Good morning, good afternoon, ladies and gentlemen. My name is Michał Zasępa, I'm CFO at KRUK, and this is commentary to Q4 full year 2023 results of KRUK S.A. Welcome. Thank you for your time in joining this conference. I will use the presentation that is available on our website, and we'll go through it with you. At the end of the presentation, I would welcome your questions. You can use the question and answers sheet here available on Teams, and I'll read the questions and respond to them. I hope you see the first slide of the presentation.
Let's start. So, this was another very good year for the company and a very good Q4. For us, we end the year with our unaudited results of billion, PLN 1,013 million of net profit. That represents a very nice growth of 26% year-on-year. You see somewhat lower, but still quite strong Cash EBITDA performance at PLN 2.1 billion, or 16% growth year-on-year. This has been, by far, the best year in terms of our investments in debt portfolios. You see close to PLN 3 billion and another very good year for recoveries across all four big markets that we have.
We finished the year with also record high EPS, PLN 52 per share. It's 25% growth year-on-year. We continue to have very good profitability of 27% on equity. We grew the assets by close to 30%, and we remain relatively low leverage. Although the leverage has grown significantly year-over-year. You see here, we ended it with 2.4 times net debt to Cash EBITDA. So overall, a superb year, still leaving us a good place to continue to grow in the next coming years. If you look at longer history, we are also proud to continue the trend of development. You can see here that for the past three years, we significantly increased the investment level.
Please note that in the current environment, assuming we fund all of these investments through incremental debt, and majority of recoveries should come from legal phase of recovery, this promises growth of profits in the mid to longer term, as majority of profits from this portfolio, after attribution of cost of funding, have not yet gone through the P&L. So this is a big stabilizer, and this is the reasons why in 2025, 2026, 2027, 2028, you should see most likely much higher net profits than in 2023. We are on a path of stable growth of recoveries. As you may have seen, the recoveries in 2023 meant also a significant beat of the accounting curve targets.
In Q4, that was 12, 12%, and that is the reasons why we continue to recognize positive revaluation, and likely you'll see more of it in the coming years, especially from Poland and Romania. We finished this year with a very good net profit. I see, I see here a typo. We finished the year with PLN 1,013 million, not PLN 1.1 billion. So sorry for that. But with that profit of PLN 1.13 million, we are at the position where possibly in 2024, the pace of net profit growth will slow down, although how much we will see, the January results, the January recoveries were above the budget.
So, we'll probably have much more to say after Q1 or Q2 . Anyway, we accept a good 2024. If you look a bit deeper into recoveries, as I mentioned, a very satisfactory return on Q4, 12% beat on the accounting curve. A very good result in Poland, a very good result in Romania, a good result from Italy and Spain that is also now improving. In those two markets, you may remember me saying that we had some minor legislative changes that affected the business negatively in 2023. This is fully priced in into the recovery and plan, and we expect at this point, no other surprises.
In terms of investments, we gradually shift the scale towards non-Polish markets. You can see here that they represented nearly 26% of our total investments. This was a year of record high market shares across foreign countries. You will see that in a slide, that in all of those countries, in our target market, which is consumer unsecured portfolios, we possibly were number one across the four more markets that we are operating in. 2023 was another year with strong recoveries, which granted us a possibility or actually necessity to revalue our back book up, and hence significant positive revaluation. Please expect that if the recovery trends continue, that will last still for the next several years, likely a few years at least.
On the other hand, we do have increasing costs. You can see here that they increased 15% year-on-year. Mostly this is salary growth as the job markets in Poland remain to be quite tight, but also it's a corresponding growth of the organization as we significantly increase scale, especially in Italy and in Spain. On the financial cost, there is also significant growth coming, mostly from this scale. You may see that a significant part of our indebtedness is already hedged, and the floating rate is hedged to fixed rate, so we do benefit from that already.
On the other hand, we see now that the debt availability on the Polish market, but also in Europe, it has improved, and the margins on the bonds is going down. So this year, we hope to see some decrease of pricing of the margin on the future bond issues when we do them. The group continues to be well-funded. Our leverage level, I think it's medium, but this is a situation where after very significant growth of investments, of course, we need to look how much space there is on the balance sheet, and possibly also be somewhat more selective about the future portfolio purchases.
This growth of investments comes in quite interesting time, market time for us. We take advantage of the fact that in high interest rates restrain some of our competitors from more aggressive debt buying, and we benefit from that. I will also comment on the three additional things here. One is tax inspection, tax control. Another is our decision to stop investing further in Czech Republic and Slovakia in portfolios. And third, our development in France later in this presentation. We continue in 2024, as we did in 2023, to focus on digital and lean transformation, which means further operating improvements through technology and also through some process reengineering, identifying problems and resolving them.
We're very focused on that. We made a thorough review of where we are and what we can do, and now we are establishing more precise targets, what we want to achieve. There are three main areas in which we want to improve. First is lead time. That means how to do things more quicker so that they don't last that many months, but less, and as an effect, NPV on the portfolio should improve. Second is more personal or even hyper-personal communication to our customers, the indebted customers, so that we're more effective in convincing people to repay.
In addition, more automation in our processes, more work for the IT systems and bots and algorithms, less for the baseline, the bottom line employees, which means also changing the fixed cost structure. There will be possibly less growth of employees in the operating level, but somewhat more employees in the overhead IT and analysis. Overall, this is a promise of greater efficiency for the business and somewhat higher or quicker cash flow from the company. But this will also require some additional investments in CapEx, in IT CapEx, in infrastructure, and people.
Take a look at the segment analysis, looking at investments in new portfolios. This PLN 3 billion comes from four of our main markets. It has been a very good fourth quarter for Poland, which ended the year with about PLN 800 million of investment, so a significant growth year-on-year. In Romania, less investments overall, but very good market share, as you see. So here, limitation is size of the market and excellent results for both Italy and Spain, which most likely give us number one position in this market in consumer unsecured portfolios.
Recoveries were very good, the best versus our ambitious operating target in Poland and Romania, a bit below the operating target, still above accounting for us in Italy and Spain, but the reasons were a change, some small changes in the legal environment. In Italy, it was change of the... execution legislation, where two additional steps were added in 2023. In Spain, it was a strike of legal employees. This is history. This is in the books already. We don't see this affecting us going forward. And you see here that with this size of investments, the size of the share of the books goes down in Poland and Romania, whereas in Italy and Spain, it's increasing. Is it good or bad? I think it's good because it allows us, you know, to get bigger.
The IRR's returns exceed expectations, the returns at which we are making decisions across those four countries is quite similar, and it was somewhat higher in Italy and Spain than in Romania or Poland, as we see the new markets as still requiring somewhat higher return, expected returns than Poland and Romania. You see here profitability. All of those markets are profitable. In all of those markets, we increased or significantly increased performance of EBITDA and also on cash EBITDA. If you look at these results and you wonder what were there any non-recurring events, there were a few, but not very significant.
So just to remind you, in the H1 of 2023, we sold our credit information business. That's an additional income of PLN 10 million, which is non-recurring, of course. In Q4, on the other hand, we created a provision for employee bonus from the very good 2023 results. It's about PLN 16 million, which is booked in the overhead here, so decrease the EBITDA. And also, our servicing business in Spain, so the business that we do directly, not on our balance sheet, not at our risk, but for the banks, underperformed in terms of EBITDA, and therefore we decided to write down PLN 8 million of that. Insignificant, but still, Spanish EBITDA would be higher by this PLN 8 million if it wasn't for this fact.
Now let's take a look at the market. This is Poland. PLN 2.1 billion was our estimate of the value of investments in unsecured retail portfolios, so a growth versus last year. You can see much bigger growth of nominal value. This is mostly secondary market transactions of unsecured consumer debt of PLN 7 billion. If you compare only supply from the banks, which is recurring, the market size was similar year-to-year. In that market, KRUK had about 30% market share, which is very decent results, although there were years where we were better. In 2021, we had over 50% market share. Our ambition is not to go down with this market share in 2024, but Polish market remains to be very competitive.
In Q4, we were much more competitive. Let's see what the results will be in 2024. So far, we see good chances to buy portfolios in Poland, and we see stable supply coming from the market, from the banks. Overall, we would expect a similar level of supply as this recurring, so smaller nominal value, investment value, somewhere in between PLN 1.5 billion-PLN 2 billion this year. Now, if you look at results, they continue to be very good recoveries.
You may see here that they decreased quarter-to-quarter, but this is because corporate recoveries were very high in Q3, which was much better than planned, and they were much lower in Q4, as a result also of the fact that some of these recoveries came earlier in time. So if you looked only in unsecured consumer portfolios, this is the performance that is above our expectations. It's very good, even though you don't see growth here, and that allowed us to recognize significant positive revaluation that should further be recognized in the following quarters of 2024. This is Romania. You see here much smaller market, but also stable recurring market. PLN 500 million of portfolios was this value of the investments on that market in unsecured retail portfolios.
KRUK took majority of that 63%, so we continued to safeguard this very good market for us. You can see much bigger nominal, which was a one-off transactions that we did not win, that was a secondary unsecured debt. This year, we would expect a similar market size, so roughly around PLN 500 million of supply, of which again, we would like to have at least 50% or a bit more. This is the results of Romania. No negative surprises, somewhat better performance than expected by us at the beginning of 2023. Very good, strong Q4, both in terms of investments and recoveries. As a result, a significant positive revaluation and very high profitability, as you see here.
Let's go to Italy. You have a similar market size like last year, roughly PLN 15 billion nominal and PLN 1.9 billion of investments in this unsecured, consumer supply coming from primary debt owners, which is banks, the consumer finance companies. Our market share was close to 50%, which marks another step for us to increase our competitiveness through improvements of the process, but also a relative weakening of our competitors, which could not compete with us at the same pace as they were in the past years. The reasons for that is that some of them are constrained or too leveraged to be that competitive anymore. That situation may still continue in 2024, but let's see.
In our planned investments for 2024, we assume somewhat lower investments in Italy because we think it's prudent not to assume 50% market share. It seems to be quite high. Overall, though, we see ourselves as a company with a potential to stay as the leader in unsecured retail portfolios on that market in Italy. Here you see the results for Italy, another very good quarter for investments, good recoveries. They were above accounting plan, but a little bit below our operating target. As a result, you see here insignificant positive revaluation. We hope the situation improves in the future.
We see in the longer term, more upside than downside to our plans, so we hope there will be more positive revaluation in the next couple of years. I can only say the beginning of this year is quite good. And here's Spain. You can see a market also close to about PLN 2 billion, also defined as unsecured portfolios from the primary creditors. KRUK market share was also most likely highest among our competitors as at above 44%. And similarly to what we experience in Italy, this is a market which shows a decrease of competition and relative increase of KRUK strength in those bids.
So we are also very happy about this development, and that especially for Spain, 2023 meant a significant growth of the business, which requires now development of the organization, some consolidation, improvements in operations, and this is our important focus for Spain this year. In 2024, we would expect similar supply. We see good signs from the market, but we already are invested quite highly from 2023. So we will, you know, decide how much more to put on the balance sheet in Spain. Again, it may be that the level of investment this year in Spain will be somewhat lower than in 2023.
This is the results for the past several quarters and including Q4. You'll see here good level of recoveries because of the strike that the effects of which in the legal in the courts employees within the courts employees, the recoveries were lower by a few million PLN. Also, you see therefore +/- 0 or revaluation. No problem here going forward, but hopefully in the future, you'll see some positives, more positives on in here as well. Overall, a very good improvement of profitability, especially cash EBITDA year-over-year.
In terms of EBITDA, you see decline here, but this decline comes also from the fact that we wrote down, as I mentioned, goodwill, PLN 8 million of goodwill from, for our servicing business. We don't expect any more negative situations like that in the future. Both in Italy and Spain, this big growth of investments means also expected growth of legal and execution fees in 2024. So please bear that in mind, that cost to collect for the group, especially in Spain and Italy, will go up in 2024 as a result of the fact that we bought a lot of portfolios, and much of them is to produce cash flow in the legal phase, and that requires this initial investment that goes fully through the P&L; it's not capitalized.
And you have the remaining markets, which is Czech, Slovakia, and Germany. Here, that's important decision that we made, looking at the size of that business, the market potential, also increasing complexity of investments in technology, overseeing, monitoring all of our businesses. We decided that this few percent, the small few percents of the business that the Czech and Slovakia represent does not represent a good enough potential for us to continue to develop this market. So we stopped as of January 2024, we decided to stop further investments in portfolios in Czech Republic and Slovakia. With the exception for some forward flow commitment that we had, and we now will negotiate how to and when to stop it.
So please expect in Q3 and onwards, there will be very little, if any, investments in this group, and then we will do a review of our options there. We could very well stay on that, on that market as a passive investor. Passive meaning we, we have our operations, we do we maximize value from them, but we no longer add to this business, and slowly in time, we downsize these operations, or we may decide at some point to sell the company or the assets. We'll do whatever is most beneficial for, for the business. As for now, we have a good, small scale, profitable business. You, you can see here on, on the Cash EBITDA, it's a very stable, it's a very stable operations, but on EBITDA, you see here, it's, it's not contributing much.
So that will allow us to put more resources, more central resources on the development of the four big countries, plus, this new country, which is, which is France. And a word of commentary on, on France. As you, as you know, we decided to, to put a, foot into the door in France. We, already invested in one portfolio. It's a Forward Flow for 2024 and, and part of 2025 for one of the biggest seller in France. It's very early yet. We have been, we have been there for two months, but the results are positive. Now, the goal, for the 2024 is to research the market, understand the market much better, and to create a plan, that will confirm what is the potential, for us in France.
So far, it's rather positive news that we are hearing. The market has little transparency, and we need to dig deep to understand what really is the supply, who is selling, what are the prices, what do we think we can make, how much money can be made on those transactions? But this is potentially a market that could be quite interesting for us. It's a market that on the one hand is very big if you look at the size of consumer unsecured NPLs in the banking system; it will be the largest market that we are in. On the other hand, it's relatively small in terms of what is actually sold. But one issue we have is we don't know how much is sold.
So we have some data, but we doubt whether this data show 100% of the market. So one phase of that research that we're ahead of is to answer the question, how big the market really is? How many portfolios and what kind of portfolios is being sold on that market? We see, unlike in Italy and Spain, many smaller and mid-size portfolios. But we know already that for some reason, French banks were more reluctant to sell historically than the same institutions many times in Poland, Romania, Italy and Spain. Maybe it will change, maybe it will not.
Even if it's not, if it not, this will be a most likely big enough market to stay with this possible upside where this market grows and becomes similar to the other four markets that we know. So once again, the goal for that year for France is to build up a business case through actual market experience, being an owner of this portfolio or maybe some other portfolios that we are at, and being there on the ground and doing a business case that will implement in 2025 and onwards. Wonga and Novum, two of our lending businesses, had a good year. Just to remind you, there was a significant change of regulation. A new cap of non-interest cost of credit was introduced in Poland in 2023.
So we wanted to see how those two businesses accommodate to it. The results are good. You can see here, EBITDA improved year-over-year in both businesses, despite the fact that some of the revenue was cut by the regulation. Now, the challenge for both the companies, how to generate growth, how to acquire new customers, and this is the main challenge, the main goal for Wonga for this next and following years. But it's being done in already stable legal environment, which is already a big improvement versus the past three years, where between 2019 and 2023, every year came with some negative legislation changes. Hopefully, this period is over now. Now, more commentary to tax issues. There is two separate tax issues that I wanted to point your attention to.
One is that there is a PLN 48 million gain in Q4 coming from release on provision from deferred taxation. Just to remind you, we create deferred tax asset on liability in our financial statement, based on a three-year-long lens of cash flows in the group. And depending on that plan, and that plan is our best plan, this is the budget plus the forecast for two additional years, says this is how much money we will have, this is how much money we'll need, and as a result, this is how much money we plan to take from our investment companies, which is two, one in Poland, one in Malta, to the mother company, KRUK S.A., and when we do it, there is a 19% corporate income tax that we will pay in the future.
The general rule is, the more we plan to invest, the more we invest, the less money we take back to the mother company, because we need more money in those investment companies. This is exactly what happened throughout 2023. You've seen that we invested much more in 2023 than in 2022. This is more than we expected. This was also translated at some more higher investment plans in the future, and as a result, we needed to decrease our plans to take the money back to the mother company, so we needed to decrease the level of provision for deferred tax assets. This PLN 50 million, 48 to be precise, was the release of this provision in Q4.
So you can look at this as a revision of plan, of old plan to new plan, which accounts already for this new reality. Please be aware that every quarter we do this exercise, every quarter we prolong this forecast for another quarter, so there could be variation plus, minus, depending on how the situation changes. So it's not a one-off, but of course, it should be treated as part of the tax planning that we do iteratively quarter- to- quarter. And another issue is that as every couple of years we are being inspected by Polish tax authorities, they've been inspecting us already for many months, so we probably are getting too close to end of these inspections.
The focus is corporate income tax in Poland for the years 2018 to 2020, and the main focus is transfer pricing between mother company, KRUK S.A., and our investment facility, the securitization fund that we operate in Poland, which by law is corporate income tax exempt, and which pays to the mother company certain fees for the collection services. These fees, the legislation says, should be market standard, arm's length, which they are, because we use it for the past several years, we use benchmark, market benchmarks to set these prices.
But tax authorities look, look, look at this and say, "Yes, okay, we understand it's market standard, but it doesn't cover all of your costs, especially overhead costs in KRUK S.A." To which we say, "Of course, it doesn't cover, because KRUK S.A. is much more than just a servicer for Securitization Fund. It's a headquarters of a publicly listed company, managing business in six countries, so much of these costs have no relationship with the servicing of the, of the portfolios for, for this fund." At this point, the tax authority required us to present very thorough cost data, and they are analyzing it. At some point in the future, they will present us the review. So this is to say the inspection is ongoing. We don't know how it will end. Please assume there may be additional tax coming from this inspection.
It may be, it may be a cost or additional tax, that to which we say, "Okay, it's reasonable, we agree," or we may say, "We don't agree. If this is your final decision, let's litigate and see what the, what this court will, will say to it." We don't know where we end up with that, but if this inspection is concluded in the next couple of weeks until we publish our audited numbers, which we plan to do by 26th of March, you may still see a revision of this net income from an agreed amount of money or just a provision to be included in our account. So please bear in mind that we deal with this uncertainty, and this is what it is.
Now, let's take a look at slide 27. This is our ERC. You see significant growth of this ERC year to year- to- year, for two main reasons. First of all, we added this PLN 3 billion, and it's significantly more than the amortization of the back book, which is about PLN 700-PLN 800 million. That also should tell you that the investment level that we've been realizing for the past three years is much higher than the amortization. Therefore, we're building up asset base from which will grow revenues and profits in the mid to long, long term. And also, we recognize significant upside from the back book. So again, it was another year where we said, "Well, this back book continues to perform above our plan. Let's raise it," and we have reasons to believe it's not the, the, the end of this, of these increases.
If you look at this added PLN 3 billion, this was decent returns. You can see here the gross returns or no cost. It was about 21% expected return and 2.3 times money, high-teen % in terms of IRR after direct costs. And as I said, it's close in terms of profitability, it's close, it's a similar number across geographies that we invest. You can see here, you know, how and next year changed the shape of this track record of our recoveries. They continue to show very long tail. In the year 2020, gave us as much as 25% of the initial purchase price. So you see here that we are still in the period of prolonging tails.
You can see it on the graph, even better. They don't want to go down as quickly as we anticipated, so every year still give us an additional upside that we have not seen before. And a few words on funding. We are in a quite comfortable situation. Last year, we have agreed with the bank significant extension, increase and extension of our banking lines. In addition, we see very strong Polish market for bonds, especially retail bonds. You may have seen us do several small and mid-sized issues to retail investors which were vastly oversubscribed. So please expect a decrease of our expected margins that we'll be expecting for the future issues.
We also see that, on the European market, the level of margin has heightened significantly, also on the, when you look at the pricing of our bonds, this, this one that we issued in May, now, now it's quoted at close to 260 points of margin. So we will be testing this market, likely in Poland first. But, it seems that, that we don't require that much additional funding, some, but much less than in 2023. In this base case investment scenario, which calls for between, you know, somewhere above PLN 2.5 billion of investments, less than the PLN 3 billion we invested last year. But of course, this is our, you know, initial view. The situation may change.
We'll see what happens when we at what rate we'll be winning portfolios going forward. But in terms of the funding access, it seems that ample liquidity is available. We plan to raise new money from the banks and from the bonds in the order of course of price coming first for the money, which is least expensive for us. Thank you very much for listening, and now I'll be very happy to take your questions. First question is about recoveries in Poland. Yes, I'll ask the IR team to help us out here. You see here, we have PLN 1.5 billion recoveries on slide 11, and then if you sum it up quarterly, it's PLN 1.3 billion.
So please, please check it and, and tell us or write, write in here what is the right number, because it may be that we have a typo.
I confirm that, PLN 1.351 billion is correct value.
Yeah. Okay, so we have a typo here. Sorry. Sorry for that. Okay, another question is, to provide more details on goodwill impairment of, of, PLN 8 million. As you may know, a few years ago, we bought a servicing business in Spain called Grupo Espand. Now it's part of the KRUK Group. This company still has some goodwill on our balance sheet. The business of that company is to work for Spanish banks mostly, to do servicing. In 2023, we had some minor EBITDA loss on that business, despite the budget, which called for positive EBITDA.
The loss on that business was because some of our clients sold their portfolios, among others, to us, so we lost some business. Of course, the business tries to get new customers, but it didn't get enough to cover for all the costs. As a result, and given the business plan that we have, we decided that it's prudent to write down this PLN 8 million. I think there is a remainder of about PLN 8 -PLN 10 million left of goodwill on this company, but this, at some point, we don't plan to do anything with that. We think that the business will defend itself. So it's I would say it's a relatively minor issue, and it's in a different line of business than our main purchase line business.
If you would look at those two businesses, you may say, "Okay, we, we lost some, in accounting terms, we lost some money on the servicing," but some of that business in servicing just went into our own portfolio operations and will more than compensate profits on this collection of these cases in our main debt purchasing business. Another question is about overperformance on the PLN 427 million, but I'm not sure what the PLN 427 million refers to. Could you help me? Which number is it in the presentation? Which market is it? Okay, maybe it's about recoveries for the group. I'll try to find the segments analysis here. Okay, here I don't have the quarters.
On the 23rd slide, can you show the deviation?
Thank you. I'm going to 30, 23rd slide. Okay, and when do you see this number?
It's income from difference between projected and actual recoveries in 2023.
Okay, and that's for the full year. Okay. I see it here. Okay. So, this is the difference between what we had in our accounting plan and what we actually achieved. So this is a total for all of those markets. I can tell you, you have seen that it's about 12, that it's about 12% difference. It's a combination of the fact that we were conservative in planning, but also we beat our own ambitious expectations from that.
In percentage-wise, it's a much higher number in percent and in absolute values coming from Poland and Romania, and also, it's been positive, but on a lower scale in Italy and Spain. In addition, in 2023, there was a significant beat on corporate recoveries, where we usually don't have this conservatism built in, but the performance was much better. We have another question. Based on your recovery course, it seems that 2022 vintages was the weakest ever vintage in terms of how much of the purchase plan has been recovered the first two years. What was the reasons for such a performance? It's related to the fact that was a higher share of investment in Spain and Italy.
Well, I would say, let's wait and see a few years. We, if we look at the expected IRRs, 2022 is quite decent. It may be also that compared to the previous years, you see here longer recovery curves, because from 2020, 2021, we started to buy portfolios using 20 years curves. So the IRRs, the times money multiple there, is longer than on the previously bought portfolios. So in that sense, we don't see a problem in 2022 vintage. The IRR that we see also is high teens %. Now, we start to see some upside from that. So I would say it's more of about longer curve and more flatter curve than a problem that we may identify.
Overall, this is a trend. The portfolios that we've been buying in 2021, 2022, 2023, are 20-year curve, more flatter curve, higher share of legal and hybrid assumes, which means a longer term cash flow profile and a relatively smaller percentage of initial purchase priced initially for the first couple of years. And you say, is it does the increased share of Spain and Italy? To some degree, yes, although, you know, we are buying in 2022 and 2023 at similar IRR expectations, assuming all 20-year curves, is it Poland, Romania, or Italy and Spain? So there shouldn't be such a big difference.
Well, the difference comes mostly, I'm thinking now from the fact that in Italy you have somewhat longer legal process, indeed, than in Romania, especially, which is more effective process in Poland. So yes, for that reasons, there should be some difference, but we don't see the difference in IRR. But it's the cash flow profiles may be somewhat, that's true, worse, relatively worse in Italy, then a bit better in Spain, a bit better in Poland, and best in Romania. And the next question is: Are we satisfied with the performance of portfolio bought in 2023? Is it better than on 2022 portfolios? So far, we are very happy with the portfolio performance of 2023, but please bear in mind, it's very early for some of those portfolios from Q4.
It's not much that we can say yet, usually. Is it better than on 2020 portfolio? Well, it depends what, what do we mean? The average IRR in 2023 is a little better than in 2022. In 2022, 2022 portfolios, because they've been with us a year more, a year longer, we see already some more upside on them, on some of them. So I would say, when we look at this, and I would say we, what we see is a decent performance on 2023. Normally, we don't see much upside at this point. On 2022, we see some. Main reasons for Czech and Slovak Republic exit scale. Now, we could continue that business, but we would invest PLN 50 million, a decent IRR.
The inflation of wages in Czech Republic and Slovakia is also strong. So there will be a risk that we would be in the subscale business, where we could do small business, but we had this, you know, fixed cost that would also grow, and that would eat into profitability more in the next five, 10 years. So we decided it's just not worth the effort. If the market was, you know, double that size, probably we would stay. More market exit? No. No, we, you know, we are now on four big markets. Four of them have very good growth potential. On four of them, we're a market leader in terms of consumer unsecured portfolios. So it's a strong focus and strong bet on those four markets.
Plus, now we hope to add France. You say OpEx in Q4 , Q3, was significantly higher than before. Yes, and so but please remember, as I said, there was this provision for a cost for bonus for in place, PLN 16 million, although I think it's in overhead costs. And also, there was already some growth, some significant growth from to operating costs coming from increased a big increase in the scale of the business. So we started to recruit people to take over those much bigger size of cases that has landed on our balance sheet. Why the recoveries in Italy were below plan?
As I told you, the reasons was outside environment. In I think Q2 of 2023, a new regulation came that added two steps to execution process in Italy, and that slowed down the execution recoveries by about six months. And that meant a few millions less in recoveries. But this is already priced in our expectations. We don't expect any further negative surprises from that. You ask to disclose level of IRRs for Q4. We don't do it for competitive reasons, but you see it for the full year, this 21% gross return and 2.3 times money expected for the full year. In Q4, I think we were close to these averages for the year.
Is the tax probe a big concern for you? No, it's not a big concern for you, but there's a relatively wide range within the outcome of that. And please understand that it could be a reasonable range, to which we'll say, "Okay, let's pay this and get over with it." And that will be unreasonable part of this range, to which we'll say, "This is incorrect. This is not market conditions. If this is your final view, then let's talk about it through court system." Both options are possible. You ask, what were the key drivers for very good net income? Very good recoveries, growth of scale and growth of assets. Plus, you had this additional boost from release of PLN 48 million of deferred tax provision in Q4.
But overall, cash performance that was a good base also for additional positive revaluation. That was the reasons why you had this significant delta, 12% delta of additional cash, and this variance between accounting and actual cash level. The growth of scale, this additional PLN 3 billion of investments. So again, you ask about why the net income in Q4 was better than the previous quarters and that usually is worse. Again, you have very good cash performance from the portfolios, this release of the tax provision are the two most important reasons.
So, again, as you see here, there is a fair degree of volatility quarter- to- quarter, which indeed is may be difficult to predict year to year, also for us. Is the PLN 2.5 billion a cap for investment or just an assumptions? It's not a cap. It is more of an assumptions, I think, of a prudent assumptions. If we invest this PLN 2.5 billion, that means still a significant growth for the business in terms of assets. It's much more than our current amortization, which is below PLN 1 billion. PLN 2.5 billion investments will still would still mean an increase in leverage level to EBITDA of net profit.
So I think it's a reasonable assumption for now, and let's see where the market is this year. Would we be open to acquire a portfolio of a mid-size Polish player? Would it be a big challenge for your organization to cope with such a purchase? Yes, we would be open to that. No, it would not be a big challenge. Of course, if it's, you know, millions of cases, that is always a challenge, how to transfer these cases effectively. But we've done it before. We have much bigger scale than any of our mid-size Polish competitors. So it would be a good project if we do it, and we don't have significant limitations in doing it. Another set of questions.
Inflation: Do we expect better recoveries and lower cost of the debt due to the decrease in inflation? Yes. First of all, inflation in this environment of a tight labor market means the relative value of our debts is decreasing versus the growing value of salaries. Second, as you may remember, the inflation is correlated to the growth of value of debt after the legal process. The law in Europe usually says there is certain interest linked to the interest rates, by which the value of the debt increases year to year, if it went through legal process. So that means somewhat higher recoveries, possibly on some cases in the longer term. And on the other hand, inflation may not directly affect our cost of debt or, you know, of course, it's interest rates that it's affecting.
But we see in Europe, tightening of the spreads in the bonds on our markets, so we expect also our spreads on the future issues of debt to go down somewhat. Let's see what the market will allow us to. And another question is about the regulatory update. Do you face any new regulation changes in your key market, which will risk the future recoveries? The easy question is, at this point, we don't see such initiatives. Future growth potential. Where do you see the future sources of growth for the cash flows? From the bank book, from those three big investment years that we've done between 2021 to 2023, the majority of net profit from these portfolios is still to come through our P&L in the next five to 10 years.
So please remember, we just added a lot of over PLN 7 billion of assets to our balance sheet, which should be source of profit, still to come, not for 2024, but more for 2025, 2026, 2027, and several other years. And the more we invest over this amortization value, the more we'll be adding to the future possible growth. You ask also, what are the pockets of good portfolios still to exploit in the markets, or to enter new markets? So we will concentrate on consumer unsecured. There is still potential to grow on these markets, but you've seen the market shares. They are already high.
So you know, I'm telling you, PLN 2.5 billion seems to be a reasonable, ambitious target for this year, but, you know, maybe this is conservative. Maybe, maybe, maybe there is a potential to do several hundred million more. I don't know. That, that really depends on the competition, on, on the, on, on how competitive we will be in this portfolio. So in those four markets, we still have potential to grow our market shares in the couple of years, but, you know, this potential is not possibly, not PLN 4 billion, maybe it's PLN 3 billion, maybe it's three point something billion, maybe it's between this two point something to three point something. To grow more, we would need to enter new asset classes, which to some degree is possible.
We will be getting a bit more comfortable with SME, small corporate portfolios, in Italy and Spain, as we are in Poland now. Those are relatively bigger markets, but we do little of these investments, and we want, we know it's a quite risky asset class, so we will increase it, if performance is good. But in our strategy, we say not more than 25% should come from these other asset classes. Today, it's less than 10%. So there is a place there, but I don't want to promise too much because maybe it will never be 25%. And there is new markets, of which now the only focus is France. If France is successful, it may offer good opportunity to, for growth, but it's too early to say how much.
Today, it's a smaller market than Polish, Italian, or Spanish market. It's also, you know, an option, how will France develop as an NPL selling market? Today, it's a mid-sized market. Maybe it stays the way, maybe it will become a big market like those other three that we are. You're asking, is Wonga doing a card business? If yes, do you expect any negative impact from the recent interpretation of regulation from KNF? No, Wonga is not doing a card business. It has a different models. This is, Wonga offers to a limited scale, a product which is card-like, which is, you know, a credit, but it's not a card business in formal terms, so we don't expect to be hit by this interpretation.
Okay, you're also asking, why did recoveries decrease Q4 versus Q3? There's two reasons. One reason is, the weakening of euro versus Polish zloty. If euro in Q4 was at the level of Q3 versus Polish zloty, recoveries would be roughly PLN 20 million higher. And second reason is, in Q3, we had extra high recoveries from corporate portfolios in Poland. It was, if I remember well, about PLN 60 million, and they were much lower in Q4. They were below PLN 20 million, if I remember correctly, which is very good news, because we realized a much better margin on corporate portfolios in 2023 than we expected. If it wasn't for those two reasons, you would see some growth of recoveries. And you ask also what was the effect of strong European, Polish zloty on recoveries from foreign markets?
So I answered, you know, that, that, that would be PLN 20 million, roughly. And you are asking also, what is the outlook for 2024 if the current, if, if we have the current, Euro-Polish zloty, effect? That would be a slightly negative effect. We budgeted somewhat, somewhat, more favorable, fixed exchange rate, but it wouldn't be a significant, it wouldn't be significant. I would say, at this point, when we look at relatively strong zloty, it's, it's more or less it's what we, what we expected, and any, depreciation of, of Polish zloty would be an upside to the result. And no, I cannot comment about possible impact of the, of the, of the tax, control. If we had idea, we would need to report it, of course, to, to you.
So at this point, unfortunately, I cannot be precise. You're asking also, what are the expectations for pricing of investments in different countries? So if you ask about the IRRs, we want to keep this high in percent expectation unchanged from 2023 across all of the markets, with possible exceptions if we see good value for money. But on average terms, this is. We expect to keep up the pricing level. We are not analyzing at this point seriously any other markets than France. Do we have a plan to merge or acquire other companies? Not at this point. Is that the reason for net income in Italy to decrease?
We are not showing net income, so I'm not sure whether you're referring to EBITDA. And let's take a look at EBITDA. The EBITDA increased significantly, year- to- year. And if you look at quarter- to- quarter, it's stable. EBITDA, stable cash EBITDA is growing, so I'm not sure what you're referring to. We are not commenting whether we participate in credit in Casa Deal, sorry. Can you comment on how is Wonga business doing after the change in the law? It's doing good. It's doing good, meaning it's a stable, profitable business in current market condition that could be at the level that you observe in 2023.
But we need more volume, especially in the mid to longer term, when the interest rates go down and the revenue will therefore decrease. And Wonga will introduce new initiatives to increase the volume of loans sold on the Polish market. At this point, we're not analyzing diversifying into any new services. So overall, I would say it's been a very good year. 2024 starts very well. Recoveries in January were above expectations. Please don't expect us to continue to grow at the pace you've seen in 2024, but we definitely have ambition to grow profits this year, despite this high base effect that we have.
Please also bear in mind that the final audited results may be somewhat lower if the tax inspections will be concluded, or we decide we have enough information to create provision. In March, please take a look at this three years of investments, of very big growth of investments between 2021 and 2023, and try to extrapolate that, that should translate into further increases in net profits in the following five years. So we are positive. We, as always, concentrate on improving effectiveness, those four markets plus the fifth now, and we think there is still much we can do about growing that business in the future. I don't see any other questions, so thank you very much for your time, and all the best in your investment decisions. Goodbye.