Thank you. Good morning or good afternoon depending where you are, and thank you so much for joining us on this mid- mid-summer day.

It's very warm here in in Budapest, and very sunny, and unfortunately very dry, we're, a bit fighting with the elements. Now, if we follow the usual—we are going to follow the usual process, so, we are going to show you the presentation, but the presentation is also available on the website so you can download it.

And, first I go through a a reasonably brief presentation, and then we will have a question-and-answer session. We may just start going to page 2, the kind of high-level features or most important messages.

They have not changed, I I don't think we should dwell on these. We continue to deliver on those lines.

Page 3, we try to summarize the situation and and and and make sense of the numbers. Because in order to be able to understand the the underlying business developments, we we need to somewhat specify which numbers which we are looking at.

If we just look at—looking at only the the reported numbers, that is 306 billion HUF profit after tax in the second quarter and 483 billion HUF profit after tax for the first half, and looking at the quarter-on-quarter and year-on-year developments of these numbers is not particularly insightful. One big problem with these numbers in order to make some sense of them is the usual one which we have been facing for a number of years that this extra profit tax, and the bank tax, and the in in general the supervisory fees across the group, they all have to be booked at the beginning of the year.

Since the the size of these numbers have grown, unfortunately, quite extensively during the last couple of years, this is actually it has a huge impact on the quarterly distribution of profits. On top of that, the extra profit tax keeps decreasing throughout the year as we continue to fulfill the requirements in order to reduce or or kind of be able to have the discount on the on the extra profit tax.

Therefore, we kind of show you these pro-rated or adjusted numbers where we show the numbers as if these extra burdens were evenly distributed between the four quarters throughout the year. That those are the numbers what you see on this page in the upper left corner in a kind of darker green color.

Now, these numbers are much more meaningful than the reported ones. However, they also require some further kind of consideration.

The first one is due to the fact that the HUF exchange rate moved so much, the HUF appreciated so much during the last year, year on year, in order to fundamentally understand what's going on, what in in terms of the business performance, we may it it may be better to to look at the FX-adjusted numbers which are not affected by the exchange rate changes. If we compare the first half of this year to first half of last year, this adjusted number shows 2% decline, but on an FX-adjusted level, without the impact of the exchange rate changes, in fact, profit went up by 4% after tax year on year, first half.

Now, taxes increased quite substantially, and there are two sources of that increase. The bigger one obviously is the extra profit tax doubling from last year to this year.

In the first half, it's almost 30 billion HUF ex- plus tax. The other country where we are subject to increase taxes is Ukraine.

In Ukraine, the corporate tax increased from 25% last year to 50% this year. Therefore, the taxes line, which includes all of these, went up 22%.

Now, that leads us to the profit before tax numbers, and on that line, again FX-adjusted, we see 8% growth year on year. That's somewhat better.

Even this number includes this kind of one-off num- one-off burden which we had to book in the second quarter for the mortgage for the for the rate cap in Hungary, which has been with us since the beginning of '22, but previously the method applied by the previous government was that in every 6 months they extended the program with another 6 more months. Therefore, we kind of gradually, step-by-step recognized the the the potential loss of this.

Now, the current situation is that, legally, the there's no end to to the to the rate cap. This we understand as an interim situation because discussions are ongoing between the government representatives and the the Banking Association.

Our expectation is that eventually this is going to change and they will come up with a solution which creates more a more fair system on the level of society and and and and and a solution which is actually according to the legal requirements in Hungary, because we believe that the current solution is not. Therefore, we have taken legal actions, obviously, and we will we are going to continue to do so in the future as well.

Nevertheless, the the best solution is if there's there's a fair outcome of this rate cap, which, shouldn't have happened, but it has, and it should be fixed. It hasn't been done yet.

Technically, we had no other choice than booking the the full potential loss for the remaining maturity of these loans. That was the equivalent of 30 billion HUF pretax, and most of this was booked as a risk cost.

Now, if we hadn't ha- if we had not had this, then the profit before tax growth compared to last year would have been 11%. This kind of 11% is more or less what can be considered as a kind of business as usual underlying performance improvement.

That looks markedly better than the -7% or the -2% or the +4% +8%, but you can pick your number, but we believe that the these that one is probably the closest to to the actual developments. Now, let's have a look at the details of the of the P&L lines again on this FX-adjusted manner, and this is the the middle section of the slide.

Net interest income year on year has gone up by 19%. That's a pretty solid performance.

This is a result of strong organic loan growth. Last year, we had 15%, and we guided for this year maybe similar level to last year.

The good news is that the first half of the year was 8%, some acceleration. Even within the first 6 months, the second quarter was stronger than the first.

That means that year on year, to end of end of June this year compared to end of June last year, the growth was 17%, again FX-adjusted. That's loan growth volume.

On top of that, net interest margin also improved somewhat compared to last year, and these two together plus, obviously, the the the the strong and and and even more profitable deposit growth, especially in retail, resulted in almost 20% year-on-year net interest income growth. However, fees and commissions, only 3%, and other net non-interest income actually negative 21%.

What happened here? Fees and commissions used to grow faster.

What happened on the fees and commission lines? Two two reasons.

One, the bigger one is that in Russia, fees and commissions actually declined by 17% year on year. The other smaller impact came from the fact that we had to delay the legally possible fees and commission increases in Hungary.

You may remember that we were strongly requested to voluntarily delay the the fee increases by the previous government somewhere last year, and therefore those kind of annual fee and commission adjustments in retail which we typically do in Hungary happened only at the end of June and then not in January. Now, but this has a smaller impact.

The other line, the other non- the other income line, which was actually negative, -21%, was primarily negative again because of Russia. Russia, this line declined by 32%.

This is this reflects the declining volume of this transactional business what we have in Russia, which is primarily coming from European corporate clients who who make transactions, and that's that's a reasonably high-margin business, but this is declining in line with the overall decline of trade volumes between Russia and the and EU counterparties. That's a kind of external environmental trend, and this is something we are not going to fight.

This we accept and we are not proactively selling these. That, in a way, this is okay.

Maybe some of you might be a bit happy to see that, because that shows that our Russian activities actually declining in that sense, and and and actually our profits are also year on year started to decline. That's why the total income growth is only 10% despite the fact that the the net interest income growth year on year was 19%, and that night net interest income is obviously the majority of the that's the biggest part of the total income.

This 10% is due to these factors which I just explained. Now, operating expenses went up 17%, and this doesn't look very good, to be honest, and we are not very happy about this that operating expenses went up 17% and income only 10%.

Again, despite the fact that actually the core part of income, which is net interest income, grew more than expenses, 19%. Certainly, on this expense growth trajectory, we we are actively working on this, this is this is one of the management focuses to slow down this rate of growth, and and we are working hard to to have a materially lower number for next year of the operating expenses growth.

Okay. On the right side, you see the the ratios which are related to the guidance what we have given, and we decided to change the guidance or modify the guide guidance on on in one occasion, and that's the net interest margin.

Given that we that the fact for the first half is 4.61%, and and considering all the environmental factors, we believe it is actually quite likely that the net interest margin is going to be higher than last year. That's probably not a huge surprise to you.

On all the other lines, we we we haven't found necessary to to modify the guidance, but you you can see what where these numbers lead to. Maybe the the risk cost rate requires some further elaboration.

As I mentioned, this kind of one-off cost of of the interest rate cap extension to maturity, the 30 billion HUF cost, most of it appeared as a risk cost, as a credit risk cost. Obviously, that increased the risk cost rate and the risk cost line.

Without this impact, the ri- risk cost rate, the credit without Russia, would have been this 42 b- basis point would have been 21 b- basis point. That is without Russia and and Ukraine and Uzbekistan.

This kind of 42 basis points what you see here as risk cost rate for the European countries was kind of on the fundamental part was was actually only 22 20 21 basis points, which is not very different from the reference period last year. Okay.

Page 4, it just gives more details of these of the P&L lines, you you see the numerical values as well. I already talked about the most important column, and that is the the one somewhere in the middle, showing the year-on-year FX-adjusted growth rates.

On page 5, you can see the technical details behind this pro-rata recognition or pro-rated, sorry, pro-rated recognition of the of the extra charges. If you are if you're interested, the the what we actually booked and reported for for the first half was 173.5 billion, and what actually should what falls on on on this first-half period, if we kind of evenly distribute, was only 75.9, so that's the explanation of this kind of difference.

Before we dwell into the details of the performance of the group, let me share with you some some information and some thoughts regarding the potentially most exciting re- recent development, and that is that we finally agreed with the owners of Luminor of buying the bank, we signed an SPA with Blackstone and DNB Bank. We are obviously very ex- excited about this.

The price we are obviously we are not able to disclose anything other than than what's available is publicly. However, we we agreed with the sellers that we can actually share this one information that the that the, as you can see here, the purchase price was set below the book value.

Again, this is not a pro- potentially not a new information, because DNB Bank already kind of published the expected loss on their in investments in their books, and from that, some some of the analysts already kind of calculated the the price, with or roughly the price or the price range or something like that. This is what we can tell about the the the purchase price with an agreement from the sellers.

Now, on our side, the rationale is well, obviously entering three new markets which are quite developed eurozone markets, both in terms of penetration, in terms of income per capita, and in terms of banking services. These markets are very advanced in terms of digital services, and that's that that that's part of the excitement what we have.

To be able to compete in in in in a in the in in such an advanced market. Now, the the this acquisition, we have been saying that we like to be or the optimal position in in Central Eastern Europe, in the smaller countries, is to be number one or num- number two maximum.

Now, Luminor is not number one and number two. We consider this potential acquisition as creating a growth platform in these countries, and obviously our our intention or aim is to challenge the market leaders, and that can be done through organic growth, but that also could be done through further acquisitions.

This is obviously something we we take into consideration when where we when we look at this transaction strategically. Again, we are not able to share with you insights, but we may go as far as that we find the the the management team very competent and capable and strong, the current management team, and the IT developments what what they have achieved during the last couple of years is also very impressive, and there's a a visible result of that.

Luminor actually recently came out with a very new and and and we consider it very good and very competitive new mobile app which we believe will considerably strengthen their ability to to compete in in the retail segment in the country primarily in these countries. Now, in the next couple of slides, you can see the kind of publicly available information and the kind of pro forma combination of the the assets.

If we were to combine these assets just pro forma the end of the first quarter, because that's the those are the most current numbers what we have available publicly for Luminor, then then it would be like 12% of of the total assets, 14% of total loan book, and and 22% of total loans. In total mortgage loans, actually mortgages is as the strongest part of the the Luminor kind of business activity.

Also very interesting that the if you were to combine with with Luminor now, actually the the total, 50% of the of the loan volumes would be in the eurozone, and that's again, this is potentially important from from not just from the kind of primary business, but also from this perspective, maybe for rating, and and it has kind of wide potentially positive effects on us. On the following page, you see you see the the detailed information on what available is publicly for Luminor and also for the market.

You can see from the penetration numbers that this this indeed these markets and the whole region seem to be more similar to to to to developed Western European eurozone markets than than what we typically have at the moment in our portfolio, and that is reflected in the in the kind of higher mortgage loan penetration and and the much lower consumer loan penetration. This kind of around 3.5% is closer to the to the most developed eurozone countries like Germany, Netherlands, and so on.

Specifically Luminor, the the RO- the return on on equity is not particularly strong. If you we look at the last year numbers, 8.6%, this is much less than the the comparable two larger and two smaller banks, which you can see on page 8 at the lower right corner.

These are the banks which are active in in across the region, and directly comparable to to Luminor. Luminor falls behind in terms of return on equity.

Why? Again, just from outside in, if you look at the numbers, in terms of net interest margin, they seem to do well.

In fact, it's better than the the market leaders. In cost-to-income ratio, they don't compare very well.

There, that a not-so-good performance in some it aspect is always a potential opportunity to improve. This is obviously a theoretical at this stage opportunity to maybe improve the profitability ratio of of Luminor in the future.

Now, page 9 shows this kind of the level of digital maturity of the market and the the and the scarcity of branch coverage. As you can see, in all the three countries, Luminor itself has 18 branches only, it's it's already primarily digital.

Again, with this new mobile app which they just came out, it's called Luminor Bloom, we believe that they will be able to compete even more effectively on on on the digital front. That's what we can say about the story.

Obviously, we have to go through the the the approval process, and that is going to take some time, given that it's ECB and and and also the the authorities in in all three countries which are relevant here, it is going to be a process taking some time. We do everything on our side and on the side of the sellers to make it as fast as possible.

We very much hope that the process will be objective and fair, and and that scenario we don't see any major roadblock to success. On page 10, we go back to the kind of usual series of slides, starting with the story in Hungary.

The Hungarian results were even more affected by this one-offs what I kind of explained. I didn't explain the quarterly decline on the on the on page 3 on a group level, but I'm going to do it here, because the reason for that came from the Hungarian numbers.

There were there were two events, or two two factors here. One, I already talked about, and that's the the interest rate cap what we booked, and again it was 30.4 billion pretax and 26 billion after-tax impact, and all of this was obviously in the core in in Hungary.

Plus, on a quarterly quarter quarter-to-quarter basis, there was another line which impacted the the quarterly difference, and that is the on the kind of other income s- side the the fair value adjustment of the subsidized loans. Now, this is a rather large and growing portfolio.

It's now more than 2 trillion. It's like 2.2, 2.3 trillion and growing portfolio in Hungary in local currency in Hungarian forints.

It's it's it's getting closer to €5 billion equivalent, right? Now, we have to fair value adjust this portfolio, and also if there's any kind of swap interest rate swap related to this portfolio, also those swaps have to be fair value adjusted, because we can only do hedge accounting or we or, I would rather say, hedge accounting cannot be done if the underlying asset is actually marked-to-market on a fair value adjustment basis.

This is a rather big portfolio, and if the if the the yield curves shift and change their shapes, then then the the quarterly impact can be actually quite sizeable. What happened was that in the first quarter, we had 20 billion plus, and in the second quarter, we had 20 billion minus impact coming from this.

That created a difference of 40 billion between the two quarters. In Hungary, on top of these two, there is one there we also re-evaluated negatively some investment in subsidiaries, but that only has impact on the numbers in Hungary, on the local numbers.

On a consolidated level, they are eliminated so they don't appear. They actually appear positively because they create a tax shield in Hungary.

The impact of this is actually positive somewhat because of the tax shield on group level. The other two obviously appear on the group level as well, the 26 and the 40, and these two were the reason behind the quarterly decline on the group level as well.

They are also the the reason behind the quarterly decline on the quarterly level in Hungary. Now, the good news is that in Hungary, despite, in the first 6 months, if you take the 6 months all together, does the then this fair value adjustment of subsidized loans had a very small positive impact, a few a billion or so.

The good news is that on a kind of year-to-date level, there's not much impact, but on the quarterly level there is. The other good news is that actually if we compare the first half to the last year, again this pro pro-rata pro-rated recognition of one-offs, then the increase in Hungary was 15%, even including the cost of the interest rate cap, right?

That obviously comes from A, from the the improvement in the net interest margin, which you can see here on this slide, and also from the very strong growth in the portfolios. I'm going to talk about that.

The growth rates of of the loan portfolio and the deposit portfolio both are very positive in Hungary. Now, one more remark on this slide.

The the credit risk cost rate in Hungary was 55 basis point in the first half, which is much higher than, higher than last year. Now, again, the entire growth here was due to the fact that we booked most of the the cost of the interest rate cap prolongation here in in and among the risk costs.

If that If this was not there, if it didn't happen, then oh, it had not happened, then we would have had 1 basis point credit risk cost rate in Hungary, pretty stable portfolio. Okay.

Few more details in Hungary. Page 11, you can see the growth of the home start program.

It continues. Second quarter was just as strong as the first in terms of new applications.

Far, we haven't heard about modifications of the conditions. As far as we understand, the program continues.

As usual, when there's a surge in demand, and especially when the demand is shaped by availability of subsidized programs, and subsidized loans are typically more complicated to to process in terms of applications than market-based loans, because clients have to prove their eligibility and the the structure is usually more complicated, it requires more longer and deeper and and more skilled interaction with clients. In these situations, typically our market share increases, and indeed this happened.

During the first half of this year, our market share from new production of mortgage loans went up from this kind of low 30s which we used to have to close to 40%, which is also something we are quite happy about. Following page shows the other retail segments and how they fare.

Cash loans continue to be strong. The baby loan program continues.

Again, we haven't heard about changing conditions. There's one interesting number here.

It's the market share in retail deposits. As you can see, there is some decline in the second quarter, which also shows up you know in the year-to-date number.

We ended the year last year 41.2% and we went down to 40.4%. Now, this is in our understanding due to a technical well, a a development that a digital bank which is active in the region started to localize its client base and they switched the the IBAN numbers of their Hungarian clients to Hungarian.

Apparently, in our understanding, they were actually part of the the the the total market number at the end of '25 and and and first quarter, which was, in fact, not quite the case, because they were part, but with zero volume. Technically, this localization and the the deposit volumes of this digital player who has clients in in Hungarian clients starts to appear in the overall market numbers, technically, from most of it at the end of June.

We We don't know exactly, but our understanding is that most of these volumes appeared end of June, but maybe some part are going to come through in July, maybe August. Certainly by the end of August, we we should see the impact on the total market numbers coming from this technical reporting change.

That resulted in this in this decline. Overall saving market share increased, but that is just May number, so that's not June.

Corporate, few words in Hungary. It looks good.

Again, we were probably one of the very few banks last year who started to grow, and the growth rate even last year was quite strong in in in large corporate and in in micro small. Now, the good news is that the the large corporate growth continued into the first half, and the even better news is that micro small accelerated quite substantially.

We have 14% growth in 6 months in micro small corporate loans in Hungary. As a result of this, our market share continued to increase in terms of loans to Hungarian corporates, and now it reaches 22%.

A brief overview of our non-Hungarian operations, these are the foreign group members, or outside Hungary group members. The the overall performance is quite stable, I would say, in terms of profitability.

We will go more details into a volume growth in loans and deposits in in in the coming slides, but if just looking at the profitability, it's typically stable, with some exceptions. The exception the biggest improvement we see in Uzbekistan in terms of return on equity compared to to last year, and that's due to the fact that the share of consumer loans, which have higher margin than other loans, increases, plus we managed to somewhat optimize the the cost of funding, the deposit rates and the and the the the cost of deposits.

That translated into better margins, and that translated into higher earnings. Now, on the negative side, we have Russia, where we have a trend-like decline in profitability.

This is this is linked to the fact that what I kind of explained at the beginning of the presentation that income, the fee income and and other income lines, decline in Russia in line with the decline of these overall activities, this this transactional activities of our primarily European corporate client base. We also have decline in case of Ukraine, but that is not at all related to the business performance.

As you can see, return on equity went down from the kind of high 20s to to to to 17%, but that's due to the fact that the corporate tax doubled. Last year we had 25%, this year 50%.

Even with 50% corporate tax rate, we made 17%, which is kind of okay. The other kind of small smaller magnitude decline happened in Serbia.

In Serbia, there's a not as drastic, but there's also a kind of rate cap primarily for consumer loans which was introduced last year and that to some extent, it's actually contracted our margins in Serbia. That is that's why we have somewhat lower return on equity in Serbia than last year.

Now, going back to the kind of cross-section slides, maybe one briefly looking at the margins, there was not much, but 3 basis point improvement, at least it was positive, quarter on quarter in the net interest margin. That and you you see the biggest components of that.

Hungary was unusually in this period negative, but the reason behind that was not that, product-level margins declined, it was because the there is a surge in the overall total assets, so that the denominator 6% growth quarter on quarter on the balance sheet, and that that came primarily from intragroup placements, intragroups, placements of the subsidiaries in Hungary increased quite substantially, and that's obviously a a close-to-zero margin ac- activity, and also corporate deposits had quite a surge, and that also a a a relatively low margin liability-side product, especially compared to retail. This kind of composition impact in impact in Hungary.

Uzbekistan was positive, and the other 4 basis point came from again composition, the the lower-margin countries had lower growth and the higher-margin countries had higher growth. In rate sensitivity to the euro rate and HUF rate, it they have not changed much, €120 million for 1 percentage point to the euro and 23 billion HUF at the 1 percentage point to the HUF rate.

Looking at volume dynamics, we are quite happy to see this slide. Slide, again, 8% growth in 6 months, and the quarterly increase was 5%, there's acceleration in in the growth rate compared to the first quarter.

You can see the particularly high performers. Highest Ukraine.

In Ukraine, we started to kind of turn on the tap, and and and, the growth rate is high. Nom- Nominally, this is not you can see the nominal numbers in terms of growth, this 18% growth in in Ukraine was nominally less than 10% of the nominal growth in in Hungary, but but I I think this shows our commitment to the country, and and I believe that that that business can be done profitably in in this in in even in this environment, and we also con- consider this as an investment into the future of the country.

Obviously, the biggest countries, Hungary, Bulgaria, did very well, double-digit growth in 6 months. In in in Bulgaria, this is the kind of post eurozone accession impact, and in Hungary this is primarily fueled by the the housing loan subsidized program, 17% growth in in the first half in 6 months in mortgages in Hungary, right?

Now, the only kind of laggard here is is Uzbekistan. I I I showed you that in terms of profitability, Uzbekistan, Ipoteka already started to improve, but in terms of growth they are not there yet.

Now, the new development here is that we've changed the the CEO, we have a new CEO who's a Hungarian gentleman who joined in 2005, I guess, to actually to my team in finance, and and he is he's a very seasoned and and and very good manager. He has been this the CFO, the Chief Financial Officer of Ipoteka since we acquired it.

He he's taking over the the leadership of the bank, and we I especially, personally, me, I believe that this is going to give the right boost to the performance, and I I personally expect visible improvements over the course of the even the next 6 months compared to what we have achieved so far. Deposits, year to date, 6%, again strong, especially strong in Hungarian retail and in Bulgarian retail, which are very profitable, these are the pro- potentially the most profitable products across the group, so that is certainly very important.

Overall, good picture. Quarterly numbers, I'm not going to dwell or go in detail, but again I think the headline is that 5% first 6 months loan growth was 8%, second quarter was 5%, there was some acceleration in the growth rate what we have seen.

In terms of portfolio quality, stable, coverage also stable. Again the risk cost rate, second quarter was higher, but that was due to the fact that we booked this one-off charge for the rate cap as a risk cost, most of it.

In terms of capital position, 17.6% Tier 1 ratio. We consider this strong.

You can see the the the year-to-date development of the of the the the factors, the decomposition, the the kind of profit the normalized profit generated 1.9 percentage points Tier Common Equity Tier 1 percentage point Tier 1 equivalent, so that that shows the the the capital generation potential. Yeah.

In term, is it high, is it low, 17.6%? We You may I'm sure there will be questions about this, we believe that this 17.6% is is somewhat higher than than the optimal if you believe that the optimal is that we want to be at the kind of one of the strongest in this pack, in this group of comparable banks, and now we we seem to be quite at the at kind of an outlier on the higher end.

Raiffeisen obviously because of the large exposure in some high-risk countries, they they may not be the best benchmark here. The good news is that we we found a solution, and we hope that we we would be not just hope, we believe we found a solution which actually creates value for shareholders, and that is an acquisition, the Luminor acquisition.

We believe will bring this ratio to this range what we kind of target compared to compared to these banks. In terms of liquidity, liquidity remains stable, loan-to-deposit ratio 78%, liquidity coverage ratio above 200%, net stable funding above 150%, and in the second quarter we made a a benchmark Tier 2, and now we moved the benchmarked up from 500 to to million to 1 billion, this is this was our largest ever issuance and it we we consider it quite successful, so that further strengthened our not just our capital, but also our liquidity position as well.

Having said that, we are still not very much leveraged. The leverage is quite low.

If you if you look at the the total wholesale debt to total assets, it's 8%, which we consider still quite low. We were in in in 2008 when when the global financial crisis hit us and hit us hard, that was actually 25%.

This is you can see the comparatively low still. There hasn't been much movement on the rating.

However, we we are potentially optimistic in terms of the future, coming from two two factors. One, that the new the the economic policies of the of the new newly elected government in Hungary are obviously we believe rating friendly, obviously they they also have to deliver, not just set targets and and and policy frameworks, but a a good framework is important, delivery is even more important.

That that makes us optimistic in terms of potential future rating developments. The other factor is, obviously buying an asset in in in three eurozone countries with a mu- a better rating than than our our ours should should have a positive impact on on this consideration as well.

Another outside-in perspective on us, I'm sure it's not a big thing for you because you have investing in many very successful large global companies, but for us, it was actually quite important that our ranking in in the Forbes Global 2000 improved considerably, and now we are in part of the elite group of top 400 entities, corporate entities, so that's that's something we're quite happy about. Then some some more kind of self-marketing slides.

There's not much change on this, page 26, 27. You have seen these.

We continue with green lending, on 28th you can see. You may remember that we set this target to to reach 1.5 trillion HUF equivalent of green loan stock.

We did that in '22. We overachieved at the end of '25, and but we did not stop.

We didn't want to stop, we this has further developed, and and now we are close to 2 trillion green loan stock volume. That's, that's getting closer to to €5 billion.

Maybe a few words about expectations. In terms of macro, there's there's a volatility.

I'm sure you are also very much subject to, coming from the war in Iran and and the strategy the US strategies regarding that difficult situation, and so therefore expectations are volatile, to say. If we put that as and plus it's this the heat and the drought and the and the scarcity of of water is actually it's it's the it's a current issue in Hungary, but nevertheless we believe that it's not going to have a a major material impact on the overall kind of forecast numbers for this year, we still believe that these are the the the the expected numbers.

Now, what we see kind of as a as a kind of regional trend that we have had couple of years when when when South- Southern Europe, the Mediterranean, has done better, and the kind of Central or Northern Europe has done somewhat not so better, but some normalization seem to happen. The the the Mediterranean seemed at least in our portfolio where we where we focus on seemed to kind of slow down somewhat, and and and Central and Northern part of Europe starts to kind of perform somewhat better.

There's some normalization of this growth difference what we have had during the last couple of years. Other than that, we don't see a major impact on on on the macro other than what we kind of talked about that potentially higher energy prices translate into higher inflation and higher rate environment at least temporarily as long as the conflict lasts in in in in in in in the Gulf.

In terms of guidance, we decided to modify somewhat the guidance in in one respect, which regarding the the net interest margin. Again, it's the I I think now we can reasonably safely predict that that the the net interest margin this year is going to be higher, exceed last year, and not just to be around it.

On all the other lines, we we we keep the the previous guidance, and you can judge yourself whether the risks are up or down in in on those lines. There's a bunch of other cross-section slides going through each line of the the balance sheet the the P&L, sorry, if you have interest or if your questions will target them, I'm going to talk about, but not not part of the formal presentation.

I finish here, and and I'd like to ask you to to ask your excellent questions.

Hi, good afternoon. Thank you for taking my questions.

When it comes to Luminor, where do you see the greatest opportunities to create value under your ownership? At the same time, what do you see as the key execution risks associated with the acquisition, both in terms of integrating the business and operating in a market where OTP has not previously had a presence?

You mentioned that you aim to become number one or number two in the Baltic market. However, the Baltic banking market is highly competitive.

There are well-established Nordic incumbents as well as digital challengers, such as Revolut. What do you see as OTP's and Luminor's key competitive advantages in this market?

How do you plan to strengthen Luminor's competitive position over the medium term? In addition, on the slide 8, you highlighted that Luminor's cost-to-income ratio is materially higher than that of the Baltic peers.

What are the main operational levers you intend to pull to improve the efficiency and narrow this gap? Do you think this will require material upfront investment from your side?

Are there any areas of the business of Luminor where you can see scope for improvement or the profitability? Thank you.

Wow, that was a very detailed question. Now, what I said exactly was that we would like to challenge the market leaders, and if you look at the numbers, they have 12% market share across the Baltics in terms of loan.

The number two player has 21%, so that's quite a big gap. As an aspiration, this gap should be closed or at least should decline.

What else would be a target to buy a bank than to grow it, right? Again, I don't think it's a secret that we may look into other acquisition opportunities in these markets to strengthen the position of Luminor through acquisition.

It's typically not easy to grow through market shares organically. That's usually very costly and exercise, nevertheless possible.

Now, all of your other questions I have answers to, more or less, or we have strong views on those, but I don't think I'm able to share with you. We have a nondisclosure agreement, I cannot tell you anything where the information comes from other than publicly available sources.

At this stage, I won't be able to have an answer because operational levers and so on and how to improve the cost-to-income ratio, that would mean to share with you information which I'm not allowed to do, right? Therefore, I think, in terms of communication, we have to remain on that level.

If we go to page 8, I think it's very clear that there's an opportunity. If bigger banks and even smaller banks can operate with a much lower cost-to-income ratio, then there may be an opportunity to improve this.

I'm not in a position to share with you where, if at all, we see opportunities, right? Because we have not closed the transaction.

In terms of risk of integrating the bank, I don't see. We have done this.

We acquired 14 banks in the last 12 years, and many of them were in new markets. Some of them were much, much less developed in terms of the market where they operate, in terms of the supervisory environment they operate, and in terms of their operations or management.

I think the risk of integrating Luminor to OTP Group is much less than the risk what we have faced in most of the cases during the last 12 years throughout this 14 acquisitions. Either because the country and the entity was less developed and/or because we actually had to merge entities.

There's no merger here, right? We only have to include it into our kind of group activities.

Plus, again, you may consider this sensitive, but maybe not, because you know the names as well of the management team. We consider the management team quite strong.

We consider this as low-risk in terms of integration to the group. I'm sorry, I'm just not in a position to answer your very detailed and very pertinent questions, I must say.

Indeed, these are the right questions to ask, and these were the questions what we asked to ourselves when we did the due diligence and when we did the modeling of the expected financial performance.

That's fair. Thank you very much.

Thank you.

Hello. Can I please follow up on Luminor?

I think the way you phrased it that you were hoping for a fair and objective approval process here, how concerned are you that this may not be a case? Some of your approval processes in previous M&A deals like Slovenia, I think, dragged on for quite some time.

We saw some press reports about OTP's Russian exposure coming up. Your views on this would be interesting.

Secondly, on your point of high or advanced digital adoption in the Baltic markets, what is your point here? Does this mean that you might actually not have too many low-hanging fruits for to save on costs?

Would this mean that the rest of the organization can potentially learn from the more digitally advanced Baltic operations? Or could this mean that, how do you think about the physical network of 80 18 branches?

Is this the optimal level? Your thoughts on that would be helpful.

Then, finally, on the home start program and the Hungarian loan growth topic, what are your latest thoughts about the sustainable growth rate here? I think you mentioned on a previous call when we spoke about it that mortgages could potentially grow at a double-digit rate even without the subsidies.

Would be interesting to hear your thoughts to what extent are we seeing a front-loading of demand ahead of the market potentially moving to standard rates? Thank you.

In terms of the approval process, indeed put it this way, the nature of OTP Group is somewhat politically sensitive in the Baltics, and we openly acknowledge that sensitivity and take it very seriously. I think we have to put effort into transparently communicate what we do, how we do it, and why it should not be a problem for any of the Baltic countries.

Somehow communicate the OTP story, our strengths, what we have achieved, what we typically bring to a country and what we could bring to Luminor, and also our commitment and dedication in supporting Ukraine and taking the risk there and being potentially the most active non-local banks in terms of growth rate and everything. I think we have to make a good effort to create a transparent and fair view of the group, and somehow focus on the facts and the objective parts of the story.

We cannot, and we don't want to, be kind of politically involved, but as we have seen across Europe, cross-border acquisitions can become part of local political discussions or agendas, right? In case of much bigger countries, we have seen that happening, right?

I think this is unfortunate in Europe. This is not healthy for Europe.

This is there. We have to take it seriously, and we will take it seriously.

Obviously, we have consulted with the local supervisors and with ECB prior to this transaction, and also these discussions made us believe that, objectively, that doesn't seem to be any potential big roadblock to a transaction. Nevertheless, it will take time, and we have to manage this process or kind of contribute to this process as much as we can.

I think this is what I can say at this stage. In terms of the nature of digital development and why I think it's good, because you are as strong as your competitors make you, right?

You get better and stronger by competing with better and stronger competitors. Actually it would be a potential mistake to stay out of one of the most developed markets digitally in Europe because then you are not part of the real happening, right?

Yes, I'm sure we will learn from these markets, and which learning we can apply in some other parts of the group. I also believe that we can contribute from the quite broad experience what we have in terms of different geographies and market situations and potential developments.

The home start program, your question was very good, but even more exciting question I think is how long this is going to continue. Far we don't see the end of it.

We haven't heard any plans to change the structure or the level of subsidy or whatever. This is certainly as far as we can tell, this continues, right?

Obviously the longer it continues, well, we take this commitment by the government to join the eurozone seriously. The timeline what they say was quite short?

In 3 in 4 years, by 2030, they want to be ready to join eurozone, and that assumes a quite rapid fulfillment of criterias and a normalization of the rate environment quite rapidly. That means that the difference between the kind of subsidized rate, which is kind of maximum 3% for clients, and the market rate is going to be less and less different.

Therefore, as we go more into the future, the difference should be less and less between the subsidized and the market rate. In this sense, that means that the attractiveness of the program, if it doesn't change, is going to diminish because this relative attractiveness is going to be less and less and the potential negative impact should the program end or be substantially changed be less and less.

I think it's still reasonable to assume if in a kind of business as usual environment that we should be in a kind of lower teens, be around 15, 10-15%. Having said that, if we look at what happened in Bulgaria, closer to joining the eurozone and after joining the eurozone, we have very strong loan dynamics.

We have had 2-3 years of more than 20% growth in Bulgarian mortgages, and we are still, year on year, we have 35%, as fast as Hungary, right? Now, Bulgarian mortgages are special because there the benchmark is the deposit rate, and that's on the market, and that's zero, it's very specific and rather cheap.

Still, strong growth. Bulgarian penetration level is twice as much as in Hungary.

Housing loans to GDP in Bulgaria is around 40%, in Hungary it's still around 7. If we believe in this accession scenario, policy scenario, then maybe even without this subsidized structure, in a few years, we can get to 20+%.

That's what the experience in Bulgaria suggests, right? We'll see.

For us, the more immediate question is that how long is it going to continue? That we don't know, the current subsidized structure.

Yeah. Fair enough.

Thank you for all the color, László.

Thank you.

Yes, can you hear me?

Yes, loud and clear.

Yes. Yes, my apologies.

I would like to ask about the Russian situation. You mentioned decline in profitability, but I want to check if the bank in Russia handles oil and gas payments from Western Europe to Russia, if you can give some color on this.

The broader question is what are your expectations about a resumption of upstreaming of dividends from Russia? Thank you.

As

we have been clear about this, we do cross-border transfers between European counterparties and Russian counterparties, typically serving European corporate clients in Russia. Within the framework of these sanction rulings and rules and being extremely focused and rigorous on compliance.

Exactly what clients and what details, I probably should not go into more details than this, but strategically, by far, the first and most important target is or goal is to fully comply, and especially to the sanction regulations. Everything what we do is within the context of detailed sanction regulations.

Whenever there's a potentially sensitive transaction, we do consult with the relevant authorities outside Russia, right? That's what I can say on this.

Dividend upstreaming, we will submit an application for dividend payments based on the first-half results, and we are hopeful that they will be approved and we can resume the dividend payments. We are going to try.

Yeah. I hope silence means sufficient answer.

Maybe we can go to the next one.

and

Hi, good afternoon. It's Jovan Sikimić from RBI.

Thanks for taking my questions. I was just interested in what about, let's say, your earlier thoughts on expanding the footprint in Central Asia, if it's still valid?

After Luminor deal probably will not take as much capital as initially thought, can you give us a bit of an update about capital returns going forward? In terms of potential new share buybacks this year.

Thanks a lot.

The attractiveness of Central Asia has not changed. We continue to consider the region attractive and we continue to look into every meaningful opportunity in the region.

That's not a guarantee, obviously, for any new event or transaction. Our interest remains, and we are going to continue to monitor these markets and seriously consider opportunities if they come up.

In terms of capital returns, our approach to share buybacks have not changed, we announce them when we receive an approval from our supervisor. I think it's fair to say that we are going to submit application, but as usual, we are not telling that how much and when, only on the day when we receive the regulatory approval.

In the other part of capital return is dividend, obviously. I think I can say as much as that this acquisition does not change our dividend aspirations, to say, or our views on how much dividends we intend to suggest to pay.

Having said that, we don't have a formal dividend payment policy and a payout ratio target. I think it's fair to share with you that our internal thinking and discussions, this Luminor transaction does not change how we think about future dividend payments.

Of course. Thanks a lot.

Maybe if I may add another one, maybe your thoughts or insights, is there something changed recently in terms of how do you see windfall tax development in Hungary by the new government? Very,

very relevant question, indeed. We expect the windfall tax to start to decline next year and then potentially gradually go down to zero.

This was an extraordinary measure for a situation which was claimed to be extraordinary. The magnitude is huge.

It was just doubled last year without any we believe that if the government seriously considers kind of converging with more developed countries in Europe in terms of their economic performance and in terms of their institutional and business environment, then these sector taxes and with this magnitude are out of the question. This is not just the banking tax.

There are many other sectors in Hungary which have been heavily, specifically taxed, and this is extremely distorting and very negative for long-term development of the country. Obviously, there are short-term fiscal constraints.

We acknowledge them. We didn't expect anything for this year.

We expect the government to make a commitment during the course of this fall, because somewhere in October they will publish the budget for next year, but even more interestingly the convergence plan, which is a 3-year fiscal plan which they have to submit to the EU. In that 3-year convergence plan, we pretty much expect to see a gradual phasing out of the at least of windfall tax, right?

I'm sure there will be, now it's August and very warm, but I'm sure starting from September there will be discussions between the Banking Association and the government on this, and I hope these are going to be fruitful and positive. Obviously these are not our decisions.

Don't think we have very strong arguments, but we'll see.

Thanks a lot, László. Appreciate.

Sure.

No, that was me, László, we don't seem to hear Nisch.

Yes, hi, good afternoon. Can you hear me?

Yes, loud and clear, yes.

Oh, wonderful. Thanks a lot for the presentation.

I have a few questions on Ipoteka, Uzbekistan. You mentioned that loan growth in H1 was mainly due to consumer loans, I was wondering how do you see cost of risk, NPL ratios, migration from stage two to stage three developing into the end of the year, and also I don't know whether you can comment on your expectations for next year as well?

Then, this leads me to my next question, which is mainly on the growth strategy for Ipoteka. I was just wondering where do you see the main opportunities, given there is quite intense competition in the corporate lending and various caps on retail loans?

Then my last question is, when do you expect OTP to buy the remaining stake of the government, and shall we expect any dividend distribution from this year's earnings? Yeah.

In the first 6 months, a consumer loan, which in our case is just cash loan typically given to payroll clients who have official we declare the income, was 8%. Now, this segment contributes to maybe 20-25% of the growth in the total market of unsecured lending or lending-type activities.

Our problem so far has been that we have been targeting only a small segment of the total unsecured lending, to say, in the country, huh? Now, the good side of that is that our risk profile is actually quite good, and profitability is good, and the portfolio quality is good.

We are falling behind in terms of growth. We are not capturing the full opportunity from the market growth.

Because we're not targeting the whole market, we are targeting just a sub-segment, which is a lower-risk, lower-return segment. I think it has been okay that we have done this, because it's learning and we don't want to do reckless lending.

Until the IT environment was not there, and until we didn't have enough data and understanding of the market, and until the management was not solid enough to start to potentially penetrate riskier segments and higher-growth segments, it has been okay. Now we have to broaden our scope and our aim.

The acceleration I primarily expect in consumer lending or in non-mortgage retail, right? Which actually includes car lending in that sense, huh?

It's non-mortgage, hm? Even a mortgage, we should do better.

Corporate is tricky. The potential is big, volumes are big, but our comfort level is still not very strong to start meaningful level of corporate lending.

However, we should do more, because now this volume has been declining, and it keeps declining, as you can see. This is too conservative.

This is not the strategy. There should be some moderate corporate loan growth as opposed to decline.

Because in corporate you could do very big deals, right? Volume-wise we could grow very fast, but that we don't want to do.

Decline is also not something we want to. We have to fix this.

The corporate business line we have to fix. We have two potential areas to expand.

One is the non-cash loan part of the unsecured retail lending, huh? Of the non-payroll.

That's a big part of the population. Now we believe that we have enough understanding and enough IT capacity and people to do better and try to penetrate that part of the market, which is the bigger part actually than what we have been targeting so far.

The other one is to do better in corporate. That doesn't mean that we want to blow up the corporate volumes, but there should be some moderate growth, cautious actions to slowly build up that presence as opposed to just kind of precipitous decline what we have seen during the last 3 years.

Dividend, yes. Yes.

We seem to be able to pay dividends this year after last year results. That's quite good, actually.

Yes, we are in discussions with the government to conclude the buying of the remaining part, and we hope to make a deal which is going to be beneficial to both sides and make both sides happy, because obviously we have a strong interest to be in a good relationship with the government. Yeah.

Hello?

Yes, now we hear you.

Hi there. Actually, there must be some kind of a confusion.

This is Nik Dimitrov of Morgan Stanley Investment Management. Hi, László.

I just have a quick question. Actually, a couple of questions.

The first one is, I know previously you said on earnings calls that if there is a larger acquisition, you're going to look to optimize the capital structure and potentially issue an AT1. I was wondering whether Luminor qualifies as a large enough transaction.

That is the first question. The second one is there's been another transaction that I think has fallen under the radar a little bit because everybody's so focused on Luminor.

There is a bank in Latin America, in Paraguay specifically, called Banco Basa, and I noticed that you increased your stake from 6.6% to 10% in May. I'm kind of curious about first, I was very surprised when I saw it, to be honest, because it's not your natural footprint, right?

I was kind of wondering what is the long-term intention there. I guess my last question is, you have different M&A opportunities, and you opted out for Luminor.

When you look at kind of Central Asia and the Baltics, and you did say this yourself that the Baltics are very advanced and blah, blah, blah, when it comes down to growth, it could be limited. What was it in the case of Luminor that kind of attracted your attention to kind of pivot away from Central Asia, which has been talked about previously, and kind of focus back on the Baltics?

Thank you.

Okay. It's a large acquisition.

This is the largest acquisition we have ever made. In that sense, it's large.

Is it big enough for us to issue an AT1? No.

It's large from our perspective, but not as large to qualify for an AT1. ueno is very exciting.

It's a story we are obviously biased because we invested, but we really like the story. It started as purely financial investment, but we started to talk with the management and we go there and they came and so we very much like the story.

It's a digital bank. It's a digital challenger growing very fast.

23% RO- They actually they have public reports, you can look at their numbers and their story. I think it's worth looking at.

23% ROE in a phase when they are growing very fast. They have an amazing client relationship, market share in the country.

They are very strong in payments. It can develop into a story beyond even the country.

We really like that story, and the more we know the more we like it. It's still a financial investment, right?

It's a financial investment and there's no immediate intention to go beyond 10%. We could consider if they wanted to.

We are not a strategic investor. It's financial.

We're not involved in managing the business. It also opened a window for us to look into a different continent from a very exciting digital, successful perspective.

That perspective is actually quite fascinating. We're quite happy financially that we made the investment but are quite happy that we have this window to be able to look into the Latin American market from a purely digital challenger perspective.

That's where we are, huh? Now, Baltics, we don't pose this question as either/or, Baltics versus Central Asia.

It's not that we lost interest in Central Asia or in any other potential market where we could grow. Including the footprint where we are present at the moment.

The fact that we decided to buy Luminor doesn't mean that we neglect all other opportunities which come up. It's just that this time what we saw in Luminor and the deal what we agreed, we believe that this is attractive, it create value, and we see the upside.

If we show this page 8, we go back, I don't think it's difficult to see the opportunity in the Baltics, right? Because if out of the top five banks in the Baltics, the ROE is 15.3%, 18%, the two bigger banks, and the two smaller banks, 19% and 14.6%.

These are developed eurozone markets with the eurozone cost of capital. We find these market attractive.

I think this is, objectively, is attractive. That's the Luminor decision, right?

It's just we believe we made a good deal. That doesn't mean that we lose focus or attention on all the other opportunities which may come up in other parts of the world.

Again, between '14 and '24 or '23, sorry, in 9 years we acquired 14 banks. That's the kind of speed of acquisitions.

We are kind of used to. Not doing anything for 3 years was rather strange.

Now, at least we have one transaction, but there's no reason not to have more. Actually, we'd love to have more.

Obviously, that is only going to happen if we can have a deal where we believe that we create value. It may not happen, but we continue to keep trying.

Thank you very much for joining us today, listening to the presentations, and thank you for your very pertinent questions as well. I hope to see you personally.

We are going to the US. We're going to the UK.

We are going to be as active as usual. Our CEO Péter Csányi will join us in the US and to meet investors there on the two events early September.

You can see us there. As always, we are at your service.

Anyway, I wish you very good rest of the summer. I hope you will have more time to relax and prepare for the second half of the year, the rest of the year.

Wish you all the best and goodbye.