Erste Group Bank AG

Good morning, ladies and gentlemen. Welcome from my side, let’s quickly go through the presentation and we start on page four.

The net result for the first quarter this year was €377 million, which on a year-to-year basis vis-à-vis the last quarter of 2018 is €188 million lower of which €118 million is due to taxes, €58 million worse in the other result, which includes a €24 million legal provision in Croatia. Operating result is €85 million lower than in the last quarter of 2018 and we're going to get in detail into it.

That’s on the NII, and the commission income side and risk costs are better. On a quarter-to-quarter performance, the result is better than in the first quarter 2018 where we had €336 million, so an increase on a net profit basis of 12% and that's mainly due to substantially better operating results than in the first quarter of 2018, based on stronger NII, a very strong trading fair value resolved and fee income up by 2%.

If you look at the ratios on page 5, you see vis-à-vis the last quarter 2018, the net interest income slightly lower and the margin going down from 233 to 218, that's basically due to a relatively strong expansion of the balance sheet. In the first quarter, you look at the operating results that I said before, up 11% vis-à-vis the last quarter and the cost income ratio for the first quarter 2019 is 63%, so quite a bit better than in the first quarter of 2018.

Risk cost nothing much to mention, and the return on tangible equity is at 12.5%, so slightly better than in the first quarter of 2018, where it was 12%. If you go to Page 6 you see again a strong growth on the lending side with €3.6 billion in loans to banks, but €2.6 billion net loans to customers up and the same on the deposit side €3.5 billion of increase deposits in the group which brought our total balance sheet to €243 billion.

If you look at page 7, loan-to-deposit ratio basically unchanged. If you look at the NPL ratio, no major changes, slight improvement again to 3%, and again the same time an improvement of the NPL coverage going to 74.5%.

The Core Tier 1 ratio in the first quarter, 13.2% and more changes on the liquidity and deleverage side. You look at the business environment in our region that basically across Europe forecast for growth in 2019 and 2020 are being revised downwards.

Not very different in our region, but to a much lesser extent than in Germany and other Western European countries. We still do expect in many of our countries that GDP growth in 2020 will be greater than in 2019.

Inflation is relatively stable, domestic demand increases, unemployment is coming down across the region, and of course, particularly in the Czech Republic, and in Hungary has an effect on personnel expenses. Other than that, I think you see from the government's side, whether we talk about the current account balance with the most notable exception of Romania.

All countries are doing well and are basically improving vis-à-vis last year and public debt is coming down in all our countries, and we do expect in the Czech Republic, relatively soon that it will be one of the few countries in Europe where these debt-to-GDP ratio is below 30%. On the interest rate side, no changes other than yesterday.

Another hike in the Czech Republic, which in our view will be the last one, but very good news for us for this year and very good news for our NII, in the Eurozone, Maastricht and Slovakia, no news and probably no news to be expected this year. I have very little to be said about the foreign exchange side.

We would expect actually the Czech crown to appreciate a little bit throughout the year, given that growth rates are strong and the country is performing extremely well. On Page 12 you see our market share development, which has been very positive, particularly in Austria, we also gaining clients across the board.

We are increasing our client share in Austria quite substantially. Part of that is of course also reflected in higher expenses, but the income out of the higher market share is hopefully here to stay for long each.

If you look at the business performance, overall on page 14, strong loan growth across the region, and on page 15 also strong deposit growth across the region and that is reflected on page 16. Our -- first quarter NII is at €1.161 billion [ph] that's about €80 million higher than in the first quarter of 2018.

And if you compare it to the last quarter of 2018, where it's €50 million lower, half of that is due to the fact that we have in the first quarter two interest days less than in the last quarter. That alone accounts for €25 million.

Then we have an adjustment, an interest rate adjusts and accrual of €4 million due to a consumer protection case, and another €6 million is IFRS 9, so say €5 million, sorry IFRS 16, so €35 million are explained by those items. If you look at the countries, you have a rather diverging picture in the Czech Republic, particularly due to the balance sheet expansion you have the net interest margin coming down whereas in most other countries like in Hungary, it's relatively flat.

And in Romania, due to the interbank rate hikes, you see the margin actually going up. On page 17, you see the result of that so on a quarter-to-quarter basis, pretty nice performance of the operating income in the first quarter of 2019.

Not so nice on the operating expense side. Costs are at €1160 billion [ph].

Of that, quite a bit can be explained simply through an increase in personnel costs. Personnel costs in the first quarter of 2019 were about €17 million higher than in the first quarter, which is mainly, almost entirely due to increases in wages notably in most of the Central and Eastern European countries.

Although personnel have been kept flat and actually we negotiated pretty well know the average salary increases in the country. If you look at the cost income ratio, it's usually the worst of the year in the first quarter, which is also due to the fact that we booked the deposit insurances with very few exceptions almost entirely in the first quarter.

But it's better than in the first quarter of 2018. So overall the ratio this year should be better than last year and you can look at the ratios like we added in the countries.

And with that I will pass on to Willie who will continue on page 20 with the risk picture of Erste Group.

Yes. Thank you.

Just a few remarks from my side. Talking about pages 20, 21 or 22 I've been looking at the current development.

This is characterized by a calculation of a healthy asset quality and volumes up further down by €200 million, at the level of €4.7 billion. NPL ratio is below 3% to be expected to go further down.

This comes predominantly from a low level of NPL inflows and will be benefiting from recoveries. Looking at the NPL coverage as already mentioned, it's going up to 74.5%.

So we see as in a very positive territory. With that, I want to leave the floor to Gerot.

Good morning from my side. I continue on Page 26 and page 26.

As already mentioned a loan to deposit ratio is at 91.4%. So a little bit lower than at the year-end, but stable at this point in time.

27 you see the continuation of the loan growth, performing loans, up 7.2% on a year-on-year basis, and accompanying reduction of the non-performing loans of 14.2% to a stock of €4.7 billion performing loans now at €150.7. We continue on page 28.

Liquidity situation of the Group LCR and liquidity buffers the usual picture that you could see over the last couple of quarters. No change there and a continuation of the excellent liquidity position of the group.

Page 31 is showing you the maturity profile of our issuances. We were active already this year and issuing in the beginning of March €500 million 81 [ph] and non-core 6.5 years and we are almost feeling the 1.5% 81 bucket by this issuance, and in addition in April we placed Senior preferred €500 million at 45 basis points and had an outstanding interest from investors and a really very granular and big orderbook.

Page 32 gives you an overview on the MPE resolution strategy of the group. We are planning to issue non-preferred senior already in 2019.

And here you have the details about the Austrian Resolution Group and the resolution strategy. And on page 33, we come to the capital position.

We saw a growth in credit risk weighted assets partially by a regulatory one-offs and the IFRS 16 effects of €1.2 billion, the rest driven by business effects. The capital ratios don't include the first quarter net profit.

But anyway, we are at 13.2% fully loaded. And here you see as well comfortable capital position.

With this, I hand over to Andreas for the outlook 2019.

Thank you. We still look very positively at the year 2019.

We believe that in our region according to all the forecasts whether they were in-houses, out of house. Growth in our region will be better than in other places in Europe.

We see a lot of signs also that the effects of Brexit will be well however, and whenever it happens will be minor in our region. Actually partially positive, some of the English car manufacturers have just decided to move practically all their production into our region.

Of course, the superior economic growth has its effect on the labor market. We see that in some of our countries, I felt you might have read in the paper, that Prague, yesterday was declared the city with the lowest unemployment rate worldwide.

That of course has an effect on wages, but our personnel departments actually have worked very well. We're able to retain the best people without paying above market, and actually we negotiated agreements that were below the market.

So in principle, I think 2019 should still be a pretty good year for the group in terms of economic performance of the region. That's why we continue to target a return on tangible equity of above 11% for 2019 and we can reconfirm for this year, that we expect revenues to grow faster than costs, and that is based on our expectation that loan growth again will be around 5% or even higher on the group level risk cost as you have seen were absent in the first quarter.

It's a bit too early for us at that point in time to revise our expectation for the year. We might do that with the half year results if we feel more comfortable that the very positive trend of the first quarter continues.

That being said, thanks very much for listening and we're now ready to take any questions you might have.

Good morning, thank you for the presentation. Have a couple of questions, please.

My first one is on the costs. Specifically, could you please provide a little bit more color on your expectations for the rest of the year, in terms of year-in-year dynamics for the quarters, particularly as part of the growth in Q1 as I understand was driven by regulatory charges which are front loaded into Q1.

My second question is on your digital strategy, particularly now that you have an income in board member focused on the area. Do you have any updates and also any comments on George's performance so far would be appreciated, anything quantitative?

Thank you.

Yes, on the cost side, as already mentioned, we see the wages growing at the 2.5% to 3%. This is a similar situation as we have had in the first quarter.

We had some regulatory increases in the first quarter and on top of that due to the 200 anniversary we are having a marketing campaign that started already and kicked off already in January. So there we have a little bit higher expenses as well coming from this.

There should be a normalization of the cost base going forward. Second question is….

Okay. Is that okay on the first question or do you want more just juice, beef?

Yes, I was kind of trying to understand if this 5% year-over-year seen in Q1 if there is any scope for that to moderate? Sounds like there could be some, but just wanted to be sure.

Yes, I mean it will be – we’ll be moderating going forward. It will not be 5% full year cost increase.

Okay. Clear.

Okay. Okay so on George, we are now active in Austria, Czech Republic, Slovakia and since October last year, also in Romania, we presently have a €4.7 million registered users.

We plan the next rollout hopefully at the end of the year, already or early 2020 in Croatia and in Hungary. The active user growth is about 2.7% month-on-month.

Login growth is 13% monthly average users on the George app, which is the fastest growing part of it is 38%. We presently have around 13 million payments a month.

And the growth rate there is 6.4% month-on-month. And so the payment volumes presently on a monthly basis is about €6.5 billion.

Those numbers should continue, should maybe even continue to grow. On the present configuration, but of course once we add the remaining two countries that should give us another and another pretty strong push.

I think it's pretty clear that we have developed a leading position on digital banking, in a different, in different categories from country to country. I think, so Austria we’re clearly the leading brand with 1.7 million users.

In the Czech Republic, we have 1.6 million users. Their competition is quite a bit stronger, and in Romania we're just starting with close to a half million users presently.

So I think that it should grow nicely during the next years. It helps us to also gain new clients, particularly that were particularly strong in Austria, and is now starting also very strongly in Romania.

We've done a couple of other very nice things on that front. Part of that is also reflected in higher advertising expenses.

Two weeks ago we were the first bank in Austria and the Czech Republic to offer the Apple Pay, which brought us close to 60,000 users within the first two days. So moving very quickly, we're quite happy about it.

Okay?

Okay. Thank you.

I think you're right

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

I have a couple of questions, please. On Czech Republic first, Czech BMIs are coming in weaker the last few months now.

Do you see any signs of impact of this on the business so far? Even Czech National Bank reduced its growth expectations yesterday?

And my second question would be, how has the business changed in Romania, in the sense, you must have seen some impact in 1Q, because of uncertainty, and now that there is some clarity involving, do you see any changes happening and how do you see this evolve over the year? Thank you.

So the Czech side, the program, the economy is facing is the shortage of qualified labor, and so this is impacting the economy and this is limiting the growth rates there. So we will see a little bit lower growth, and the National Bank has confirmed it.

But nonetheless, business is quite okay. What we have seen is in the first quarter a reduction on the mortgage lending, but this was due to the measures introduced by the National Bank on the 1st of November.

And there we have seen some increased activity ahead of the introduction of the measurements. And as a result of that, and in the next quarter as we expected, a lower production number.

Going forward, it should stabilize, and should not have a negative impact throughout the year.

So we are quite hopeful in the Czech Republic that Brexit might have a positive effect with most of the Czechs being kicked out of the U.K. They hopefully will come back home and ease the pressure on the labor market.

With regards to Romania, we have a pretty painful story at the end of last year with the attempt to introduce high levies on some of the industries, including banking. The outcome of that is quite positive, because it's substantially very substantially less painful than we thought it would be.

But what remains is a relatively bad taste on the political environment in Romania situation. If you look at the pure numbers, isn't that bad.

In the debt-to-GDP ratio in Romania is to very favorably growth rates are okay. But the more you look into the details, the more you basically on a comparative basis see the difference between the economic development in a country like the Czech Republic or Slovakia, where growth rates might be somewhat lower.

But the structure of growth is substantially healthier than in Romania where it's mainly consumption led and that you can see very easily if you just look at the current account deficit in the country. That's again widening and is a sign of the relative weakness of the Romanian industry which is not based on a weakness of the industry.

Its health is actually relatively strong. But you can see it on all corners of the country that the infrastructure development in Romania continues to lag behind that of other countries in the region, whether it's Croatia, Hungary, Slovakia or the Czech Republic in all those countries infrastructure in all aspects is developing rapidly.

And Romania continues to fall behind. And if you listen first to the talks of Romanian politicians, now they have the EU Presidency.

It doesn't make you feel a lot more comfortable, quite frankly. So we're doing fine.

We think it's relatively. I think, the bank is doing fine.

We're gaining pace. Base rate is improving its competitive position in the country, and the bank will do fine.

Whether the country will catch up with the star performers in Central and Eastern Europe, that’s a big question mark in our mind still.

Okay. Thank you.

Yes. Hi, good morning.

A couple of questions from me as well. Please.

The first one, so I want to go back to the Czech Republic. But this time on interest rates, are you starting to see any pressure on interest rates, deposits at all?

And what would be your estimated impact for that for the most recent hike? So that's my first question.

And then, and secondly banking taxes. So Romania, I mean now we know the impact.

Czech Republic hopefully at least from what we understand shouldn't happen. Is there any other geography that what is your or what you would expect, any changes on this front?

And then, and actually finally. One last point on fees, fees keep growing.

And it's especially payments less so asset management. And could you please tell us what's driving this and what's the outlook here?

Thank you.

On the interest rate in the Czech Republic, yes, I mean might be now this time where banks sink and about forwarding something off the increase to the customers. What you see is still pressure on the mortgage rates and mortgage margins.

Deposit side did not move until now. Now we got 200 basis points repo rates that might be the starting point for that saving pays off again.

On the Texas -- on the fee side, basically you have slightly increase fee income which should continue, and as you probably know that we have now lower fees on the current account, but improving fees on the investment products and particularly for Ceska Sporitelna, also insurance fees are increasing. So, we would expect a positive trend of the fee income in the Czech Republic during the coming quarters.

On the tax side, I think it's rather unlikely that we will see the introduction of sector taxation in the Czech Republic given the fact that the countries under no pressure to do that, because it's – so it’s basically of a populist call on part of the Czech they the Socialist Party which is very weak in the Czech Republic and with very populistic arguments. I think -- what the country would like to see is higher investments.

There is, I think some concern and I think some justified concern on part of the government as it tends to the communication sector in the Czech Republic where fees are relatively high. There are continued discussions on the very high dividend payments of the banks to the parent companies.

Those are issues where we are ready to talk and assist, but basically I think the economic performance and the performance of the government presently is so strong that – I think the fear of that whatever taxation would be put on the banks or insurance companies, all it would do is would make products and services more expensive for the people. And so I guess the likelihood that that will happen is a very very low.

Thank you.

Good morning everybody. I’m Thormann from HSBC.

Two questions please. First of all, regarding your net interest income interest income, you mentioned to Czech rate hike.

Do you expect the same translation affect that most of the benefits feed through to your NII? Or do you expect that the Czech customer behavior that’s change and you see less of the benefits there?

And secondly for the -- still existing leases of provisions. Do you see any signs in any of your customer sectors or client groups where you already see deterioration of asset quality or is it all currently on green light?

Thank you.

The net interest income as I was mentioning already, we are discussing what to do now. Definitely, it will not have a 100% translation as to last net interest – the last rate hikes.

But what you could see in the first quarter now we had the effects of last year's rate hikes in. So, it’s definitely a positive, but it will -- you cannot add another 20 million to our net interest income from this.

That has nothing to do with customer behavior. That has to do with our behavior.

Okay.

Okay. When it comes to the asset quality, currently we do not see any worsening throughout the various business segments, but as the geographies looking at the NPL ratios as it is already and also shown including Croatia.

Now we’re in all of our countries and in all of our geographies we have presence in this year [ph] and we see in all geographies and across our business segments, room for further improvement, so currently no signs for any worsening.

Thank you.

Hello. I like to follow-up on Czech NII please.

You mentioned the negative ALM contribution in Czech here. Are you referring key to a lower returns from the treasury bonds?

And if yes, shall we assume that this is going to be recurring? And if you could also quantify the impact please?

And regarding the rate hike impact, what is your current utilization of the CMB repos roughly? And have you changed your utilization with the recent rate hikes?

Well, we’ve started last year ready in the first half to fully utilize the repos. We were investing heavily as well in last year because we were underinvested in the Czech Republic, hence we were using every opportunity and location to buy some duration at levels that we could see in the market.

Right now you have seen in the first quarter a little bit of reduction on the longer end. So there we were a little bit soft in our investment activities.

But as you could see on our net interest margin and the growth on interest-bearing assets this effect is mostly due to the utilization of Czech repos moving out the funds from overnight. And a question on ALM, who mentioned on ALM something I didn't get that, weather who mentioned something on ALM.

It was in your presentation on page 15.

Okay. Well, the thing is that we are paying internally from the ALM a certain rate to the retail for overnight deposits and this is a calculation of short-term and long-term, average of short-term and long-term rates.

And due to the fact that this was growing quite significantly, the short end -- the transfer pricing is increasing and this is then slowly reflecting in the ALM. As I was mentioning that we were underinvested and rebuilt that in the last year.

And in the first quarter we were a little bit slower given that market the environment. So this is then leading to a negative ALM results.

Okay. And can you remind us roughly how much does CMB repos are you utilizing these days?

What your link and what you’re utilizing?

I think it's a high single digit billion figure in Euros.

Okay. And was it similar last year?

It was lower last year in the first quarter because we increase that in the second and third quarter.

Understood. Thank you.

Good morning. Thanks for this call.

I have a follow-up question in Czech here. I was wondering if you could give us a little bit of color on what's happening in the consumer finance market.

And if some of the margin pressure or the lower NII we saw in Q1 was already some sort of pricing pressure we see in the segment and your expectations going forward? And the second question of have is on fee is you mentioned lower securities fees in Austria.

It's growing 2% year-on-year. What does that mean in terms of your aspiration to get to 2 billion fees maybe this year that would require quite a bit of an acceleration, so just have a bit of comment or flavor on that would be useful?

Thank you.

So on the fee side Andreas is working hard all over the summer. I can confirm that.

And on the consumer finance market in the Czech Republic, yes, we are seeing market participant once special market participant with rather active in reducing the prices and this is putting a pressure on the market at the moment. Volumes are good.

And that people are taking consumer loans. So, I hope that this is just a moments and short period of time where we see increased competition because other than that the demand would – underlying demand would be healthy.

So, on the fee side, yes, I mean, the growth rate in the first quarter is too low for the 2 billion, but as you can see we are not that far away and it’s not out of reach.

Okay.

But I think it will require some effort in the remaining three quarters. I agree, but I am not giving up on that goal yet.

Okay. Thank you.

I’m going to beat them to that goal.

Good morning. Good morning to everybody.

Three, four questions if I may. The first one is on funding and I noticed that the total amount of securities issued from the liability side has gone down in the quarter.

This is not maybe a surprise given the deposit will continue to outpace loan growth. Now, when I look at the slide where you present all the values maturities expiring in the next few years.

So, shall I assume that that you might be in the position not to need all those issuances? And more in the short term is it the amount of securities issue that we see in the balance sheet today more to remain more or less stable over the next few quarters?

This is the first question. The second question I had is on the – I don’t see in your outlook mentioned the 55% cost income target.

I was wondering whether this still stands. Third question I have is on the risk-weighted assets.

If you see any headwinds in the coming quarters now that you have accounting for IFRS 16 or maybe could you have any impacts from Prima or more than any kind of more update anything like that? And very final question I like to be – I’m curious to know with regard to George, if I remember well you mentioned maybe 4.6 million activate or registered users.

Is that possible to have an idea out of these number how many are new clients for Erste Banking in all the banks for that group level in the various countries where you have to rolled out George?

Okay. I’ll start with the funding question.

Yes, total funding was going down a little bit this year; because we didn't have to replace everything. As you've seen we were focusing on 81 and we were issuing one additional senior benchmark because we didn't issue anything since 2013 as far as I remember and we wanted to have a reference point in the market in anticipation of senior non-preferred issuances.

The next thing that you can expect from us going forward is mortgage bonds and senior non-preferred is as I've mentioned. Given slide on the resolution that we have added and that necessities that we see on issuance is I think you will see a stable issuance activity from the group similar to what -- a little bit lower probably in this year, but similar in the amount going forward and this should in the next couple of years cover maturities that we are having.

The overall stable I mean from the prices you could see and the prices what we’ve achieved, I think there was some concern that our funding costs will dramatically increase once we are issuing everything and fulfilling the annual targets I think with this we could mitigate some of the concerns and proof that we will not be impacted too much. Overall, I think volume should be pretty stable depending on the eligibility of various other balance sheet items that might be a chance that it goes down in the overall size.

Then, I cover risk-weighted assets question as well. We are expecting relief in the next couple of quarters.

So the most negative impact that we are expecting is included in Q1 and there will not be additional negative impact as far as we can see it from today. On the cost income ratio, good question.

We never put the 55% in writing, so we don't do that this year either, but it still remains our target. On the George question we had last year across the group in those countries in which George has been introduced 250,000 new clients.

You can assume that 90% of them are entirely due to George new clients, so if you calculate that into our total user base of 4.7 million, you can say about 5% of them are new clients.

If I could just one thing, 250, let’s say 90% of 250,000 new clients in how much time if I may?

Last year, it doesn't include the first quarter of 2019 in one year.

Okay. In one year, all right.

Now, is that continues like that, basically you will be building up a brand new bank let’s say, in two, three year if that goes ahead like that then we can debates the profitability. But customer-wise it’s like buying a brand new bank.

Is that the fair assumption to such statement?

It's a very sympathetic assumption. You can basically put it that way.

The good thing is that the number of non-clients that join us because of George is increasing and it still doesn't include as is the number of last year, Romania, Hungary Croatia and Serbia. So there is more, more bees in that as we will – we’ve introduced George last late last year in Romania and we plan to introduce them late this year or early next year in the remaining countries.

And then I'll stop, I promise. From a managerial perspective, does the management of Erste see George as a valid alternative of the traditional M&A from your work and I would say.

But I would prefer to hear it from you?

Yes, yes, yes.

Yes, yes, yes, cannot be clear on that.

It’s not an alternative to traditional M&A. It’s definitely our preferred solution vis-à-vis traditional M&A.

Hi. Good morning.

Thanks for the call. A couple of small points and one or two questions.

What was the 24 million negative in the other income in Croatia in the first quarter? Secondly, in the Austrian business, in your own Austrian business, the costs when Q1 were quite high in the first quarter, how much of that comes down to the sort of 200th anniversary market costs, because that’s quite a high number.

And also in Romania in the Q -- in the first quarter costs also look high. I wonder if that’s related the road out of George.

So if you could answer those three that would be great? More specifically on the -- your own bank in Austria.

In the first quarter you had a 10% ROE. We haven't seen such a low number for quite a long time.

And I wondered what you feel about the performance of that business. I mean, see the flat NII isn’t really moving and also see that the costs were quite high.

So, could you give us a better view as to how that business has been a consistently strong performer over the last number of quarters? What we should be thinking about that going forward?

And then one last question on staff numbers. I can see in one or two geographies that’s a very slight reduction in staff numbers over the beginning of the year.

Elsewhere you’re actually adding staff. And in those sort of this precise digital route that you’re taking we are well on the sort of the way to more than half a way to achieving what was the two-year program in terms of digitalization.

Do we get to a point where your ability to reduce FTEs becomes more obvious? I mean, there are some banks in Eastern Europe that are seeing quite significant reductions in FTEs as a result of digitalization.

We’re not really seeing, as I said, I’d ask through at the moment. When do you think that’s going to happen?

Thank you.

We’ll start with the 24 million in Croatia. This is legal, an old legal cases that we were winning in the first instance and losing in the second instance and half is substance, half is interest and cost.

So we were -- because we had a negative decision we had to reflect it in the quarter. We appeal it.

We think that we are going -- finally we are going to win. But if you have a second quote instance decision in-house you need to reflect it in your earnings.

So the cost situation in Austria, yes, it's not brilliant in the first quarter. Additional marketing cost is a low million number.

I would say, it’s a one-off. Don't say we're celebrating our 200th anniversary.

This year we've added a marketing campaign for that, that is causing all-in-all will be up to 9 million. This year we introduced Apple Pay in the first quarter with a major advertising campaign and we have added personnel in Austria on the IT side.

Again, we would have like to do with in other countries particularly also on the Georgia [ph] front office side and on AI. But some of the people that we wanted to get and not a small number, but 80% of that wanted to have their working place in Vienna and not in a Bratislava or Prague which we would have preferred which would also have been cheaper for us from a taxation point of view, but the numbers are really relatively read relatively low.

But I agree we have in the CE region we have small personnel reductions in all countries, but Serbia and the only country where you see a very slight increase is in Austria. I prefer to say that this will develop and you see anything like that and that will of course working very hard on being able to transform the back-offices on a digital basis, a lot of that has been achieved already during the past month we made big steps forward, but it correct you don't really see on the expense side yet, but that is one of the main targets and goals of the management this year and the years after.

So we’re working on it and we’re very positive that we will achieve it and you can rest assured that the cost income ratio of the remaining quarters this year will be quite a bit better than the first quarter. And also if you look at Austria; at the end the year the cost performance for the full year in Austria will be substantially better than what you've seen in the first quarter.

Okay. That’s clear.

Thank you very much.

Yes. Good morning.

Thank you for your representation. I have two more questions left.

Firstly, on cost of risk, it seems like an asset quality remains still a very healthy, very strong. At this point based on the year to-date trends would you expect to be closer to the lower end of your 10 to 20 basis point guidance range for year?

And then also related to that, if you could give us the gross number for cost of risk or for provisioning, so without the write-backs. That would be helpful.

And secondly, a follow-up on expenses, I know there is significantly step up in depreciation and amortization about 20 million year-on-year is also clearly upward pressure and personal expenses across the region. So if you could perhaps elaborate a little bit more what can do in the next few quarters to contain and perhaps partly offset this pressure.

That would be helpful. Thank you.

So the 20 million additional depreciation 16 out of that is IFRS 16. So, this is just a sheet from other administrative costs to depreciation.

So that’s not new normal run rate. As already mentioned I mean, underlying we are seeing a personnel cost 2.5% to 3%.

And a little bit elevated marketing expenses vis-à-vis last year, it will be flattening vis-à-vis last year’s quarters because we are usually having the highest marketing spending in Q4 and we don't -- usually don't have such a high marketing spend in Q1 as we are having this year. So the base effect will have dampening impact going forward on the cost side.

And yes, so the cost risk question…

Yes. When it comes to cost of risk, as already let’s say outlined by Andreas there is room for a positive deviation to be at the lower end of our outlook, it wouldn’t be a surprise to me.

And when it comes to the releases this is solely coming from cooperate.

Okay. Thank you very much.

Hi. Thanks.

I’d have a question on the Romanian bank and a related question on Romanian margin. I’m assuming that your 20 million bank tax charge assumption is based on getting some kind of the discount price if you grow your loan book a certain level or if you restrict your margins in Romania as you could just confirm that?

No, it’s not the case.

No, it’s not the case.

This is not the case. So this is the upper end of the Romanian bank tax charge, might be below that.

Thank you. So it could be below that.

If you – can you just remind us how you can produce that? You have to grow your loan book I think by 8%.

I guess it’s not by this line.

Yes.

Would you try to do that?

We’re not planning to reduce our margins to achieve a tax reduction, because the tax payment is a one-time the margin is forever.

And loan growth.

Loan growth, we will see how the economy is developing and demand is developing. We are not going aggressively out just because there’s a tax incentive.

So the margin gain that you achieved is about sustainable and it will continue. Can it go up further actually the margin in Romania?

I mean, I think right now pretty stable. Central Bank did not indicated they are changing something.

We’ll see how their market develops going forward.

And you can raise definitely, assure that we’re not going to grow our loan book because of a tax incentives and don’t ask us to qualify that legislation that you can reduce a tax if you grow your volume. It speaks for itself.

Yes. Okay.

Thanks very much.

Hello. Thank you.

Two questions remaining. Actually one, could you share your expectations regarding the fee impact from the restriction on cross-border SEPA payment, which will become effective I think in fourth quarter this year.

And second now with PSD2 now becoming reality and the sand boxes or the trials now open I think since March. Do you already have a better view on the impact on your revenues or on your business or would you change anything based on that?

Thank you.

I can tell you sort of on the PSD2 side it has zero impact so far, and I think you will see the impact only then when you have really full oversight of transactions third-party transactions that can be done on yours or somebody else’s platform which really doesn’t work yet for the fledge, but it will. And quite frankly this is where we see with George as a platform that we have the competitive advantage vis-à-vis most of our competitors as it is an incredibly attractive platform to utilize for third-party bank accounts and do the transactions from one platform.

So basically when it's fully fledged we see that as a strong positive for us. What’s the second question on SEPA?

Yes. On this restriction for cross-border fees?

What the impact on the P&L will be?

Right.

I don’t know. I got to get back to you.

I really – I don’t know. I’ll look into that in detail.

We’ll write you something on that.

All right. Thank you.

Well, thank you very much for listening him. Thanks very much for interest in our group and your questions.

Next round will be on July 31st with the half year results. If we don’t see or hear each other again until then, enjoy May, June and July.

All the best.