Erste Group Bank AG

Andreas Gottschling – Chief Risk Officer Andreas Treichl – Chief Executive Officer Gernot Mittendorfer – Chief Financial Officer

Gabor Kemeny – Autonomous Research Hadrien de Belle – KBW Riccardo Rovere – Mediobanca Alan Webborn – Societe Generale Johannes Thormann – HSBC Margarita Streltses – UBS Alan Bowe – GoldenTree Stefan Maxian – RCB

Thank you very much and a very warm welcome to Erste Group’s First Quarter 2015 Conference Call. We will follow our customary conference call procedure whereby three members of the management team, Andreas Treichl, CEO of Erste Group, Gernot Mittendorfer, CFO of Erste Group and Andreas Gottschling, Chief Risk Officer of Erste Group will lead you through the presentation, highlighting the achievements of the first quarter.

Following that we will do our usual Q&A session and hopefully answer all your questions that you might have. Before I hand over to Andreas Treichl also as usual I would like to highlight page 2, the cautionary note on forward-looking statements.

With this I hand over to Mr. Treichl.

Good morning ladies and gentlemen, let me start on Page 4, the summary of our results for the first quarter. If you look on a year-to-year comparison profit went up from €103 million to €226 million for the first quarter.

Operating results actually are rather flat. Risk costs, a substantial reduction and still a couple of extraordinary items in a couple of extraordinary items in the other result, let me go to that immediately.

If you look on page 5 our regulatory and taxation bill, which is all included in the other result, came up to €91.8 million for taxes and a booking of €54.9 million for the resolution fund, the European resolution fund, where we booked the whole fee for 2015 in the first quarter. It also includes €19.2 million contributions to the deposit insurance but that’s on a national level.

The European deposit insurance will be decided, to our knowledge somewhere in the second half of this year. With regards to the banking levies that we have a reduction in Slovakia, which was announced by the government last year.

You see that now with €5.8 million in the first quarter. In Hungary we have negotiated a reduction of the banking levy, which will become valid as of 2016.

In Austria we’re still negotiating with the government and hopefully we’ll come to some kind of result this year of accounting at least part of the banking tax against the payments into the deposit insurance and the resolution of fund contribution. But that’s still up in the air.

Other than that, we had, of course, like last year booked the banking levy in Hungary in full in the first quarter. That is the most important mentioning for the extraordinary effect.

With that, let’s go to the ratios. Actually the net interest income came down slightly, that was made up through the trading result.

However, in the trading result you have a €25 million extraordinary write-up in the Czech Republic. But the margin actually – particularly look at the business segments, remained rather stable.

As a result of that actually our operating result actually increased slightly in the first quarter and as a consequence of that our cost income ratio improved to 56%. But the real action you see in the upper right hand corner, which is the real dramatic reduction in our cost of risk from €484 million in the first quarter of 2014 to €183 million in the first quarter of 2015.

That’s a reduction from 151 basis points down to 57 basis points. However, as you will have seen, we’re keeping – our outlook for this year is for risk cost anywhere between €1 and €1.2 billion, so that has to do with some form of a seasonality of the booking of risk charges in the first quarter, so we do expect risk charges in the coming quarters to be higher and that they will lead to somewhere in the range of €1 billion to €1.2 billion for the full year.

Earnings per share and return on equity, yes, 9% return on equity. We haven’t seen that in very, very long time and we can only hope that we see that more often and even better in the future.

If we look at the balance sheet development on page 7, you see that actually net loans really increased in the first quarter, by €2.6 billion. That was pretty much matched with the increase in customer deposits.

As a consequence of that our loan to deposit ratio remained more or less stable, but 2.2% rise in net customer loans is a positive sign. However, it has to be mentioned that part of that is very simply due to the appreciation of the Swiss franc.

On page 8, net loans as you’ll see increased by 2.2%. At the same time risk weighted assets more or less stable and a further improvement in our NPL ratio from 8.5% down to 8.1%, a development that we hope to see continuing throughout the next quarter.

Capital remains strong. If you look at the fully loaded Basel 1, core Tier 1 ratio the reason why it dropped by 40bps to 10.2% is very simply that according to Austrian regulations we cannot include the interim unaudited profit for the first quarter but we’re forced to reduce it by the audited risk costs.

So that makes our core Tier 1 ratio in Austria not comparable with other countries who do not have that regulation. Tangible equity increased to €8.8 billion.

Leverage and liquidity coverage ratio are all fine. We move to page 10.

Actually, the most important thing for us, the fact that GDP growth in our region with the exception of Austria and Croatia, is developing quite nicely and what’s even more important for us, it’s now more based on an increase in domestic demand than based on exports. All the other indicators look relatively okay.

The current account balance has improved almost in all our countries and if you look at the bottom hand I think it’s quite interesting to look bottom hand I think it’s quite interesting to look at that. So once you have three countries with relatively elevated debt levels, those are Austria, Hungary and Croatia, and three countries with a public debt that is at the very, very low end of Europe.

Surprisingly it’s those countries that do economically the best for the moment. Page 11 not much to be said other than the fact that interest rates are on a downward trend in all our markets.

With regards to currency volatility the last event we had was – already in 2013 with the depreciation of the – or devaluation of the Czech crown. Since then actually nothing happened.

Our currencies remained very stable. The same more or less about the market share chart that you see on page 13, with maybe two exceptions.

We were able to either maintain or even slightly increase our market share. But you see quite a deterioration in corporate business in Romania.

That’s of course due to [indiscernible] due to the NPL sales. A trend that actually we hope will continue this year.

And also a reduction in Hungary where we maybe see a turnaround later on this year. But in terms of retail and retail deposits, either stable or slightly increasing.

If you look on page 15, our performing loan stock growth. Actually doing very well.

You actually see that performing loans are going up in all our markets. Again, of course, with the exception of those markets where we still like to – had our exposure reduction; Romania and Hungary.

But in Austria, with the savings banks, Czech Republic, Slovakia and Croatia you see slightly growing performing loan volumes. On the customer deposit side – and we can have a long discussion on whether that’s a positive or not but given that we are retail bank in principle, it is positive.

We do have increasing deposit volumes across the region. And particularly in retail and that in all our markets we have increasing volumes and market shares.

With regards to net interest income and net interest margin, relatively stable throughout the region. You see margins coming down in Romania, substantially.

That again needs to be linked to the substantial NPL sales that we did in 2014 and 2015. So other than that, no major changes.

Operating income, as mentioned, is pretty stable. The lower NII is basically compensated by higher fees and higher trading income in the first quarters.

And expenses on page 19 are slightly on the downward trend. And as we mentioned already last year, we’re pretty firm on our forecast for this year.

The expenses will be lower than in 2014. On that basis, I think pretty solid operating result.

Slightly above our own expectations. And with that I’d like to hand over to Andreas Gottschling to guide you through the risk.

Good morning and a warm welcome from my side as well. Turning to page 21.

The quarter one risk costs have been falling and look favorable year-on-year and quarter-on-quarter across all business lines. From a geographic perspective this was most pronounced in Romania, Hungary and Croatia whilst Slovakia stands out.

But only due to a single event, namely the removal of the Swiss franc floor. A note of caution before this is assumed to be the new run rate; of course there is a seasonality effect in the savings bank booking, as aforementioned.

And in Hungary, there was the execution of the conversion of the Swiss franc retail loans which forced a contractual change of over 100,000 contracts. And that of course touches the 90 days past due triggers and as such we could expect some of this positive effect to turn out to be of a temporary nature after all.

Turning to page 22, the NPL ratio improved on the effect of the loan book growth, including of course a small component being the Swiss franc revaluation effect in the loan book growth. The Hungarian conversion which reduced the above-average NPL ratio.

A pronounced smaller inflow of NPL and an upgrading in the loan performance assessment. Turning to page 23, we see that the NPL coverage remains in the high 60s, comfortable at Group level.

It’s quite stable with the exception of the retail Hungary section where, of course, again the Swiss franc conversion can be seen. As aforementioned, the Hungarian loans denominated in Swiss francs were converted into new loans on a net basis, i.e.

after provisions. This reduced the outstanding.

Of course the loan book is smaller after that on a basis. And it wipes out the single loan loss provisions associated with the non-performing loans.

So that changes the coverage ratio of that particular segment. Maybe a side note.

We did not upgrade defaulted loans after the conversion to performing to avoid more volatility in this ratio, should there be an improvement according to the EBA forbearance over the next 12 months. This is of course then the next step one would take.

But we did not take the renewal of the contract as a signal to install them as new. With that, I would like to hand over to [indiscernible]

Thank you very much, good morning ladies and gentlemen, we continue on page 27. Asset liabilities, usual picture, yes we see a loan-to-deposit ratio stable at 98.9%.

So no material changes in the last couple of quarters. On page 28, you see reflected the healthy loan growth and breakdown according to countries and on the right hand side you can see the continuous development and improvement on the non-performing loans area we’re down to €5.6 billion reduction of 13.7% vis-à-vis Q1 2014with the biggest development taking place in Hungary due to the conversion of the Swiss franc loans.

We continue on page 30. Liquidity coverage ratio very comfortable level 121.5%.

The usual liquidity buffer that we could see over the last couple of quarters just reflecting our liquidity situation and a continuous positive development on our customer deposits. Page 31, you have an overview about the intangible developments so there’s no movement since we’ve impaired the remaining Romanian goodwill.

Goodwill that we are carrying on the books is just related to Ceska sporitelna, Czech business, Slovak business and €600 million this is stable position. Software that is depreciated but due to the permanent investments the overall stock is pretty stable.

Continuing on page 32, again the picture stable. Customer deposits still growing even in the current interest environment where we can say that in the major markets when we have majority of our deposits, interest rates or customer rates on deposits are literally close to zero, but we’re still seeing an in-flow that is the same as our long-growth.

Page 33, our own debt securities issued stable development but slight increase of tier 2 papers. This is a continuous development and will be continuing given the current capital requirements.

But other than that, no major changes. The maturity profile on the next page, page 34 you remember in the years 2012 to 2014 we had redemptions of about €5 billion on an annual basis.

We have stretched and flattened the debt maturities. So, we will see €2.4 billion this year and €3.7 billion maturities next year and we issued in the first quarter €500 million 10 years mortgage bond at a rate of mid-swap plus 6 basis points.

Continuing on page 35, capital position faced in – we are at CET1 of €10.7 billion and total capital of 16%. On a fully loaded Basel 3 ratio we are at 10.2%.

The effects that we cannot include the first quarter net profit and at the same time have to deduct risk provisions of the first quarter. This is resulting in a 40 basis point reduction of our fully loaded CET1 ratio.

We are doing a half-year result review and then we can recognize the capital contribution from the first quarter, but at the same time, we’re not planning to do a review of the third quarter results, so you will see an increase on the CET1 ratio in the half year result, and again the same picture with the third-quarter result as you’re seeing it right now. Mainly, onto – on risk weighted assets a slight increase on credit risk weighted assets and increase in risk – total risk weighted asset to €101.8 billion, but a very stable and solid development.

With this I hand over to Andreas Treichl [for] the outlook.

Thank you very much. Last page 37, outlook We’re reconfirming our outlook that we gave with the full year results 2014.

We continue to expect our markets with the exception of Croatia and Austria to perform well in terms of economic growth. Actually, in some of our markets, growth expectations have been upgraded.

Recently, Croatia will still have negative growth rates and Austria has started to quite seriously underperform the European average. In terms of our return on tangible equity, we continue to expect it to end up anywhere between 8% and 10%, our tangible equity.

Despite the flat performance of our operating result in the first quarter we continue to expect a decline of our operating results on a Group level, however, with continuing to be positive on being able to maintain, keep and improve our operating results in Hungary and we still continue to expect long growth to be in the low single digits for 2015. Same about risk costs, which we expect to end up somewhere in the range of €1 billion to €1.2 billion.

So, the question that’s open again is how much of the resolution contribution and the contribution to the deposit insurance from the Austrian banking levy we will get accounted for. With that, we finish our presentation and we’re ready to take your questions.

Morning there. I have a few questions.

Firstly, in your publishing guidance, can you give us a few more details on what do you assume in the Romanian and Hungarian businesses when you set out this new range? I think you were guiding for 100 basis points/150 basis points normalized risk cost in Romania, slightly more in Hungary.

Do you think you could stay below these levels over the coming quarters? Secondly, on your operating profit guidance, I – so, operating profits increased somewhat, but you are still guiding for mid-single digit decline.

I understand that there are more headwinds to come in Romania and Hungary, but what do you think? What would make it turn a bit more positive on the outlook?

And just finally on Hungary, can you give us a worst case estimate on your potential contributions to the Quaestor compensation?

Okay, on your first question, I think we’re well on track to achieve the provisioning guidance that we gave. I don’t think that we will get much lower than that.

I think that it’s currently the best assumption that we have about that so no reason to change.

On the operating profit levels, I mean you’ve seen the development that we’ve indicated last year already in Hungary and Romania reflected. We had some one offs in our operating result, what would make us return more positive is if we continue to have more positive contributions than negative ones to the operating result, what is a continuous pressure to current quantitative easing environment.

And there we are seeing a continual – throughout the year a continually difficult environment. On the Quaestor in Hungary, this is pure speculation if we – and I hand over to Andreas Treichl on this question.

We have a very clear reading of the EBRD memorandum of understanding with the Hungarian government and it very apparent that the handling of the Quaestor case is a clear breach of that memorandum of understanding and to our knowledge, this has been communicated by the EBRD to the Hungarian government. Therefore, I believe that this matter will be solved somewhat amicably during the next few months.

With regard to what is the – could be the total damage, that is in the speculative area for the moment, but it would not be detrimental to the existence of Erste Bank Hungary and it’s not going to happen.

That’s very clear. Thank you.

Just a quick follow-up on your operating profit. So, your NII and your fee income declined in the Czech Republic.

Shall we assume that the Q1 rate of decline is indicative for the next quarters if you assume that the current rate environment prevails?

For the Czech Republic, yes. We will see how business will be developing.

Fee income, is at the moment, we are seeing positive contribution from asset management on the fee income side, but due to the reduction of fee charges to our customers linked to lending, this is negative going forward and there is no reversal of that trend and it will be continuing.

That’s very helpful, thank you.

Hello. I had a quick follow-up question on your NII in Romania and Hungary which obviously was a little bit better than expected.

We have seen I understand just a little part of the effects and we should have more downside for the year. When you – you look at Romania and Hungary that has to come down a little bit further, Czech Republic which was disappointing.

What would be for the NII in particular an estimate that we could have? Is it going to stay more or less where it is now?

Is it going to go up or come down further? If you could just give us some sense on this, that would be useful.

Thank you.

The Romanian and Hungary you have seen most of the reduction already in the first quarter because Romania is driven by unwinding effect and this is started in the fourth quarter of last year and now you have the full impact because the [indiscernible] result are now fully reflected and now are not part of net interest income through unwinding. The only thing that could change it if we sell again bigger portfolios in Romania.

Hungary you have reflected in the first quarter already the reduced net interest margin on the newly created [indiscernible] loan book and they have – we should see – we have seen the most in the reduction of net interest income.

Right, but they are caused by flat quarter-on-quarter if I see it well, so no more decline from there, okay.

Yes, I mean, given there is still the one or the other effect, but the majority we’ve seen already.

Okay [indiscernible]

Okay.

So, at the Group level, how does that translate please?

If we would like to give sort of a clearer view on our net interest income for 2015, we would have done it. I think – we told you those things that we’re firm about, but other that that, you can say it that the client margins remain relatively stable and we don’t see too much pressure on that.

We told you we’re seeing about low single digit growth on the lending side. It’s very difficult for us to get more precise at this point in time.

Okay.

Maybe we’ll results we can be a bit more specific, but please don’t pressurize that for the moment.

Fair enough, thank you.

Yes, good morning to everybody. Just one question from my side.

In your slide on your outlook, you mentioned consumer protection initiatives. Could you give us a more – a little bit more color of where we stand in Romania, in Croatia?

And when you mentioned your political risks that resulted in potentially negative economic impacts, is there anything in particular you are referring to in that statement? Thank you.

I think on both accounts one of the problems of consumer protection and that’s pretty much the same with some of the political risks that we’re pointing out to is, is it’s very hard to predict what is going to happen. Consumer protection is not a one-time act.

It’s an ongoing activity that is also heavily influenced by the political environment. So, you can give views as of today, as of tomorrow, they might be very wrong within a couple of weeks.

That is not a risk that we can specifically – that we can anticipate. We have cases going on in the Czech Republic.

We have the consumer protection discussion in Romania. We have it in Croatia with regards to the Swiss – potential Swiss franc conversion or what – those are ongoing negotiations between us the consumer protection the government, the government and the central bank, the politicians changed quite frequently the views change.

We are engaged in it on a permanent basis and very often if we give indications on what we believe the outcome, it can fire back on us. So, I think we’re pointing out it is a risk.

It’s a clear and present danger that is lingering over us. I don’t think it’s something new for us or for anybody and we’re working on it.

On parts, we’ve been very successful to avoid it, so I think it’s very difficult now to say and particularly in the case of Romania or Croatia for the moment, I don’t think it would be very wise decision on my part now to make a comment on what I believe the outcome would be.

Okay, thank you. Just to be 100% sure, in the numbers, in Q1 numbers, we have seen nothing on the loan losses or in any other P&L line related to those potential initiatives in Romania and Croatia, am I correct?

Croatia, there is an effect due to the fixation of the monthly payments, the old exchange rate before the Swiss National Bank was introducing the free-float of the – or removing the float on the Swiss franc exchange rate. This has a EUR7 million negative impact on our trading result because it will be going through the trading result, and then at the year end when it settled because the customer has an option to choose, then it will be reflecting it either in the trading result or in the risk provision line.

So, there – Croatia is in. Romania there was nothing and there was one decision on consumer protection in the first – on the first instance courts where we were defending ourselves but this is – this was won by the bank.

Okay, thank you very much. Very clear, thanks.

Hi, good morning. Thanks for the call.

Is there more you can do on fee income in terms of dealing with the deposit flows that you’re getting and pushing them into other products, I mean particularly for example in the Czech Republic. I don’t know whether you could tell us how the asset management business is performing there.

But clearly it’s been something that you’ve been very keen on and I’d like to hear how you feel that’s progressing and whether there’s more you can do or is it simply a question of, that you’re reacting to demand, but there’s nothing much more you can do. That would be interesting.

Secondly, could you give a little bit more color on where loan growth is coming from on – in the major countries? I mean, is it essentially mortgages?

Where’s the corporate demand coming from? Is it SME?

Is it large caps? Do you think it’s investment?

Is it working capital? Just a flavor of where you feel this slight uptick is coming from.

And perhaps also a word on the competitive position. I can remember a year or so ago, you were hopeful of there being more corporate lending growth but in fact the margins that were there at the time were not conducive to you actually doing the business.

So, it would be interesting to hear what you feel the competitive environment is looking like. And then lastly, this sort of underperformance of Austria as an economy.

I mean, where are you seeing that in the day to day business? Are you seeing that in a lack of demand?

Are you concerned about asset quality? Is there something that we should be concerned about in terms of how the Austrian economy is performing?

Thank you.

If we sign off on that, stop us from Alan if we talk too long, but those are very comprehensive questions. By the way, I love the Societe Generale.

Not yet.

On the fee income side, yes, that is a key issue for us in Austria and of course coming up in the Czech Republic and in Slovakia. As you’ve seen, we’re still getting a rather substantial in-flow of deposits and as you know, those deposits are in a zero interest rate scenario.

An issue for us many-fold, as loan growth is still not up to really over-compensating dramatically the deposit growth. So, it has to be our aim to convert as much as possible into fee income.

Actually, it’s in the interest of us as it is in the interest of our clients. We don’t make money on deposits for the moment and our clients don’t make money on deposits.

The particularity of the Czech Republic is that it is within our region in terms of investment patterns, the most conservative market. Very difficult to get Czech retail clients to actually invest into value added asset management products where they can earn at least a decent return on their deposits.

I think we have been doing a pretty good job on that. I think all three major banks have been doing a pretty good job on that, but this is one of the most important issues for us overall that we grow that market much faster than it has been growing in the past.

We see that as a great chance. If you look at our numbers recently, I think we’re doing a relatively good job on that.

So, it’s an issue in the Czech Republic, but it’s as much an issue in Austria and in Slovakia and it will be an issue in Romania in the not too distant future either. By the way, in Hungary, we’ve been doing a very good job, a very, very good job in building our asset management business and that’s moving along pretty well and generating nice fee income.

Same in Croatia and even Serbia, it has been improving. On the lending side, it is the mortgage lending business that’s growing, but we’ve seen also some uptick on the consumer lending side.

We see that in the Czech Republic, in Slovakia, and also in Romania where since some months we actually feel really fit on growing our – from a credit procedure, a credit process point of view to really grow our retail and consumer lending portfolios. On the corporate side, you see we’ve gained some volume, but it is not extremely interesting from a margin side, which you can clearly see in our NII.

In that segment, volume has increased, but NII has increased subscale. From a competitive point of view you have to look at it from – you can’t talk about it on the regional basis.

You have to look at it from a country to country point of view. I think the competitive environment in Romania is now working in our favor.

It’s pretty stable in the Czech Republic. In Slovakia, I would say it also works slightly in our favor and even in Croatia.

In Austria remains to be seen. There are a lot of question marks up in the air with regards to the future development of certain Austrian banking groups and that basically leads me to your last question, the underperformance of Austria.

I think it’s – this is a very easy answer. Unsolved problems for a very long time and six years of very indecisive politics, and the days when you cannot decide in politics or banking are over are over.

You’ve got to do a good job if you want to have good results and that’s as much true in banking as it is for politics.

Do you – I mean, just on Austria, do you feel that there needs to be a very – more structural change? Do you feel that you need to start attacking branch networks, do you feel that there’s something that you really have to focus more on?

Well I think that has nothing to do with the economic development of Austria and I’m very, very firm that the situation will change again in Austria. The Austrian economy is incredibly strong and at some point in time will have good politicians.

Some of them have already appeared and they will turn it around. But that has no relation to the fact that we have to gain efficiency I think, that is going to be the name of the game anyway over the next years how banks will be able to adapt the development of their digital networks with brick and mortar networks and do it in a way that we can actually offer our clients an omni-channel facility 7/24 and at the same time dramatically reduce our costs.

If you look at the cost income ratios of our respective countries, where most of the action has to take place, given that in the SE region, even in a relatively mediocre operating environment we run our banks at cost income ratios of 40% and in Austria it’s somewhere between 55% and 66% whether you talk about Erste Bank or the savings bank.

Yes, okay super thanks very much.

We’ve been doing a relatively good job if you look at the cost income ratio that we have in Erste Bank Austria five years ago and the one we have right now it’s not that we’re not doing something.

Yes.

Thank you.

Thanks.

Good morning everybody. Two questions from my side please.

First of all on Hungary, adjusted for the – is it right to assume that adjusted for the banking sector business would be profitable and, I don’t know, as I had to jam on late on the call, is Hungary probably already profitable in 2015, what is your view on that? And secondly, if you would have retained the Q1 profit what is – do you have an adjusted or pro forma CET1 ratio fully loaded?

Thank you.

That’s very easy, the fully loaded, as Gernot mentioned the difference is 40 bps so it would have been unchanged at €10.6 billion which you are going to see again at the half year results. So until that piece of legislation is being changed in Austria you will have an up and down and up and down between the first quarter and the second quarter and the third quarter and the year end result.

So the real comparable, fully loaded Basel 3, core Tier 1 ratio you will only get at six months and at year end. The only way we could avoid that would be to have our quarterly statements fully audited every quarter and that’s, in our view, too expensive.

It’s actually…

Okay, yes.

Johannes it’s not the law in Austria, it’s the CRR and the reading of our authorities how they understand it. We’ve now asked ECB, the regulator, whether this is a correct understanding of the CRR that we have to deduct which is somehow a little bit ridiculous because you are deducting the risk cost and you are not adding the quarterly result.

And so we are awaiting a clarification and as soon as we get guidance we would change it or keep it as it is. But this is the current understanding of the CRR and current interpretation of Austrian regulators.

Okay thanks, and Hungary?

Yes, Hungary we had a quarter without any risk provisioning and this is something that will not be repeated on a permanent basis. If you add the banking tax it would be a zero quarter or slightly positive quarter.

This is not the current guidance that we are giving for Hungary because we believe that with the current banking tax burden it will be difficult to break even on a reduced business. But so far so good and we are not changing our outlook for this year for Hungary.

We will give an update at half year results how overall the risk situation is developing and whether we see some positive impact that customers are servicing their debts again because now all the question marks around Swiss Bank lending in Hungary are removed.

Okay, thank you.

Good morning, Margarita Streltses from UBS, thank you for your presentation. Just a quick question from me.

You have shown obviously a robust profit in Q1 ahead of the expectations. In light of that, how would you see your capital generation for the year adjusted for all the timing differences that we have discussed, and what level of capital would you want to hit before you make – consider revising upward the payout ratio?

Well which payout ratio are you referring to?

I’m referring to the…

25% to 30%...

Yes, yes.

Yes, that is too early to say. As you know we still have some open regulatory issues that need to be solved whether it’s the Pillar 2 and Pillar 1 discussions that we have [indiscernible] or whether it is the systemic risk buffer that is still under question.

So I would like to, and hopefully will get towards year end to a much clearer view on what the final regulatory requirements will be. Only when we have that we can define our final target core Tier 1 equity ratio and based on that our dividend payout.

We have consistently said that we believe that with our business model we do not need to be at the very upper range of core Tier 1 ratios but that we feel very comfortable in the range where we are at the moment and that view hasn’t changed.

Okay, thank you.

Yes, thank you for taking my follow up question. If I remember correctly over the past few conference calls from time to time you commented about potential expansion outside the current perimeter of the Group.

If I’m not mistaken we discussed about Poland potential opportunities. Has anything changed since then?

You see more opportunities, less opportunities, it is something that you don’t completely think about right now?

Yes, obviously this year will be the year of delivering on our quarterly results and any kind of expansions will be – we have defined Poland as an attractive market but we see no operation, there is nothing currently in the pipeline except minor steps that we are doing our core markets. This has not changed since last conference call because this was the same statement we made we made last time and we’ll make it the next quarter again and the quarter thereafter, which doesn’t change that we believe that in the long-term term Poland should be one of our markets because we define ourselves as the financial institution for the eastern part of the European Union and Poland is the largest country in there.

But Poland is not going to run away.

Perfect. Thank you very much.

Thanks very much for the call. I was just wondering what your intentions are regarding the outstanding hybrid Tier 1 coupon and also what the state of distributable items are at this point in time?

You know that we have closed last year with a loss and that exhausted our distributable items. In the first quarter there was a – didn’t change the situation.

We will be receiving dividends in the second quarter for 2014 results and this will then build up the distributor items and then we will give an update at the half year results. Position on the hybrids, I mean the coupons had to be cancelled for last year and we are still looking at a continuation of interest payments from 2015 year results onwards.

Thanks.

Thank you, just two questions from my side. First, can you give us an update on your negotiations with the Hungarian Government and EBRD concerning taking a stake in Erste Hungary?

And second actually management of [indiscernible] yesterday flagged that they will face a double burden this year from resolution fund contributions and deposit insurance contributions. Can you give us your situation on that?

Thank you.

Resolution fund is in the first quarter €54.9 million and we’ve treated it as a non-tax deductible because it’s still not clear, so we were cautious on this. We’ve indications that in some countries it’s tax deductible.

And this was pushing up our tax ratio to 28% above the 27% that we said. So this is an additional burden, I wouldn’t say a double burden because we have banking levies, financial transaction tax resolution funds, deposit contribution funds.

We are used to that and have it in various intensity in the various countries.

And the deposit insurance is also included already at €19 million, the national deposit insurance. The European deposit insurance we don’t know yet.

Okay, thank you.

On Hungary, no we are still in negotiations and we we’re still very hopeful that they will turn out to be – come to a positive end. We expect this to happen sometime during the summer.

So maybe already with the second quarter results we’ll have the final result of those negotiations done. Okay?

Okay, thank you.

Well thank you very much. Thank you very much for your interest in our results and we will hear and see each other again when we present our half year results early August.

All the best. Have a nice day.

Thank you very much.