, flexibility, and therefore, we could adjust the net interest margin to stay above this floor that I mentioned earlier.
Thank you. Please comment on the expenses from insurance activities, which seem to be elevated. Is this due to the acquisition of INVL Life? Is the cost base expected to decrease going forward, or will it remain at these levels?
Of course, the acquisition of INVL Life increases our exposure to insurance market. However, to decide and judge about the profitability of insurance activities just from expenses, it could be not the right option, because opposite amount are distributed in different items of profit and loss statements, namely trading activities. Because unit- linked portfolio of customers where we have negative impact to our expenses of insurance activity, it have the opposite positive impact, but it is described in trading activities. It's quite complicated, and we used to have the questions many years that asking how to read these statements.
Right now we're consulting our auditors in order to find more reader or investor friendly approach, how to show this activity result of insurance subsidiary. But talking in general, so we are happy with the result of insurance subsidiary in the first quarter. It was quite significant profit, and therefore, as I mentioned in the beginning, it could not be decided from the one expenses line.
Thank you. Asset quality continues to show strength. Any clouds in the horizon? And what is the biggest threat here?
I will start answering. Of course, I try to elaborate in my part of main presentation, but probably I will ask Indrė to add all from the macro perspective. So from my view, when we consider and measure our portfolio, loan portfolio, so we use this estimated credit loss models with different scenarios and trying to forecast how what kind of provision should be provided for certain exposures in our loan book. However, general environment could change from, as I see, if the macro situation would deteriorate significantly. And this is the main threat in my view. But please, Indrė, if you have something, add on, please.
Yeah. Thanks, Donatas. I would like to elaborate a little bit on this because, especially from the corporate clients' perspective, because what we see, we see that our businesses in Lithuania will have a pretty tough first half of the year. On one hand, the cost pressures remain pretty strong. On the other hand, the demand, both external and domestic, remains sluggish. And we hope and believe that in the second half of the year, this situation will change within the decreasing interest rates, which are expected to fuel our sentiments and more domestic consumption, as well as investments in our exposed markets.
That will provide growth in the revenue and will ease the tensions the businesses currently face. However, looking to the resilience factors, accumulated reserves and liquidity in the system, I think that there won't be any significant major threats to the public comments.
Thank you. How much operating income is attributable to the INVL acquisition? Could you elaborate on the benefits and merits of this transaction?
Yeah, thank you. Yeah, I would say there's some short-term benefits that could be assessed after the transaction, evaluating how much business has been accumulated into the one organization after the merger with Invalda Retail. So from that perspective, I would say it's on the, you know, one bigger figure, so I would say it's about 25% of net fee and commission income increase due to this transaction. But that's only one part.
So the other part is a bit more long-term and strategic, that we're, you know, building up, have built on our strategy and working on that, that with this merger, we've managed to create the full franchise of retail banking, not only having historically strong lending product set up for private individuals as consumer lending and mortgages and card business, but also strengthening very well our saving and investment part. So we see the, with strong, you know, execution of the retail strategy to reach much higher development of a fee growth compared to the current result that we've managed to achieve after this merger from day one when it was completed. So there's kind of two elements.
One is the short term, which we expect to continue to maintain and to grow as a current business, and as extra value to receive our benefits of working in more depth with our retail business.
Thank you. Should we expect significant volatility in quarterly operating expenses that are directly tied to the IT and new core banking platform, or can this Q1 OpEx level be considered stable run rate going forward?
I'll take that question. And, as I mentioned in the main part of presentation, so, this new level of operating expenses of first quarter could be taken as a benchmark, but, of course, with the inflation impact, that will, this level will go up. And also, this IT and core banking platform will also add on additional expenses. Currently, we discussing with our auditors regarding the possibility of how to show these spendings that we are using in the implementation of core platform, how to put into the P&L, which is the best and most prudent way. But, at the end, it will affect our operational expenses negatively, and it will increase this.
But this increase will be gradual, and therefore, this level of Q1 expenses could be taken as the benchmark for the future projections.
Thank you. What margin are you currently paying on the outstanding TLTRO facility?
I will take that question. So it seems the last question today. So we do pay the same rate that we do get from ECB, from keeping our liquid assets in ECB account. So currently, the rate is 4%, and so it's matched between what we get and what we pay. Worth to mention that actually, we do ready to repay TLTRO even today, as we have already gathered all the amount that should be repaid on September this year, as the maturity date is set on this month. Thank you.
As all questions have been answered, on behalf of Šiaulių Bankas, thank you, everyone. It was a pleasure being with you here today. The recording of the presentation will be available on the Šiaulių Bankas website and the Nasdaq Baltic YouTube channel. Thank you again for a very informative conference. Have a great day, and goodbye.