Thank you. Good morning or good afternoon depending where you are, and thank you for joining us today on OTP Group's 2026 first quarter results conference call.

You have the stock exchange reports, the analyst tables, and the today presentation available on the website, and we are also broadcasting the slides, as usual, as part of this video call. As usual, I will make an attempt to summarize the main developments and events during the first quarter, and then we will open the floor for your very good usual questions.

The first page, it has been pretty stable for a long number of years now, which I think is a good sign, by the way. I think it's quite good that the most important kind of headline features of OTP Group have not changed, and we don't intend to change those, we are working hard for these features to continue to dominate our performance.

I'm not going to elaborate too much on this because I'm sure you know it by heart now. Talking about first quarter results, unfortunately, just like in last couple of years, the first quarter results is very in a way confused, and it's confused by the huge one-off or kind of the huge extra taxes we have to pay in Hungary especially, and the fact that we have to account for all these taxes at the beginning of the year.

We are not allowed to accrue them accounting-wise. In case of extra profit tax, the number we have to put in the first quarter is even bigger than the expected number for the whole year because, as you probably know, the system is such that if we acquire a certain amount of Hungarian government bonds, then we can reduce the tax payment.

This eligibility to reduce the tax payment is measured as time goes by during the year, on a monthly basis, basically. We have to fulfill that criteria month by month in order to qualify for these reductions, the full reduction, actually, will only be reflected in the full year results.

By the way, I think it's an important information that we have acquired those additional Hungarian government bonds, we expect the reduction of the extra profit tax to actually happen according to our expectations. Now, because of these charges we booked for the whole year in the first quarter, the actual kind of representative numbers of our performance and the book numbers in our financial reports differ, and therefore on this slide you can actually see both set of numbers.

The dark green number reflects numbers where we accrue these one-offs over the whole year, and this for sure provides you with a better representations of actual performance, whereas the gray numbers are the ones which are in the financial reports. Then you can see the tax gray number on this slide as well.

It went up year on year by 30%, and again, this is mostly two factors. One is the substantial increase, in fact, doubling of the extra profit tax in Hungary, and also the higher tax rate in Ukraine.

You may remember last year was a decision in Ukraine that they increased the tax on banks' profits to 50%. Last year that was only 25%.

This kind of adjusted number grew 9% year on year. On the next slide, you will see that actually FX-adjusted this number grew 13%.

We can still go back, sorry, to the previous one. I think from now on, we will have to take into consideration the HUF rate impact, especially when we compare to previous year numbers, our performance, just because the HUF has gone through quite an appreciation very recently, and that obviously has an impact on our numbers.

The ratios, return on equity, again this adjusted one, performed quite well. Cost-to-income ratio, slightly better than whole year last year, but worse than first quarter last year.

Most importantly, net interest margin continued to somewhat increase compared to last year, but also compared to the fourth quarter last year. Portfolio quality remained stable with a kind of normal level of risk cost on the credit risk cost rate side, and we actually wrote back part of the provisions we previously created on the Russian government bonds, almost HUF 20 billion equivalent of provisions were released after the payment of the maturing bonds at the end of last year, and therefore the other risk cost was actually a positive number, and the total risk cost was also a smaller number.

Now, if you go now to the following page, where we actually present the FX-adjusted changes quarter on quarter and year by year on year on a I mean of the first quarter numbers, and if you look at this at the end of this presentation, we have cross-sections for each of these lines, the the most important P&L lines, by country you can also see these numbers on typically on an FX-adjusted level as well, at least where it's relevant, and it's mostly relevant obviously to the to the euro-related countries. Maybe it it makes more sense to actually elaborate on this FX-adjusted changes.

Year on year, if you compare the first quarter this year, '26, to last year, there were no acquisitions or disposals, it's a kind of apple-to-apple comp- comparison. 13% overall profit after tax increase, operating profit improvement 9%, and there was some moderation in the risk cost, mostly because this release of provisions on the Russian government bonds what I just mentioned.

I think in the revenue lines, there are some important developments. Net interest income up 17%, and this has been driven by mid-teens volume growth in the loan book and also improvement in the net interest margin overall on a group level.

That's, I think, a pretty strong performance, and, again, this is all organic. Now, on the other hand, on the net fee and commission line, you see only 1% year-on-year growth, which is, obviously, a much lower growth rate than we would expect given the nominal GDP growth of the countries where we operate and given the overall volume growth both in deposits and in loans across the group.

Now, there are two important factors here. One is coming from Russia.

In Russia, year on year, net fees and commissions went down by more than 20%, and this is related to the transactional income what we generate on transactions. There is a lower demand typically for the corporate transactions we provide for our typically European corporate clients in Russia.

There was a decline there, those of you wanted to see our Russian revenues declining and transactional activity declining, it actually has started to happen, and this is not a unique feature to OTP. This we see if you look at the numbers of other kind of European banks operating in Russia as well.

The other factor was that in Hungary, there was a moratorium in the first half of this year on the fees, we were not allowed to adjust from the start of the year despite the legal potential or opportunity. There was a strong, to say, pressure on the bank sector not to apply those increases, this is going to happen only in the second half of the year.

From July, basically, we do apply the CPI increase on our fees in Hungary, hopefully the Hungarian numbers in the second half of the year will show a better performance. There's one other factor here, that this very high level of mortgage lending activity generated not just higher volumes, and therefore higher future revenues, but also higher commissions to third parties.

This higher commission number also kind of is reflected here in this number when you look at the Hungarian growth rate, which is only 1% year on year, again, due to primarily these two factors, that we had to delay the fee increases by six months and we also incurred quite sizable commission fees on the new lending on mortgages. Again, the NII line, I think that's quite strong, and that's probably the most important in this sense, and the close to 10% operating profit increase as well.

The next slide is rather technical for those of you who are interested in the exact numerical details of the difference between the reported number and this kind of even recognition of special items adjusted line. Those are the differences, and most of the differences, as you can see, come from Hungary, and it's due to the windfall tax mostly, right, which was mostly booked in the first quarter, 135 36 billion, but again, the annual number we expect to be only 110 billion, and then the actual number relevant to the first quarter was 26 billion.

That causes this difference. Now, this big difference is, again, it's in Hungary, and therefore the Hungarian numbers, which you can see on the following chart, have been even more distorted by this accounting treatment.

Again, we actually had losses due to the windfall tax and the other taxes in Hungary in the first quarter, but if you do this adjustment, then the number was actually positive, 120 billion, which is quite a sizable growth year on year. Having said that, I think I have to highlight here that the most of this positive impact from the provision release behind the Russian government bonds happened in Hungary.

There was some in Bulgaria, but bulk of this almost 20 billion release happened in Hungary. There was also a pretax 19 billion fair value positive adjustment on the subsidized loans in Hungary due to the movements of the yield curve, basically, of the yield curve movements.

There was a positive effect in the first quarter, and those two appeared in the Hungarian numbers in the first quarter, and those two may not appear in the second and subsequent quarters in Hungary. Now, and that's actually resulted in this high jump in return on equity, again using this kind of adjusted numbers.

It's unlikely that we are going to continue to have this level of earnings in Hungary for the remaining of the year. It may kind of moderate back to the previous trend line.

Net interest margin, on the other hand, kept improving, and that's although the improvement on a quarterly basis was quite slight, but at least positive. Again, risk cost rate overall was actually negative provision write-back, but again, this is due to this kind of Russian bonds provision release.

Here, in the kind of right lower quarter, you can see the extra taxes. These are our expectations related to what we are going to pay for each of these tax lines during the course of the year, and those expectations have not changed.

Maybe a few deeper thoughts about Hungary and the Hungarian operations. The subsidized mortgage program, which is very popular, continues, and these are the new application volumes, as you can see.

As expected, new applications in the first quarter were somewhat lower than the previous quarter, but still more than double the last year first quarter number, it's still very strong, and our market share is also, you can see, from the contracted demand, our market share jumped up to higher than 40%. Before the introduction of this program, it was in the low 30s, and by the way, this is quite typical, we tend to have much higher market share in case of subsidized programs than on the market-based structures, and that's primarily because these are typically more complicated products.

The sales process, the client interaction is much more complicated. It requires more resources, more skilled resources, more physical presence, and overall scale in order to be able to handle this sudden, dramatic increase in demand, and we are typically much better positioned to provide this performance than some of the other banks, so that's the reason primarily.

In other products, cash loans and savings deposits, again the market share in newly contracted cash loans somewhat declined, and that's due to basically price competition. There's an increasing price competition in this segment, and we try to balance to maximize future earnings by positioning our price points in a way that we, again, maximize the MPV of production, and that resulted in a somewhat lower market share, but the kind of year-on-year growth of new production is still quite strong, 17%, and in baby loans, as you can see, we have also quite remaining high market share.

Having said that, even more important on this slide, I think probably the most important in Hungary, is that we continue to increase our retail deposits market share, and despite of the very low rates what all the banks provide, and we consider this number extremely important because we consider that this number is probably the best gauge to suggest how deep and strong a bank's connection is with retail clients in a given country, and this number has been going up for quite a long time, so that's very positive. Corporate, similarly positive news in Hungary.

Our market share in corporate loans continued to increase, and it has, again, reached a historic height, 21.6%, and you can also see the kind of long-term development there, which is very positive. The other good news is that, in line with the, I would say, somewhat positively surprisingly high first quarter GDP number in Hungary, corporate loan growth continued.

Overall, it was 2% on a quarterly level, which is somewhat a slowdown compared to the second half of last year, but still much more than what we grew altogether in 2024. Most interestingly, micro and small volumes continued to grow, and actually the growth rate there accelerated considerably, 6% growth in just one quarter, and this is the micro-small sector.

Again, that's quite promising when you want to have a view on the kind of fundamental activity level in the local economy, in the local corporate sector, this typically is micro-small are typically local. Part of the large corporates, mid corporates are obviously multinationals as well, and for kind of the sector which is serving multinationals.

Page 10, you have an overview of the performance of the various units with various countries across the group. It is solid performance, however typically not better than last year, with the exception of Uzbekistan, which managed to improve profitability, and this is good.

ROE is close at 30%, so that's actually quite promising, and we are quite happy to see these numbers. We had a big decline in profitability in Russia.

Again, this is related to what I just explained, that demand for this corporate transfers and FX conversions started to decline, and that reflects in our numbers. Now, if we go to page 11, where you can see the net interest margin development on a quarterly basis, 11 basis points up, and as you can see, small improvements in Hungary, Bulgaria, Uzbekistan, Russia, and a bigger chunk of this improvement actually came from the composition effect, namely higher-margin countries provided higher growth rates in the first quarter, and it's not just the quarter on quarter, but also the year-on-year number, which has grown a lot, and here obviously the contribution of the Hungarian business was much better.

More than half of the margin improvement what we can see year on year came from the Hungarian business. Rate sensitivity has increased primarily, and especially in Hungary, because of very rapid growth of deposits.

You will see the deposit growth rates in Hungary in the first quarter, and that's obviously very, very good in terms of profitability and earnings, but somewhat increased the HUF rate sensitivity, which now stands at HUF 24 billion annualized NII in case of the 100-basis-point change, or in this case, the potential decrease in the rate environment. Likewise in the euro sensitivity, it went up to €125 million annualized NII potentially impact based on 100 basis points.

Now, looking at loan growth, it was 3% in the first quarter, was actually 3.4%, but we have kind of rounded number here, this was rounded down to 3%, but actually it was 3.4% FX-adjusted performing loan growth, which was quite in line with our expectations. Some countries provided actually quite remarkable performance.

Actually, the good news is that these are the three biggest countries, Hungary, Bulgaria, and Slovenia in the group, who had a very strong performance, 5%, 4%. Just to remind you, last year, the whole year, Hungarian loan growth was 17%, Bulgarian 18, and Slovenia was 8 for the whole year '25.

Now in this case, Hungary first quarter 5%, Bulgaria 5%, Slovenia 4%. In Hungary, this was primarily, to a large extent, driven by the subsidized mortgage program, but there's no such program in Bulgaria or Slovenia.

The other country which kind of grew quite fast was Ukraine, 9% growth. Last year we had decent growth as well.

Last year there was 27% annual growth. Therefore, the base is getting bigger as well, and on a higher base now we have an acceleration in the run rate in Ukraine, which is, again, a fairly good news.

Deposits, 3% increase in deposit volumes just in one quarter, and especially Hungarian retail was strong. This is not surprising given that it was the last quarter before the elections, and therefore some fiscal transfers happened to the electorate, and quite part of it actually landed in bank deposits, I don't think I have to tell you that this is actually very positive for earnings and NII specifically.

I think this is the kind of biggest news on the deposit front. Portfolio quality, page 14, remains stable, slight improvement in the Stage 3 ratio in the first quarter down to 3.4%, 2.6% without the higher NPL ratio countries like Russia, Ukraine, and Uzbekistan.

Coverage remained similarly high to previous quarters, there's not much event here. Next page is about the capital adequacy ratio, which actually decreased from 18.1 to 17.6, the Common Equity Tier 1 ratio, and in this waterfall, you can see the factors which affected this ratio.

The profit itself would have increased the ratio by 90 basis points, but in case the one-offs, these large taxes were accounted for evenly during the year, but they were not, this kind of accounting for all the taxes in the first quarter, that had a 40-basis-point negative impact. Then dividend, which we calculate according to the EU regulations, this is not a guidance on the potential dividend payment.

Organic growth consumed 40 basis points, and some temporary measures were phased out, so that's another 30 basis points negative, and there were some other effects. The bottom line is that although the reported number was 17.6, if we recalculate these one-offs and, again, evenly distribute over the year in Hungary this kind of adjusted profit number, and we recalculate the adequacy ratio with this restated number, then the rounded number was actually at 17.9, close to 18%.

Just anticipating the discussion about how high our capital adequacy is or is not, indeed this 17.6 on even in a Tier 1 ratio levels seems to be quite strong, and here we can say that, again, the real number was probably, or the kind of the number which better reflects the actual situation was closer to 17.9%, and that's quite a decent number, and that created some room to, again, restart share buybacks. We've just announced that there was another HUF 60 billion approval we received from the National Bank, now we can start a new program to continue to buy back shares, and the approved number was HUF 16 billion, and ultimately there's some room for more acquisitions as well given this higher-ever ratio if there was an opportunity to do so.

On page 17, you can see the liquidity and the capital markets activity of the group. Liquidity ratio is very good.

We remain to be funded by deposits, right? 77 loan-to-deposit ratio, pretty stable across last year, and liquidity coverage ratio 227, net stable funding ratio 151, quite strong levels.

Relatively compared to the size of the profits and the size of the balance sheet, the call date profile is relatively modest, there's 1.1 billion call dates coming through this year, and the overall share of wholesale funding in the balance sheet is still less than 10%. It's 8%, as you can see at the bottom of the chart in the right corner, we are not very levered at all in terms of market funding.

Rating, there has been no change recently. This is obviously an interesting topic.

You probably heard about the new government in Hungary and the economic policy plans of the new Hungarian government. They seem to be quite serious about targeting the preparation for eurozone accession, and they want to meet the Maastricht criteria, accession criteria, they said in four years.

That obviously assumes a trajectory, a fiscal trajectory, which may open up the space hopefully for rating improvements in the sovereign, which may hopefully reflect in our rating as well. This is to be seen, right?

We will see how it goes and how it develops. I'm going to talk a little bit about our expectations in terms of Hungarian macro later in the presentation.

The next two slides are the ones we always include just to reinforce our message that it's not only us who consider our performance to be reasonably good, but some or other external objective views as well seem to confirm that in its research and the EBA stress test results. Then sustainability and green lending, which is our page 21, which is our strongest focus in terms of sustainability to contribute to the most of our ability in terms of doing green lending, and we achieved the quite ambitious targets what we set a couple of years ago at the end of last year, and even compared to that, there was an acceleration in the growth rate, and just in one quarter, we achieved 9% growth in green lending volumes.

If it continues like this, then we will, I'm sure, surpass the '28 targets what we set and achieve them much earlier, which is a good news. Now, macro.

In our case, there are obviously two large developments. One is a global development, and that's the war in Iran and the closure of traffic in the Strait of Hormuz and the impact of that situation on global energy prices and the expectations regarding future energy prices.

Obviously we don't know what future will bring here, and expectations change day by day depending on the communication primarily from the President of the United States. Our assumption or rather hope is that the Strait will open soon, and in the second half of the year there will not be much disruption in the traffic across the Strait, and that means that we expect the gradual normalization of the energy supply globally, and therefore the gradual normalization of the energy prices over the course of the second half of the year.

These numbers are based on that assumption. Obviously, there's a risk here that the situation is not going to ameliorate, and in that case, obviously GDP growth may be lower due to higher energy prices, and inflation might be higher, and the rate environment might be higher as well.

This is potentially true for all the countries on this page except Russia, which Russia would be the beneficiary of such a high energy price environment, obviously, but all the other countries would be potentially negatively or at least marginally negatively, and some of these countries even more negatively impacted. Now, based on this assumption, and I think here the most important numbers are the Hungarians once.

Can we go back? Yeah.

The number which changed the most is the expected fiscal deficits in Hungary. It's up to 6.8%.

This is the latest indication from the former government and from the new government as well, but what they do now, the new government just took office this week, and they are going to review the fiscal situation and come up with a new budget basically for this year during the course of the summer. This number may or may not be reinforced, but at least I don't expect a lower number than this.

I think if all goes well and it's not going to be higher than 6.8, it seems that the previous government spending had been excessive and going up to the election, and certainly the higher energy price also not helping here. Despite all of this, actually the first quarter GDP growth in Hungary was surprisingly strong, or somewhat better than most of us expected, and therefore even in this environment, we expect closer to 2% GDP growth, which is the highest number over the last four years.

Then obviously the macro expectations regarding Hungary changed considerably based on the newly elected government, which has two-third majority in the parliament, and therefore they can change technically all the legislations, obviously in line with the EU legislative framework. Again, there seem to be a commitment to converge to the eurozone and to converge to kind of Western European standards and business environment, which maybe not in very short term, but mid to long term is actually quite supportive and positive for the potential growth, and also for fiscal deficit decrease, and also for inflation decrease, and for the rate environment to go lower.

In that scenario, growth expectations probably increase in Hungary, and margin expectations somewhat moderate, but that is kind of compensated by the cost of capital or expected return numbers also going lower potentially the next couple of years due to lower rate environment. What short term potentially most important is the access to EU funds, and we put here a slide to facilitate your understanding of what we are talking about when we talk about access to EU funds.

There's this €36 billion, and Hungarian GDP is 220, that was €219 billion was last year number. This is actually a sizable amount of money what is at stake now, and there are different parts of it.

There are grants and there are loan facilities, access to loan facilities at a much cheaper level than the Hungarian sovereign cost of funding is at the moment. These are the different parts.

The most urgent is the Recovery and Resilience Facility grant, subsidy, 5.8 billion, and the REPowerEU, again, subsidy, those have been suspended, and they're subject to fulfilling 27 milestones. These are 27 requirements regarding the legislative environment, basically, and the institutional environment in Hungary, and those have to be changed according to these expectations to get access to these funds.

In case of the RRF grant and the REPowerEU, the deadline is actually very close. By the end of August, actually the payments have to happen, and that's a short time frame, it requires fast legislative changes, which is quite feasible.

Pretty much it seems that the new government intends to make those, so that's not a kind of a problem. It also requires some level of flexibility on the EU side to actually provide those funds despite the fact that these projects have not obviously been completed, and therefore some more creative solution is needed.

I think the chances are good that these funds will be available. There's a loan facility as well linked to the Recovery and Resilience, RRF facility, that's 3.9 billion.

There's the usual structural and investment funds, that's the usual EU funds and subsidies budget and access to that. Here, it's partially, again, suspended because of these 27 milestones, partially suspended because of the Fundamental Rights chapter, that's another kind of four four additional Hungarian legislations which are affected here.

Again, it does seem to be in the intention and the interest of the new government to comply with these requirements, and here the deadline is much longer, '29, I don't see much risk here to be able to actually secure those funds. Then there's the Security Action for Europe, SAFE loans.

This is still early stage of development. I don't think any European country has started to actually use those funds, so that's obviously also they are dependent on the same milestones and requirements, but I think, again, and there's no deadline, at least we are not aware of a deadline to use up those funds.

This is for the defense developments, right? That can have a positive effect short term, right, if these funds open up and start to flow and generate a new investment cycle, basically.

It's not just these funds, but overall investments can accelerate because these are just kind of triggers or contributing factors to a bigger investment scheme, and typically what we have been seeing over the last two decades now, that together with EU funds, we typically have other funding facilities as well. A higher EU fund flow to the country translates to higher investments, higher GDP growth, and higher especially corporate loan demand.

This is what can be expected should all these events happen. Now, based on this, we don't see fundamental reason to change our guidance, the guidance remained the same: similar to last year volume growth, similar to last year margin, cost-to-income ratio maybe somewhat worse, similar risk profile, and maybe somewhat worse return on equity.

Now, based on the first quarter numbers, I think pretty much on track in terms of loan growth. Margin seems to be better, and maybe on this line there might be a positive surprise.

Cost-to-income ratio, we'll see. I think it's too early to say that.

Certainly the risk profile seem to continue to project the same features as last year, there's no reason to believe that this guidance would not be the right one. ROE, well, the first quarter is somewhat better than we expected, but we'll see how it's going to develop over the year.

That was it. That was the formal part of the presentation.

You have the usual additional slides in this deck, should you want to have more cross-section information about NII, about margins, about volume growth, fee income, other income, and total risk cost. These are the additional slides what we have in the deck.

Thank you for listening to this presentation, and please ask your questions.

Hello. Thank you for your thoughts.

Firstly on costs, and the 17% FX-adjusted cost growth, you talked about an amendment of the regulatory charges going up year over year and some expenses like the branch rationalization, presumably which drives savings down the road, but how do you expect cost growth to evolve from here? I guess there is a concern out there that whilst your revenues are developing more strongly than expected, a large part of that may not drop to the bottom line given the cost inflation.

Can you reassure here? That's the first topic.

Secondly on the political developments in Hungary, what do you think is the likelihood that we may see a significant bank tax cut next year? Further on Hungary, now since the election, we have seen a significant contraction in the sovereign spreads.

Can you give us a sense of how this could impact your finances, your P&L and capital from Q2? The final thing here, has this increased your appetite to issue AT1 as well?

I'll leave it there. Thank you.

Okay. Costs, yeah, 17% cost growth is high, and our biggest increase we had in Russia, where we kind of invest into even stronger compliance and kind of regulatory control functions, and also IT.

NII growth was actually 17%, the problem in a way in our case, the first quarter was that out of the revenue lines, the total income growth was FX-adjusted 5%, but the biggest chunk and the most important, NII, grew 17%. Fees hardly grew, and other income growth was also lower, and that's also kind of impacted by Russia.

We are also aware of this, and we carefully monitor and, in a way, control costs. Having said that, we still don't see a major reason to kind of start drastic cost control initiatives, right?

Let's take as an example Bulgaria, where, obviously, Ipoteka is where we invest into the future, and especially IT and people, so that's 34%. That's okay.

Then if you take Russia out, then one of the highest is Bulgaria, but Bulgaria, with this level of cost growth, achieved in the first quarter 19%, 19% ROE, right? That's eurozone, so that's more than two times return on equity over cost of equity.

Volumes have been growing quite fast in Bulgaria last year. Loan growth was 18%, and again just in one quarter we had 5% loan growth.

We are growing fast organically, right, and that growth involves some cost developments as well. I'm not going to tell you that we are going to reduce this kind of year-on-year cost growth to a single digit or something like that because it's not going to happen, but on the other hand, this is not cost growth without any reins or just kind of being without control.

All these developments are according to plan and under control, actually, and we are not actually concerned about these numbers. The only concern we have in terms of cost, it's basically Hungary and the Hungarian headquarter costs, and this is where we have started to take measures, and we will continue to take measures in order to reduce the size of the HQ in Hungary and make it more efficient.

Political developments, yes, I don't think it's at all realistic that the extra taxes will be cut this year in Hungary given the budget situation and the fiscal position what this new government inherited. Does not have any room to do that.

Again, 6.8% expected fee deficit this year. If you believe, and we believe, that this new government is actually committed to develop Hungary into a competitive modern economy more similar to kind of successful Western European economies, and that does not allow the level of sector taxes what exists today and the level of distortion they cause and certainly don't support the mid- to long-term higher economy growth which is expected in the country.

Our expectation is that, yes, there will be a gradual decrease, especially in the extra profit tax in Hungary, which is like the windfall tax, which is the most painful number, right? This is the number which was doubled from last year to this year, whereas the profitability of the banking sector overall actually declined.

This is completely unfounded and ridiculous, but happened nevertheless. On this line, we definitely expect material improvement, and in fact over a course of hopefully not too many years the complete elimination of that line.

Some level of bank tax and transaction tax I'm sure will remain, but I think it would be at least fair to go back to the situation where we were in '21 and before, where we only had banking tax and transaction tax. The HUF rate, our HUF government bond portfolio is in the hold to maturity treatment, in the HTM portfolio, there's no capital impact.

We don't mark to market these bonds, therefore there's no immediate impact. AT1, the situation regarding AT1 or our view, AT1 has not changed, this we consider as a reserve for a potential larger acquisition.

We continue to be on the view that we only do AT1 if there's a larger acquisition which requires that capital.

All clear. Thank you.

Hi. Good afternoon.

Thank you for taking my questions. Just to follow up on the previous questions, can you comment on your head count strategy?

You referred to 1.5% increase in head count. Which areas of business are seeing this incremental hiring, and what is driving that additional head count demand?

Another question on margins outlook, you reiterated the NIM outlook of 4.30 4% with potential upside. Can you provide some color on your outlook for margins across your key markets?

What trends are you currently seeing on the ground, and what are the main drivers we should be considering for this year and next across your geographies? Here, can you also mention what are you observing in terms of the competitive environment evolution across loans and deposits across your markets?

Thank you.

Easy question. Okay.

Head count, you mean head count in Hungary, or country by country, or what?

Overall in the group.

We don't have an overall head count policy for the group. The different entities in the group are at different stages of development in terms of market growth, in terms of expected growth, in terms of IT maturity, and in terms of progress of implementing new technical tools, AI tools.

We don't have an kind of overall head count plan. We have, but that's an aggregation of the individual country numbers, and different countries are in different situation.

Again, we have the most focus at the moment on Hungary, and we started to take measures, and more specifically on the Hungarian headquarter head count. Overall head count in Hungary is 11,000 people in the whole group, which it has grown a lot over the last couple of years, and here we have especially, again, regarding the headquarter, which is more than 7,000, it's kind of 8,000 people if you take out the network.

This is where we see, by the way, across the group the biggest efficiency increase potential, and this is going to come over the next year, next one and a half, two years. We are not going to do any drastic measure, but this is something where we focus, and there will be results here.

Net interest margin, again, this 4. 29, 4.6%, this seems to be clearly higher than the last year number, which was 4.34, already in the first quarter we are considerably higher than last year, and therefore I think maybe we can go to page 27 here, which is about margins.

Yes, this is it. There's I think a high risk here or a high potential for better performance than last year, and better performance that we guided for, but just to be conservative, we decided not to change the guidance.

Now, if we look country by country, in Hungary, we have seen improvement, right, over the last couple of years, and I think the bottom of the cycle was around 2.3%, something like that, back in '23. Now we are almost a percentage point higher, and improvement slows down, but still kind of especially driven by strong retail deposit growth that happened in the first quarter, this looks actually quite promising.

Then we have the eurozone countries, Bulgaria, Slovenia, Croatia, and I would include here Montenegro as well, which uses the euro, where we have seen margin compression, but recently margins kind of stabilized, and this is what you can see. Bulgaria quarter on quarter, Slovenia, Croatia, and Montenegro reasonably stable levels, right?

There we don't expect much change unless there's a rate hike, and rate hike can happen. The euro rate, again, most likely to be increased, and that can be positive for these countries.

This was certainly not expected when we made the budget for this year. This is related to the war in Iran and the closure of the Strait and when higher energy prices.

If indeed it happens and the euro rate will be increased, then it will bolster up the margin in these countries. Serbia, some decline, and that's mostly due to regulatory kind of changes.

There are limits on the margins and rates we can apply for retail lending in Serbia, and that is reflected in the margin. Uzbekistan started to improve, and that's a good news.

It's primarily because of the cost of funding kind of ratio optimization and the kind of deposit pricing optimization. Basically, that's it.

These are the parts. We are already in the first quarter higher than what we guided for, and based on this, there's a fair chance that we will remain at this higher level.

That's it.

Thank you. Can I just follow up, which markets would you characterize as facing the greatest competitive pressure, and where do you see competitive dynamics remaining relatively benign?

Bulgaria, Croatia, Slovenia, quite price competitive, it's basically the eurozone countries are the most price competitive, especially in lending, especially in corporate lending. I don't think any of these markets are benign.

Unfortunately.

Thank you.

Thank you.

Thanks very much, László, for the opportunity. I may not have catched everything in the presentation.

My question's around fees, which were quite weak in Russia in particular, but also Hungary and Bulgaria. I think you probably touched on this, but what's the outlook for fees going forward?

It seems the run rate has slowed quite significantly. I think there were a number of reasons behind this, but what's the outlook going forward from here?

That would be my first question. Then also on risk costs, just wondering what the exact changes to your FLI, forward-looking macro assumptions were, if any, because of this US-Iran situation, and, yeah, if you've used any overlays to top up provisions without hitting the risk costs this quarter.

Thank you.

Fee income growth being modest year on year was driven by two two countries. One, Russia, where they actually declined, and by the way, Russia also had a negative year-on-year contribution to other income.

It's basically transactional fees, transfers, and FX conversion margins. That's next slide, page 31.

It's not just the fee income, it's also, if you can go to the next slide, please, 31, you can see that there was quite a negative growth year on year in terms of other income as well, which is basically the FX conversion margin. There's just less demand for these from our corporate clients, and this we observe in the numbers of other banks being active in those fields, namely the other European banks still active in Russia.

This seems to be systemic, and I don't think this is going to change dramatically over the course of the year. There might be some seasonality here, but I think our assumption is that these kind of special revenues, to say, which are not so much related to our core activity, which is consumer lending and deposit taking, maybe these kind of special revenues they may be at a lower level this year than last year, considerably lower.

This is actually worse than what we planned for this year, but that's the case. Some of you might be happy to see that our revenues started to decrease in Russia.

We have a more balanced view on this. We are not particularly happy about this, but anyway, this is what's happening.

In terms of Hungarian fee income, yeah, indeed I said it at the beginning of the presentation that it's mostly because we were not able to increase the fees in line with inflation because we voluntarily had to, as all the other banks, delay the usual January fee adjustments. We are going to do these at the end of the first quarter, and that means that the second half of the year might be better.

The other factor which negatively impacted Hungary was that it's fees and commissions, right? Commissions is typically an expenditure, and the higher mortgage lending involved higher commissions for third-party network, and that's also accounted for in this line.

These are the two countries where we are at lower levels. In Russia, this is probably the new normal.

In Hungary, it is not, in Hungary we should recover growth rate in the second half of the year of the fee income. Yeah.

Thank you. I guess Bulgaria, it seems that it's currency-driven, I guess would you assume that the underlying fee growth should still be growing around 6% in euro terms?

In

Bulgaria, we had 6%. It's FX.

The HUF rate, especially to the euro rate, changed, from now on, we will have to be conscious of the FX impact, especially for the euro countries. It's better to look at the FX-adjusted changes, right?

So 6% is kind of okay, right?

Thank you. Then just, yeah, just on the provisioning.

Provisioning. We didn't do extra provisions.

We don't expect that in line with what we expect in terms of the macro environment, and that is kind of some increase in inflation and some decrease in potential GDP growth and maybe a higher rate environment, these expectations are included in the numbers what we had on this chart. In terms of the macro, that macro scenario does not warrant or require extra additional provisions.

We seem to be quite conservatively provisioned already. Whether this is optimistic or not, it's hard to tell, right?

There's an extreme scenario where the Strait will be closed for the next, I don't know, three years, and the oil prices will remain much higher than 100 for the next couple of years, and so on and so on, in which case there will be much more serious kind of real economy adjustments and supply chain adjustments and demand adjustments across industries, and that is not factored in in our current expectations. Again, we don't think that this is the expected scenario either.

Understood. Thank you.

Thank you.

good afternoon, and thank you for the presentation. I have three questions, please.

The first one would be on Uzbekistan. It's clear that you're seeing really good bottom line profit growth, and also seeing good core revenue growth in the country.

What struck out to me was a quite muted loan growth on a sequential basis in the quarter, which is surprising from a clear growth market. It seems like consumer was fine, corporates went backwards.

Any color you can share on that? What are you seeing on the ground?

What is the expectation for the remainder? The second question would be on inorganic growth.

Could you share any updates on M&A? I think at the time of the AGM or on the AGM, your chairman mentioned that you're hopeful that you could announce an acquisition this year.

Any color on that, anything you can add? Also just in this context, tying back to your earlier comments on capital, what is the level of or amount of excess capital that you're seeing at the moment, just considering you want to be at the top end of the peer group in Tier 1 ratios?

The last question would be just one on Hungary. You talked about sector taxes, and I was wondering are there any sector-specific policy changes apart from taxation that you would like to see, policy changes that would be beneficial in your view for the economy and the sector, anything on that front would be appreciated.

Thank you.

Indeed the volume growth in Uzbekistan was disappointing. I can confirm that.

It came from two angles. One was another kind of wave of IT issues regarding the core system.

The core system had serious operational issues and stopped working for meaningful amounts of time, which quite seriously disrupted our ability to sell. Now those have been fixed.

We insourced the development of this system, and we are buying the source code, now we are getting full control over the development of the core system, and we are scaling up the development capacities, and the good news is that in April there were no further mishaps in terms of availability of the core system. This sounds like a very basic problem, but these are the problems what we faced.

That was one. The other one is we still remain conservative, especially in corporate, in corporate lending we still don't feel very confident to be more aggressive or to be more active, right?

We are exploring this, but we are careful and we don't want to make moves which we regret in the future. There's no reason for that.

Again, as you rightly pointed out, profitability improved. Earnings are getting to a level where we want to see them, and we definitely want to keep that situation in the future, and we don't want to grow just for the sake of growth, right?

We want to grow profitably. In corporate, we still don't feel 100% confident that we can even achieve the returns what we expect after risk cost with strong volume changes.

This is the reason behind corporate kind of inactivity in a way. Retail growth, the consumer lending growth, we wanted that to be stronger, but that was hindered by IT problems in the first quarter, which is solved, they don't seem to be problems anymore in the second quarter.

In fact, we are putting live our new mobile app solution. We had a very not modern one, and the new development is now going live, and we expect very positive impact on retail activities as well coming from that.

The first quarter was somewhat difficult operationally again, but we are quite optimistic and we believe that the rest of the year will be better in terms of growth, and I think we're actually quite happy to see that returns are closer to the levels what we expect them to be than were last year. There's no news I can share with you regarding M&A.

We are obviously very restricted in terms of what we can just informally share, whenever there's a information important to share, we are sharing it immediately. We continue to look at various opportunities.

It would be good to make an agreement this year where we are sure that we create value, but if we are not sure that we create value, then we are not going to make a deal, right? Given the strong organic growth trajectory, there's no pressure on us to deliver deals if we are not convinced that we create value for shareholders by doing those deals.

I know it's very general and doesn't really answer your question, and I'm sorry for that, but I'm not in a position to say more. Tier 1 capital, your question, again, effectively the ratio was higher than reported, we have to talk about kind of 17.9.

And 17.9 is certainly higher, definitely higher than the highest on this slide. Again, we restarted share buyback, and we just got an approval for another 60 billion, and we continue buybacks.

There's, probably some kind of 16.5, something like that, between 16.5 and 17, that's the range, I think, which would still allow us to be at the higher end of this group. That's the potential kind of opportunity to do more buybacks or do an acquisition, or more acquisitions, more than one.

That's the magnitude on that level. Then obviously there's the alternative Tier 1 instrument, which is a dedicated reserve for us, issuing an AT1.

That's the other thing which we may consider. Other policy changes than sector taxes, if we could achieve a major improvement or material improvement on the sector taxes, we would already be quite happy.

Other changes, a path which leads to fulfilling the Maastricht criteria in four years, what the new government started to talk about, means a swift fiscal consolidation and decrease in inflation and actually quite swift convergence of the rate environment to the euro rate. In itself, that's a big change, right, and that would put the trajectory of a country on a very different path than what we had been for quite a long time, the last 10 years, I would say.

Other than this, I don't know what policy change would. In that scenario, in a kind of lower budget deficit and lower rate environment scenario, plus availability of EU funds, that means that there will be much less need for these subsidized programs, right?

If EU funds are available and coming, and if the rate environment is lower, then market-based lending and substantial demand at those rate levels can be more than enough. I think the necessity of these subsidized products in retail and corporate will diminish.

That can be another kind of subsequent policy change if that trajectory actually manifests.

Thank you. That makes a lot of sense.

Appreciate it.

Thank you.

Hi, thank you for the presentation. I have a couple of questions.

Look, the first is regarding the forint sensitivity. You touched on this on slide 11, and if you could clarify the rate sensitivity because I'm not sure I got it.

Does it mean that if rates drop by 100 basis points in Hungary, it is a net positive or negative for the bank, and does it include fair value adjustments as well? If you move forward, I have a couple of questions related to Q2 because I think that Q2 will be distorted by a couple of things.

First, the forint has significantly strengthened following the elections and will be heavily impacted. Just wondering if you hedged part of your euro exposure.

The next one is that I think due to the share swap agreement with MOL, you are eligible for dividend of HUF 13 billion. I guess MOL will postpone it to Q3, could you clarify that you are expecting it in Q3, or will you book as a receivable in Q2, or what will happen?

That's all. Thank you.

The HUF rate sensitivity, the sensitivity is negative, lower rate means lower NII. The sensitivity what you can see on this slide means if the HUF rate goes 100 bps lower, then we are going to have, ceteris paribus, 24 billion less NII in one year, in the following year.

Thanks. I didn't get that.

Is it relevant or consistent with the euro sensitivity? Because it was mentioned that for a 100-basis-points change in euro rates stood at around €125 million, but yeah, okay, it's clear.

Thanks. What about Q2?

These two are kind of independent, right, if

Yeah. Now what about Q2?

Q2, yeah, if the exchange rate appreciates, a stronger HUF translates into lower nominal HUF group-level profits, right? Then you have to have assumption on the other currencies as well, right?

Because, for instance, the ruble just strengthened towards the HUF, so that can be other movements, and the Uzbek currency can strengthen as well. There are different currency movements across the group.

If you assume a kind of HUF 10 appreciation in the HUF-euro rate, right, and if you assume a parallel appreciation of the HUF to all the other currencies in the group, then this HUF 10 rate appreciation translates roughly HUF 20 billion profit after tax per year. If you divide it by a quarter, then it's 5 billion.

That's a quarterly impact by HUF 10, and there is more than HUF 10. You can do the math and you can do whatever scenario you assume.

Hedging, we have a strategic open position, but, other than that, we don't have a HUF position, and we don't hedge the revenue from the non-Hungarian businesses. In fact, we hedge the capital ratio, group-level capital adequacy ratio.

That means that when the HUF appreciates or weakens, it changes the risk-weighted assets of the non-Hungarian businesses, right, and it also changes the equity of the non-Hungarian businesses, and we want these two to move reasonably close to each other. Therefore, we want to have a situation where the exchange rate changes don't have a material impact on the group-level capital adequacy.

That actually requires not to hedge the equities in the different group members. Having said that, quite majority of our investors are actually coming from other currencies than Hungarian forint, right, typically dollar, euro, British pounds.

They may look at the share price in their own currency as well, so that I don't know. The dividends, it has an impact that MOL decided to pay the dividends later.

It does have an impact on the cash flow, on our liquidity plan, to say, but it doesn't have impact on the earnings, right? We are going to accrue those expected dividends.

What about in Q2 or in Q3?

Q2.

Okay. The

decision was made.

Thank you. Mhm.

Thanks. I have another question related to others.

The fair value adjustment in Q1 was very significant, but given that the Hungarian government yields came down significantly in the last couple of weeks, where do you see the fair value adjustment in Q2 if you take into account the current yield curve?

Indeed, the fair value adjustment on subsidized loans was quite positive in the first quarter, close to HUF 20 billion. Not the same amount.

We don't know how much it's going to be, but the current situation means that it's going to be negative in the second quarter.

Thank you.

Sure.

Sure. Good afternoon, Jovan Sikimic from ODDO BHF.

I have kind of follow-up on Uzbekistan. If we look at loan-to-deposits, they were basically flattish or stable over the last couple of quarters.

Do you have any plans to, let's say, normalize it back to, I don't know, 100, 150? If yes, what would be approximately impact on the margins?

If it comes to the dividends, are you paying out the dividend from Uzbekistan unit, and if you maybe can share what's the current capital adequacy there? I don't think that you report it, but maybe you can share it with us.

A minor question on Serbia. I think you mentioned that you expect a kind of recovery, but we know that politically it's also quite turbulent there, FDIs are kind of definitely negatively affected by this, in which segments would you expect the recovery, especially in the lending activity there?

Thanks a lot.

Dividends, we have not taken out so far. No, we haven't attempted it or haven't tried.

Capital adequacy, can get if we have that number here. I'm sure it's somewhere in the analyst tables, but we are going to check.

Recovery in terms of lending activity, 1% we had 1% growth in the first quarter. Compared to that growth rate, I think we expect improvement for the rest of the year, right, compared to the first quarter.

Loan-to-deposit ratio target per se, we don't have. We are quite okay to operate over 100%.

We have access to capital markets on a standalone basis. We issued a very successful bond last year, which was a double currency bond, local currency and dollar, and there's further demand.

We feel comfortable to be able to fund on a standalone basis if there were higher growth of loan demand and loan growth. No, we don't feel constrained by funding, and we certainly don't have a loan-to-deposit ratio target per se.

There is no pressure from the regulator, from the central bank, right? Because the sector is such, in total, has quite high loan-to-deposit, right?

No.

Okay. On Serbia?

In normal environments, banks should have leverage. They should provide leverage in an economy, there's nothing wrong with higher than 100% loan-to-deposit ratio.

That used to be the norm, in a way. In Europe, we have developed into a situation where banks are expected to have lower than 100%.

It kind of became a new norm that because of there's so much liquidity in Europe, and because banks have been so conservative in lending, but I don't think that's actually optimal for the kind of long-term development of economies. I don't see any problem having a bank having more than 100% loan-to-deposit ratio.

In the meantime, I have the capital adequacy ratio number. It's 19%, 19.1 in Ipoteka.

The minimum requirement is 13. Serbia, we expect double-digit growth in retail and corporate lending, and I'm talking about market figures here because we haven't given guidance on the entity itself, but yeah, we expect acceleration in demand,

and yeah. Thank you very much.

Appreciate.

Sure.

Thank you. Thank you very much for joining us today, and thank you for listening to the presentation and for your very good questions.

Please join us on the next conf call, which will be on the 5th of August. During the summer, we usually don't report on Friday because it's more polite to do it midweek, it's going to be Wednesday in August, 5th of August, and please do join us again.

Until then, I wish you all the best and goodbye.