Good afternoon. This is Michał Zasępa, I'm KRUK CFO, and welcome to the presentation of Q1 2023 results of the KRUK Group. Thank you very much for your interest into dialing to hear my presentation. I made available the presentation on the website. This presentation should be now available also to you through Teams applications. I will proceed now with the presentation. Please use the chat to ask me questions, and I will reply to them after I finish the presentation. We had very good start of 2023. You saw that we made PLN 235 million of net profit. In the Q1, we also had a record high cash EBITDA of PLN 530 million.
Recoveries from portfolios were record high. In the consolidated picture, we exceeded our expectations for this Q1. In most of the markets, we beat them. In one market, we did not, and I will comment on that. This is also a very good start for debt portfolio purchases. Usually, Q1 is quite calm. This year we invested quite a lot, over PLN 500 million, which bodes well for the rest of the year. We continue to show very good profitability. ROE for the last four quarters were 23%. Our assets, debt purchase asset exceeded for the first time PLN 7 billion, and we remain lowly leveraged. The net debt to EBITDA actually fell quarter to quarter to 2.0 at the end of this Q1.
As you may have seen yesterday or the day before yesterday, we closed our first issue of bonds on the Nordic market. That has been a successful placement of EUR 150 million. Because we've done that, we looked in the mirror and had to compare ourselves to some of our peers in the rating process, in this bond issue process. That's why, unlike in many other quarters, I have a few slides of comparison and would like to share some thoughts with our shareholders. How do we compare versus some of our peers?
I'm happy to tell you that if you look at 2022, it looks like KRUK was one of the largest profit-making company in the sector in Europe, and actually also in the world, compared to the privately held, not privately, but publicly held peers, which are mentioned here on this slide. Actually, in Europe, from the peer group, KRUK had the highest net profit of PLN 805 million, as you see here. Also in EBITDA, we did quite well, if you look at the upper hand right, in graph, here.
This may be surprising as we are only present on six markets and four main European market, but still, it seems that we are well-established and effective enough to make quite a lot of money compared to some of our to our big European peers. If you look at some other measures, profitability for shareholders, return on equity or net debt to EBITDA, again, KRUK looks quite positive. We combine the best of the worlds: high return on equity and low leverage. Apparently, our strategy of gradual improvements in the process while being prudent on leverage is making a lot of money for our shareholders compared to our peers.
We're very happy that this strategy proved to be winning one, and I want to tell you, we will continue on that path. Being a company focused on operations excellence, on consumer unsecured portfolio purchases from financial sectors mostly, and showing prudence in terms of liquidity management, leverage ratios, that should, I hope, lead us to further organic growth that will be beneficial for our shareholders. I see that this is more appreciated now than some time ago. You may see on this slide that as of now, KRUK's market cap actually is the number one in the world, among the publicly listed peers. That has never been the case in our history. It's a nice thing to notice.
Of course, I realized it can change any day, but that again shows that the strategy of specialization, the strategy of continuous improvement, the strategy of focus rather than diversification across many markets, this strategy of sticking to what we can best, what we can do best, and not growing through aggressive acquisitions or joint ventures paid off and should be paying off in the future. In this bond issue process, we were required to obtain a rating, and just to remind you, the rating that KRUK obtained in the Moody's is the highest rating that exists in the industry for non-banking debt purchasers. That's Ba1. It's lower for S&P, which believes our low level of diversification should be treated as a downside. I disagree with that.
I think our low level of diversification is a virtue, we are diversified quite well, being in six countries and being very strong in the four big European countries of Poland, Romania, Italy and Spain. We are likely to follow that track. We don't have plans to expand to many more countries. We don't plan to expand to move to small countries. We understand that our strength lies in being very firmly established in big European debt-selling markets, where we will concentrate on consumer unsecured portfolios from financial sector. We may add a new country or two countries in the timeframe of the next several years, the priority will be still to grow profits from the markets where we are currently. Commenting on the recent bond issue, I think this has been quite successful.
We entered the Nordic bond market, which means we have now a more diversified access to debt funding if we need it. We are now recognized by over 100 investors from all over Europe who had looked at KRUK, and many of them has bought into our issue. The plan was to achieve adequate funding to finance, excuse me, the next quarters and the following quarters purchases. Strategically, the plan was to open that market, to make ourselves visible for those investors, and if need be, in the future, in the next few years, tap this market as needed. In that process, we obtain a margin of 650 points over Euribor. This is expensive.
This is more expensive than our current funding that we obtain from Poland. This is market conditions. Again, our strategy towards debt funding will not change. Our priority will be to increase debt funding from banks and also be present on the Polish bond market. The incremental needs may be now financed from the European or non-Nordic bond market. Going back to results. Excuse me. You see recoveries split per countries. Recoveries overall were very good for the Q1, with the exceptions of Spain, where there was a strike of legal of court employees, which decreased our recoveries somewhat for this, the Q1, which is, I think, a temporary problem. The recoveries were very good.
We see no signs of decline of recoveries coming from macro environment, which is very positive. We don't see any trend also in April for that. New purchases were mainly concentrated in Italy, thanks to previously signed forward flow and some new deals. As usually, that was somewhat calm period in some of the markets. Please understand that we should see much better picture of how this year investments play out in second, third, and Q4. So far, this EUR 500 million is a very good start. It's above what we expected budgeting this year.
If you look at some other important elements of P&L, operating and administrative expenses grew quite significantly following inflation, but also following growth of the business, our investments in technology as well. This was expected. We are mitigating the growth of costs by increasing our efficiency and increasing our automation level. Likely we'll be able to have some cost savings by replacing human work with automated work. We don't plan to lay people off. We just plan to grow scale without proportional growth of employment. Our finance costs did increase significantly, as you can see, and that's mostly a result of higher interest rates that has happened over 2022. Equity of the business remains very strong.
It grew to 3.5 billion. Our total assets grew over 8 billion, as you can see. On slide 11, we give you some more detail about the advance that we make in terms of automation, technology transformation. This is a project or a program of projects planned for the next several years, actually probably will never end, which is about the following very important streams. First of all, digitalization of collection process, both amicable and legal enforcement. A smarter use of data that we have currently for statistical use. Improving the effectiveness of our IT process that is internally developed.
Also very importantly, increasing the competencies of our employees into this digital world, which will allow us for, to make a better use of the new technology that has arrived and is now available to us. That in practice means, we will be calling more by using bots. We will be doing certain repetitive functions now automatically. That means we will be able to collect more data and build more powerful statistical models. That means that not only our IT staff will be now using advanced technology, but also our operations people will be able to use some no-code tools that will increase their effectiveness.
We see in technology a big opportunity which comes to KRUK as a prepared company, because for years we've been diligent in standardizing our processing in this lean philosophy of continuous improvement, and these processes are easier to automate once they've been standardized. That means that we should gain certain efficiencies. The biggest gain of efficiency that we aim for is decreasing the time for collection. That may mean increasing the collection , in shorter timeframe, but also it may mean greater cost efficiencies. If you look at the segment financial data, you can see that most of our investments came from Italy, which is an effect of uneven supply and also some forward flows we had in Italy for this quarter.
Recoveries, as I mentioned, were record high, and overall very good, exceeding our expectations. Also very good for corporate portfolio that we had, but of course, they represent only 10% of our recoveries, and the most important part, unsecured consumer, also did very well. The value of portfolios grew by PLN 7 billion. You can see a positive EBITDA on every market. I will now look at and comment each of the markets. In Poland, recoveries were above plan. Both unsecured and secured portfolios did very well. As a result, we were able to yet again recognize positive revaluation. The business is very good. We still see high level of competition in Poland. We don't see yet full effect of the increased cost of funding on that market.
Hopefully, that will change in the future, quarters. If you look at Romania, very good recoveries, and which again allowed us to recognize positive revaluation. Overall, very good EBITDA, very high profitability of the bank book. Relatively calm, supply, low supply on the market, which led to insignificant investments, this quarter, which is as expected. We are looking at more portfolios coming to the market in Q2, Q3 of this year. You have Italy, which opened the year with very significant investments. We also had very good recoveries, on the bank book, both corporate and unsecured. Adequate profitability and also quite we see that the market became somewhat less competitive than in 2021. Or, excuse me, beginning of 2022. Again, this is very comfortable, situation.
You have Spain, where we recently added a large value of portfolios. A big purchase of BBVA portfolios came in December last year. The good news is this portfolio started quite well. The bad news is there was a strike among employees of Spanish courts, which halted the legal processes there for several weeks. Meant some lost or postponed recoveries. This is not a big issue as of now, as we see it. The strike has ended. There is a risk that another group of employees in Spain may now go on strike within the court organizations. This is uncertain, because of that, we decided not to recognize positive revaluation of the consumer unsecured book, which we actually budgeted for Q1, and we'll see how situation develops in Q2.
I think this is a situation that should only be relevant for Q1 or maybe part of Q2. Of course, I don't have certainty on that. Fundamentally, results in Spain were very good, if you take aside this strike effect. In Spain also, we see good pipeline of portfolios, and also we see that the competition for Spanish portfolios is somewhat lower than it used to be historically. We are interested to add new portfolios going forward this year to our book. Czech Republic, Slovakia, and Germany, good performance, small positive revaluation, and quite decent level of investment as per the size of the Czech and Slovak market. Wonga and Novum, you see good results. Wonga doubled their EBITDA versus last year.
Sales are lower than planned and what we achieved last year, also as a result of somewhat more difficult market conditions in Poland. Consumers are more, you know, conservative, more cautious in taking, with taking new debts now with the high inflation and rising cost of living. We plan to enter the market with a new product after that takes into account the changes in the law that happened in December last year. Situation is stable. Just to remind you don't see any more our credit information business in Poland, which we sold in January this year. That sale generated PLN 15 million of revenues. Roughly two-thirds of that amount is a profit, which is in one of transaction for this year, accounted for in Q1 this year.
I will now skip to indebtedness. You see here the profile of our debts that is prior to the issue of this PLN 150 million of bonds. Just to remind you, we continue to run a conservative approach to liquidity and refinancing. When we issue debt, also this PLN 150 million of bonds, we assume will not be forced to refinance that five years later, and we'll have enough cash from our assets to repay it. The company remains slowly leveraged. After this PLN 150 million, we're well-placed to continue to buy in the market. We will also, this year, plan to increase our available banking lines and may consider another bond issue in Poland or outside Poland, whatever is more attractive to us.
Thank you for listening to my presentation. I'll now be very happy to take your questions. I see there are some already. Let me go through it. The first question is: "How do we see the last bond issue in Nordics? Are you planning to issue bonds this year? If still in EUR or maybe in PLN". So, this is a success, as I said. We opened another door to obtain that funding. Now, many more investors in Europe know who KRUK is. That means that if we have such needs, we could balance them and take the money from the source that gives us the best terms, including Nordic bond market.
It's too early to say what we'll do in terms of bond issues this year, but if business is good, if we continue to buy a significant value of portfolios, we may consider still tapping a bond market. I would say probably the first will be the Polish bond market, but, you know, this is really open. You're also asking about the efficiency of operation in Spain and Italy. With the purchase of new portfolios in Spain and Italy, will it cause a strong increase in employments on this market, or will the job be spread among already working people? In other words, what about operating profitability in these markets? You know, the increase of the book will increase our profitability and our efficiency.
We are a business where scale is very important. The growth of the book will not necessitate proportional growth of employees. Of course, some of the direct employment will increase, but that will be a well, substantiated increase. For example, if we have sufficient scale of cases across all Spain, we will be able to employ a country-wide coverage of field advisors. We don't have a country-wide coverage. We have certain regions of Spain which are not covered by our field advisors because we have too little cases. When we add a few hundred thousands of new cases, we will employ additional, you know, 10, 15, 20 people. That will be significantly less than the profitability from these portfolios.
There is still potential to increase efficiency and profitability in Spain and Italy by growing this scale. Also, independently of these economics that we have now, there will be more efficiencies coming in with increased automation of these processes. We still have a lot of place in Italy and Spain to improve their S. It's still a young organization, so please expect we'll be working on that. This is not a project for this year, it's a project for this year and another several years that we'll implement. Another question: "Looking at Q1 investments, how much can you invest this year? Do you see any changes in competitors' activities in tenders?".
Well, we budgeted for this year somewhat around PLN 2 billion of investments, less than for last year, where we made PLN 2.3 billion of investment. We start this year strong. I would say this budget plan holds, and maybe it's possible to exceed it. Please, please note that this is still quite a wide range of possibilities depending on competitive situation. If we see we can buy portfolios at good margins, we're happy to increase investments much. If we see competition is still hold strong, we will not do acquisitions at high prices. We see, as I mentioned in this segments commentary, we see already somewhat less intense competition in some countries, especially Spain, Italy, Spain, and Italy, but we see that the competition in Poland holds strong.
I'm saying this with the expectation of already increased IRRs from those portfolios. I'm saying to you, we see that situation after we increased our expectation for minimum IRRs, which follow the increased cost of debt in our industry. You're asking, do we see more portfolios coming to the Italian market? Yes. What I mean is that we see currently a quite rich pipeline of portfolios across both Italian, Spanish, Polish and Romanian markets. This is, I would say, even higher than last year. It's no wave, it's no change of the game. I would say it's a regular supply which is within this range we were expected, but it's a strong supply. Supply is not a constraint. I think more constraint will be, you know, how competitive these bids will be.
Again, here we are optimistic because the cost of funding for this industry has changed dramatically. That means that some of our competitors, a few, as you have seen on the previous slide, have relatively low, high leverage. Some of them need to rebalance, need to decrease their indebtedness, which means they cannot afford to be as aggressive on portfolio purchases as they used to. Some of them are now selling some of their assets or some of their assets on operations in some of the countries, which creates, of course, also some opportunities. We think that situation will last for a few years, as long as interest rates will not drop again to zero in Europe, which I think we don't, we don't expect.
I like, and the management board of KRUK like that environment much better than low interest rates environment, because this environment enforces on competition, I think more realistic approach to valuations, which means lower competition. It also means some of the aggressive players coming, usually from financial investors, credit funds and hedge funds, will no longer be interested to buy NPL portfolios because these economics changed significantly. Again, I think we're going to a more mature, more consolidated industry where specialists that have strong operations, synergies, big economies of scales on a country level, specific country level, Italy, Poland, Romania, will be the winners of that situations. More opportunistic investors who probably made decent money in the past will be forced out of the market.
We plan to be a consolidator, mostly through our increased investments in that purchase. Opportunistically, we're interested to buy our competitors, but looking through the lens of how valuable their assets are to us. We would happily buy assets from our competitors, less happily anything else. Of course, it's always matter of price. Another question. "Given it took couple of years to become profitable in Italy and Spain, would it be time to enter a new market to secure long-term growth?". Of course, this is logical that, you know, we to expect that it will take us a few years to develop profitable position in the new market. Please bear in mind, we have just started to earn money in Italy and Spain.
There is much more potential on those market, this potential will not be proportional to the history. It will be proportional to the growing scale and efficiencies in Italy and Spain. We are excited today because we think we can grow profit significantly in Spain and Italy, but also, in Poland. Romania, where we've been dominant, probably doesn't have that big growth potential. You're right in that question that following our organic growth strategy, it could be a good idea to research some of the markets or start a new market at some point, expecting it to become profitable some years in the future. We are doing it, meaning we are researching some European markets, some big European markets.
We have not yet made a decision which markets and what will we do, but bear in mind, we know it, and we are working. Hopefully, you know, at some point, we'll be able to tell you more, more details. Can you please elaborate more on digital transformation of KRUK? What KRUK wants to achieve? The most important element is that at some point in the future, a significant portion of our millions of accounts, of our bank book will be able to be processed automatically. That in practice, means that we will need much less time, effort, and money to make things happen.
For example, buy a big BBVA portfolio of 200,000 cases and be able to do calls for one week of this portfolio, or send to the legal to courts, in a month, hundred thousands of cases, not taking us, you know, six months for that. That is, we think, possible. It takes probably years of development, again, of specific IT solutions per country, that will lead in a much shorter lead time, and our people being moved from repetitive, boring tasks to more value-added task.
If we do it and we increase scale, I think what we will achieve is faster cash flow, more cost-efficient organization, and greater employee satisfaction as a result that our people in operations will have a more interesting and more sophisticated tools, tasks to be done. You know, in a nutshell, this is what transformation means for us. In practice, it means many dozens of IT technological processes, or IT combined with operating teams, will be making some small or bigger improvements of those, of their processes. Some of these will be initiatives that will last couple of months. Some of that will be initiatives which will make big changes in the IT systems, and it will take us a few years to develop them.
Another question: "What do we think is competitive landscape? Do we think the competitive landscape is improving in Romania, Italy, and Spain? Why do we think so? What about Poland?". Well, you know, we have evidence from, well, from bit to bit, where we see certain competitive situation. I can say from the experience of the past few quarters, we see that we have higher win rate at adequate or actually increasing IRRs in Italy and Spain as before. I think the reasons for that is a combination of two factors.
The first factor is our pricing models for portfolios in Spain and Italy are showing a higher success rate now, because we are more effective, because we collect more now than we collected a few years ago, and therefore, at the same, for the same portfolio, we can now pay a higher price expecting the same expected IRR. That's the first reason. Second reason is, we think our competitors increased their expected IRR today versus what they expected a year ago. Why has that happened? Cost of funding increased so much. We don't see that much in Poland, I think, yet. Why? I think, again, it's a combination of factor. Polish market is very competitive, there is actually more competitors now that we see in Poland than in Spain and Italy.
Also, if you may remember, in 2021, KRUK has made very big investments in Poland, which made our competition was probably more eager to buy more in 2022. Probably for some of those competitors, they need to buy to really substantiate the existence of their business in Poland, so they're really fighting for, you know, being present in the market in the future. Although I'm not saying anybody's losing money in Poland. You know, this is what we see. Maybe also part of this, our subjective view is that we have increased significantly our expected returns for Poland. Please remember, in Poland, we compete mostly with international investors who are not funded in Polish zloty.
Again, they have this advantage that if they decide to fund the Polish portfolios from EUR, where the interest rates are still much lower than in Poland, That is reason for some difference in opinions about the minimum IRR for this portfolio. This, I think, is disappearing as we speak, if I observe the margin expected from NPLs buyers on the bond market in Europe, which are quite high, record high, historically. I think this advantage that our competitors may have, will be diminishing or just diminished. I would expect that the Polish market also will go up in terms of expected IRRs and go down with the prices in the next quarters, but let's see what happens. Another question: "How is the legal environment in Poland affecting KRUK?
Is there any change in legal environment plan for other markets?". There are no changes in legal environment now in Poland that will take place in the, you know, in the past couple of months. There is still this draft legislation regulating debt collection industry offered by Ministry of Finance that regulates the amicable debt collection. A second draft was made public in March this year. This draft takes into account some of the feedback industry gave. Also takes into account the fact that the NPL Directive is to be implemented all over European Union, including Poland, in the next few quarters. This draft says whatever it regulates, it does not regulate banking NPLs.
What it means specifically is still subjects to legal analysis, but it looks like a big part of the NPL market which we manage is actually excluded from this new bill. This lead regulation, which is making amicable collection harder to do in Poland, will not significantly negatively affect. We'll comply with it, whatever it will be. We know, we've read through the second draft now. It makes our life more difficult, we need to license people, license company, we need to have certain restriction in the process. We'll do it. We'll do it, we'll comply, and we'll live with it. It's not, at this point, it's not any major, you know, financial concern. It's more HR organizational issue that we'll need to do. This law has not been-
This draft has not been made law, a law yet. I expect that it will be passed by Polish parliament sometime this year, maybe in still different form than is currently presented in draft two, but it's not likely to become a law, meaning starting to come into force before the end of this year. The NPL Directive is likely to be implemented, too, with some delay. The Polish Ministry of Finance, who is managing that process, said that likely it will be in the beginning of 2024 that this law will be passed. Again, NPL Directive is something that we see positively as making our industry transparent, better regulated, and less than prone to further regulation. Overall, we don't see now any major negative changes in the law upcoming.
These were all the questions that I seen. Do you have any others? If no, thank you very much for your time and interest in KRUK. We'll continue on our, you know, path to make this company more profitable and more efficient in the future. I think a good time is ahead with this higher interest rate and lower competition. Please keep fingers crossed for us, and we'll try to do our best as always to deliver. Thank you very much. Have a good day.