EBKOF - Erste Group Bank AG (EBKOF) Q3 2023 Earnings Call Transcript
2023-10-30 12:01:03 ET
Erste Group Bank AG (EBKOF)
Q3 2023 Earnings Conference Call
October 30, 2023 4:00 AM ET
Company Participants
Thomas Sommerauer - IR
Willi Cernko - CEO
Stefan Dörfler - CFO
Alexandra Habeler-Drabek - CRO
Conference Call Participants
Mehmet Sevim - JPMorgan
Benoit Petrarque - Kepler
Mate Nemes - UBS
Riccardo Rovere - Mediobanca
Johannes Thormann - HSBC
Gabor Kemeny - Autonomous Research
Hugo Cruz - KBW
Simon Nellis - Citibank
Shane Mathews - WhiteOak Capital
Alan Webborn - Société Générale
Olga Veselova - Bank of America
Jovan Sikimic - RBI Raiffeisen
Presentation
Operator
[Call Starts Abruptly]
Conference call of Erste Group. My name is Laura and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions]
I will now hand you over to your host Thomas Sommerauer to begin today's conference. Thank you.
Thomas Sommerauer
And today we follow our usual conference call procedure, which means that Willi Cernko, our Chief Executive Officer; Stefan Dörfler, our Chief Financial Officer; and Alexandra, Alexandra Habeler-Drabek; our Chief Risk Officer will host this call.
As usual, they will lead you through a brief presentation highlighting the major achievements, and developments of the quarter and also year-to-date, after which they are ready to take your questions.
With this, let me also once again draw your attention to the forward-looking – looking-information disclaimer on Page 2. And with having said this, I hand over to Willi Cernko for the presentation.
Willi Cernko
Thank you, Thomas. Ladies and gentlemen, good morning from end, as well and welcome to our third quarter ‘23 conference call. Even as a risk of sounding repetitive, we once again present to you an exceptionally strong set of figures, both for the quarter and for the first nine months of ’23. And I think it is now fair to say that ‘23 shapes up to be a large year in terms of P&L performance.
Let me start the presentation on Page 4 with the development of our income statement. In short, most trends were sold the first half of the year continued without any exception in the first quarter - in the third quarter, sorry. And while revenue momentum slowed somewhat, this was mainly due to the volatile elements of our P&L most notably, net trading and fair value results, while our core revenue lines, net interest income and fees continued to produce dynamic growth and actually again reached quarterly record levels.
Operating expenses developed perfectly in line with our expectations and guidance. Risk costs saw somewhat of an increase, but this was due to our mid-term and – updates, rather than due to anything significant defaults. And most importantly, this does not change our strong credit risk outlook.
All of this contributed to a strong bottom-line performance in the first nine months of ’23, which fully underpins our capital distribution plans already announced in the second quarter, consisting of a very healthy regular dividend of EUR 2.7 per share that equates to a yield north of 8%. And the share buyback in the amount of EUR300 million, which as we speak is underway.
All of that just said about our P&L dynamics is very well reflected in our P&L dashboard on Page 5. Net interest margin edged up again slightly, but a level of around 2.5% seems to be as good as it gets for the time being. This is not really surprising given that the slowing rate hike dynamics in the eurozone and declining rates in certain CE markets go hand in hand with slightly increasing deposit passthrough rates and smaller tailwinds from assets repricing.
Our fees continued to perform strongly driven by asset management and payment services. As already mentioned, net trading and fair value result was in track this quarter but only in relation to the exceptionally strong previous quarter. Our cost income ratio is significantly ahead of guidance for the quarter, as well as year-to-date.
Hence, we are confident that we will deliver on our promise also for the full year. We can also comfortably confirm our outlook for risk cost for ‘23 as year-to-date we have booked only eight basis points of risk cost. And if you add all these up, it's clear we'll produce a return on tangible equity well above 15% in ’23.
When it comes to the development of the balance sheet, I'm on Page 6 already. Trends were less pronounced in P&L, but in light of an unfavorable market backdrop when we talk about growth or when we talk about inflation, it is still positive. We saw an uptake in underlying quarterly loan growth. This is driven by Slovakia, Croatia, and Sberbank Group. While in Austria, this was mostly driven by corporate demand. Growth was well balanced in Slovakia and Croatia and even in the Czech Republic loan demand improved, but in euro terms, it was eaten up by currency depreciation this quarter.
As for deposit volumes, they remained in the range we have seen throughout this year. And importantly, our core retail and SME deposit stayed by and large stable. While the more volatile corporate deposits already increased year-to-date. Overall volume trends are in line with our expectations and even though we are tracking somewhat below our annual loan growth guidance, I'm confident, we'll get close enough so we keep it unchanged at about plus 5%.
Moving to our key balance sheet indicators on Slide 7. All of them remain in excellent shape. Our loan-to-deposit ratio was right in the middle of its customer range of 85% to 90%. Asset quality continued to grow strong with MPL ratio staying at 2% flat, while the MPL coverage excluding collateral was unchanged at 97%.
The pro forma CET1 ratio including interim profit and the pro rata dividend deduction improved to just shy of 15%, while the liquidity coverage and net stable funding ratios remained almost stable. The leverage ratio at 6.6% remained among the best in the industry.
And with this, let's now have a look at the operating environment. I am on Slide 9 now. The economic forecast for ‘23 hardly changed since the second quarter. It's consensus that economic growth will be weak this year and that inflation has clearly peaked in all our markets. But it’s moderating most slowly than expected earlier and this in turn means that interest rates stay higher for longer.
Currency appreciation in countries like Hungary and Czech Republic supports improvement in external and fiscal balances. Labor markets are continuing to be tight somewhat slowing these inflationary trends. But at the end of the day, they are key for maintaining consumer demand and keeping asset quality strong. Looking into ’24, the economic picture in Central Eastern Europe should brighten.
Even though economists currently expect this to happen more moderately than they expected a couple of months ago. Inflation is expected to continue its downward trend, opening up a way for central banks to cut rates. And this together with better economic growth should support to return of tangible volume growth.
Talking about volume growth, and I am on Page 10. In the meantime, let's have a look at the latest trends in our retail business. As for housing loan demand, on an consolidated level, we are still pumping around the bottom with some bright spots in one of the other countries such as the Czech Republic, where new business volumes are up for the third quarter in a row, while Romania their new business volumes more than doubled quarter-on-quarter.
But we are talking about sustainable and visible growth trend it’s still premature. The situation is different with consumer loans and new business volumes remain healthy and are on an increasing trend, and that's more or less true for all geographies. On the liability side, our retail deposit base was broadly stable quarter-on-quarter, but as well as year-to-date.
As regards deposit passthrough and Stefan will be more detailed on this later. Retail passthrough rates are moving up, but moderately. So and customers while continuing to shift some overnight deposits into term and saving accounts and to investments, of course, still maintain the largest portion of their deposits in current accounts.
This notwithstanding, we continue to see strong growth into stock of security savings plans confirming the positive trend that started in the second half of ‘22.
Moving to the corporates and markets business on Page 11. Volume trends have been mixed, while all business lines in the corporate segment managed to grow their loan books, both year-on-year, as well as quarter-on-quarter. On the liability side, we saw diverging trends. Deposit volumes came down somewhat quarter-on-quarter. This is mainly driven by the usual volatility in the large corporate business, while year-over-year, they were slightly up. So, all in all, given the circumstances provide a good performance. The markets business also performed well. We were mandated in 204 pound transactions year-to-date and generated healthy income growth in both retail security sales and corporate treasury sales.
Our asset management business recorded a slight decline in assets under management to EUR73.9 billion, but this was mostly due to the market movements of setting positive net sales confirming that there is a growing fee opportunity in this business.
And with this, I want to hand it over to Stefan.
Stefan Dörfler
Good morning, everyone. Please follow me to Page 13 where I'll give you a couple of details in addition to the comments we already made on retail and corporate loan volumes. Overall loan growth within euro terms in Q3 have been somewhat higher if the Czeck Koruna - sorry hadn't depreciated by 2.5%. That also fully explains the quarter-on-quarter decline in the Czech Republic.
Slovakia and Croatia despite being members of the Eurozone, continued to post healthy growth rates with growth being well balanced among the retail and corporate segments. As bank groups enjoyed some uptick in corporate loan growth, the retail business still remains slow impacted by regulatory measures as well as higher interest rates.
Overall, we are very pleased that we can stick to our 2023 net loan growth guidance of roundabout 5%. As for deposits and I'm already on Page 14, we effectively have not seen any significant changes in trends in the past quarter. Our core deposit base, which includes our retail, SME, and savings banks business lines remained very stable.
The same can be said about the overall year-on-year developments. Obviously, large corporate deposits turned to be much more volatile and for Q3, this is well visible in the RT or the Austria and the Czech segments. The retail deposit mix also remained very favorable. Unsurprisingly. We have seen a further drift to our term in savings accounts still 56% of retail deposits are current accounts.
Overall, our consolidated customer deposits growth base grew by 1.4% year-on-year. So that we continue to be confident about the NII contribution of our deposit base going forward.
This brings me to Page 15 and the net interest income. We posted another strong quarter. In fact, Q3 2023 was the 8th consecutive quarter of sequential NII growth. Quarterly NI was up 20.2% from a year ago and up 3.9%, compared to Q2 2023 respectively. The key NII drivers were pretty much unchanged. We saw strong tailwinds from higher Eurozone key interest rates, particularly in our Austrian businesses, Erste Group Bank into savings banks.
Higher than expected long-term interest rates pushed up our bond income, supporting our future income given the duration of the investments. And last but not least, Willi mentioned it already loan growth also starts to help again. On the flip side, retail deposit passthrough rates edged up a little bit. In our key markets, Austria and Czech Republic we are now around or slightly above 20% mark, in Romania, closer to 25%.
In most other markets, retail deposit passthrough rates were still significantly lower. All in all, NII performance was strong enough to raise full year guidance once again. We now expect NII to grow in excess of 20% year-over-year.
Page 16 is our slide describing fee income development. Fees continued to perform very well. That's the bottom-line. They reached a new quarterly record, driven by higher income from payment services and better asset management fees. Accordingly, we increased our guidance for full year 2023 free growth of to greater than 5%, I would call it up a single digit from about 5%.
Looking forward, we are confident that fees will remain a major contributor to our revenue growth in future years.
Let's move to costs on Slide 17. All expected events till year end are making us confident that we achieve our full year guidance of 9% cost inflation. The quarter-on-quarter lower personnel expenses are attributable to higher expenses for employee share program in the second quarter of this year and lower long-term employee provisions. These effects are summing up to something like EUR24 million.
And obviously, the weaker Czech Koruna helped on the cost line in Q3. Looking beyond year end, we record substantially dropping inflation and in most of our CE countries, but certainly should slow down cost upgrades in 2024. However, please note that high 2023 inflation rates continue to have a significant impact on wage inflation while collective bargaining agreements and certain catch-up effects from a technical perspective.
Moving to Page 18 now, we are delivering the fourth quarterly record operating result in a row putting us on course for an excellent operating performance in 2023. Key drivers as already discussed, are revenue-driven, primarily rates related NII tailwinds, but also very strong fee performance and not to be forgotten significant positive turnaround in trading, and fair value contributions as we always communicated as our assumption for 2023.
And with this, over to Alexandra for all key infos on credit risk.
Alexandra Habeler-Drabek
Thank you, Stefan. And once again, good morning from Vienna. We are on Page 19 now. As Willi has already mentioned, credit risk continued to perform very well in the third quarter. The fact that we booked risk cost of 30 basis points is partially related to our regular FLI update, which led to some allocations as the macro outlook for the forecast period is slightly weaker, mainly for Austria.
In addition we ran parameter updates which also led to some bookings across the segments. In terms of – real defaults, we continue to see only a few. Year-to-date, this brings us to 8 basis points or EUR128 million of risk costs. As a result of this development, we confirm our risk guidance for 2023 of less than 10 basis points. And we are also confident that risk costs will stay at benign levels in 2024, as well.
Let's now have a look at asset quality on Page 20. As the risk costs we booked, as already mentioned where to a large extent related to parameter updates and only minor NPL inflows, neither the NPL ratio nor the NPL coverage changed quarter-on-quarter. In fact, both ratios are still very close to all-time best levels.
Looking towards year end 2023, we believe that the NPL ratio and coverage will not differ materially from where we are now. If you look at the stage split, there were no major changes. And as a reminder, the elevated stage 2 level is a direct result of portfolio overlays and FLI provisions, and not connected to asset quality issues.
The slight increase in stage 2 loans were actually slow quarter-on-quarter was mostly a result of the parameter updates already mentioned. So to cut the long story short, we continue to be in a very good shape when it comes to asset quality.
And with this, I hand back to Stefan.
Stefan Dörfler
Thanks very much. When he comes to other operating results, and with this, we are at Page 21. We register a strong result by historic standards with hardly any one of so far this year, and in particular in Q3. Quarter-on-quarter deterioration mostly attributable to partial reversal of resolution fund payments in Q2 2023. Maybe one forward-looking remark here, please expect somewhat more movements in this position in Q4 on the back of typical end of year revaluations and of course, then in Q1 2024, when the recovery and resolution contribution as well as bank levies will be booked.
All the discussed components lead to net profit, earnings per share and return on tangible equity as displayed on Page 22. The slight drop in quarter-on-quarter net profit is due to higher risk cost bookings as explained by Alexandra. We are very confident now to achieve the return on tangible equity target of greater than 15% for 2023, which represents an attractive premium on cost of capital.
Let's now move to some information on wholesale funding and capital starting on Page 24. Overall, wholesale funding will stable as debt securities increased while interbank deposits declined. The increase in debt securities was mainly attributable to increased end relations. I will talk about it in a minute in the form of senior preferred and non-preferred instruments.
The decline in interbank deposits was attributable to decline in TLTRO balance fully in line with the communicated schedule. What is certainly worth mentioning and is documented on Page 25 is the issuance of the EUR500 million AT1, which we were able to combine with a very successful tender for the outstanding AT1.
Two-thirds of the issued volume was the participation in that tender. Other than that, let me mention our benchmark issuances in 2023. We're tapping the market with two each EUR1 billion mortgage covered bonds, as well as with one EUR750 million and one EUR 500 hundred million senior preferred bonds. The private placement channel contributed strongly to the senior preferred segment and is expected to fill the remaining MREL needs in the second - let's say in the last quarter, there is a very little of.
I've talked about the local MREL activities in the Q2 call. On Page 26, you find the overview, which shows that we have complemented the portfolio of transactions in Q3 with a EUR500 million non-preferred senior insurance by ?eská spo?itelna and a EUR300 million green preferred senior issuance by Slovenská sporite??a.
Let me mention that we are very happy about those transactions. Transactions are showing the strengths of our local banks.
When looking at the charts for capital and RWAs on Page 27, please note that CET1 capital doesn't include the interim Q3 profit on this chart. RWAs are primarily driven by corporate business growth, but retail also contributed on the account of Sberbank integration in Czech Republic and volume growth in selected markets such as explained already by Willi on Slovakia, and Croatia to be named primarily.
Portfolio effects in the form of rating upgrades and improved collaterals mitigated the year-to-date RWA updrifts. All in all I can say, RWA development is very much in line with our expectation. This fact, combined with the excellent results allowed us to continuously build capital as you can see from the CET1 year-to-date waterfall on Page 28.
Our pro forma CET1 ratio, which includes profit for the first nine months and a 75% of annual dividend deduction has almost hit 15% and will likely grow from here. Setting the management target for CET1 officially to 15% as from year end 2023 is a reaction to higher regulatory capital requirements. And in the same moment reflects our communication line of recent quarters. Please see Page 38 for many details on these regulatory requirements.
Finally, a quick update on our current share buybacks. As of last Friday, we have repurchased almost six million shares and at current market prices, there is probably another three million to go in order to get close to the EUR300 million total value of the announced share buyback.
And with this, I turn it over to Willi for the outlook and conclusions.
Willi Cernko
Thanks, Stefan. I'm concluding this presentation with our fine tuned guidance for ‘23 on Page 30 and I am also happy to offer first games and how we see ‘24. I think there can be no doubt that we are in good shape otherwise, we would not have further upgraded key items of our ‘23 guidance. We now expect NII cost to exceed 20% in ‘23 and fee growth to be higher than 5%.
But obviously, being great now is not enough one also has to be confident about the future and I'm firmly believe that with a projection for return on intangible equity of about 15% for ‘24, we do not fall short in this respect.
Looking into ’24, we see continued revenue growth although attributable to growing fees, rather than growing NII. And on the latter, we also remain constructive mainly on account of continued loan growth and tailwinds from our bond portfolio, but we also acknowledge that interest rates will rather go down than up from here and deposit funding costs also skewed to the upside.
Cost inflation should moderate, compared to elevated ‘23 levels. And for this to happen, we will put in every effort to mitigate wage inflation as much as we can through efficiency measures. All in all, we expect the cost income ratio to deteriorate somewhat, but to put this into context from ‘23 level that will likely be a historic best by long shot and risk costs should also remain moderate for longer.
And with this, we should again produce a return on tangible equity of about 15% in ‘24 as already mentioned.
Ladies and gentlemen, thanks for your attention. Now we are ready to take your questions.
Question-And-Answer Session
Operator
[Operator Instructions]
Thank you. [Operator Instructions] We will now take our first question Mehmet Sevim at JP Morgan. Your line is open. Please go ahead.
Mehmet Sevim
Good morning. Thanks very much for the presentation and congratulations. I have three questions please. So first of all loan growth into the yearend. Your guidance of 5% growth still looks quite ambitious, taking into account the nine month delivery, I think, which is just 2%. So for the fourth quarter alone, this would imply some 3% growth. And my question is therefore, are you seeing a stronger pipeline specifically for the fourth quarter? Or is that be underlying improvement in transit you also mentioned during the presentation? And maybe that would also extend into 2024.
And my second question is on the higher capital requirement previously you’re already communicating 14% threshold for capital that will be excess in your eyes and eligible for distribution despite the 13.5% capital target. So can I ask, is this now remaining the same? So 14% is in line with the 14% new management target? Or would that also go up with the new management target of 14%?
And finally, on M&A, if I may, how's your appetite and colon changed now that the politics basically looks to be moving back towards the doxy and now the big impediment to get involved it looks like it is going away. Thanks very much.
Willi Cernko
Okay, Mehmet. I may start with the first question. You were referring to the loan growth. Yes, 5% is pretty ambitious. But we see significant drawings during the course of the fourth quarter. So my expectation is to come close to 5% year end. And I would say it's also the level we see for ’24. Adding to that, the third question you raised when it comes to M&A, Poland. You know we have a clear set of priorities when it comes to surplus capital. It starts always with organic growth than to stick to our payout ratio 40% to 50%. And then, whenever there is an opportunity in our core markets to look for M&A, but also share buybacks, we would not exclude for the upcoming years. Poland has, - we're always looking at Poland, investment opportunities, but there are a couple of prerequisites I want to address.
The first one is, we're just interested in a strategic investment. We're not looking for a financial investment. Secondly, it has to be a significant M&A transaction and it has to fit to our business model. So, in case there is something on the market, we will have a closer look on that, but there is nothing that is currently underway.
Willi Cernko
And I'm complementing your question portfolio, Mehmet with the question on capital. Thanks very much for raising it. Also that concretely in my answer can be very short. No, that means the definition of excess capital remains unchanged. There's nothing more to it. Thank you.
Mehmet Sevim
Very helpful. Thanks very much.
Operator
Thank you. We will now take our next question from Benoit Petrarque at Kepler. Your line is open. Please go ahead.
Benoit Petrarque
Yes. Good morning. Yeah, three questions on my side. So the first one will be on the return on tangible target of 15% for ‘2024. I think this is an implicit of roughly EUR2.6 billion net profits You talked about the cost of risk last quarter at around 20, 25 BPS for ‘24.
I was wondering if that changed and also looking maybe on the revenue side, so EUR2.6 billion level will imply probably roughly stable NII, probably higher fees for 2024. Is that something you have in mind? So could you maybe without providing too much details on individual PN lines, maybe you just update us on the main revenue and also maybe cost items?
On the capital side, So 14% excess capital threshold reconfirms. I assume you will end up share buyback at around Christmas. Are you in a position to put another round of share buyback, say, close to year end, or early next year? Do you have already kind of ECB approval for that?
And then, the last question will be on the, on the NII. So you continued to shift from current accounts into savings and term deposits. Carry the mix is still very positive with a fair amount of current accounts still. Or do see that moving in the coming quarters and also in 2024, do you expect a more significant shift out of current accounts? Thank you very much.
Willi Cernko
I take the liberty in order to take your very first question. Well, I think you described it qualitatively very well. These are about the components we need to get to what we are indicating for 2024. Maybe let me just on behalf of Alexandra, I'm looking over and I am happy for her to comment a little bit more in detail. The outlook for risk cost for 2024 are little bit better these days looking at the older developments than these 25 basis points that you were talking about, nothing concrete that we would say at this point in time, but it will probably in our assumptions and in our budgeting will be slightly lower.
On the other components, you're perfectly right. NII will not be this dramatic positive driver anymore. We have been talking about this plateauing a couple of times. As you know, we are very positive on this still that we can sort of say substitute step-by-step the tailwind from interest rates by good loan growth. Again, Willi has been answering the loan growth question just before.
And yes, we are very confident on fees and then we need to manage costs in a way that we can, we can land where you are indicating. So that's pretty a much good description of what it requires to get to a 15% round about return on tangible equity in 2024. So nothing to add on that end. And maybe, Willi, if I may, I also take the current account to term deposit shifts.
Look, we are experiencing these weeks and these months a stronger move, a stronger shift in your area, in particular in Austria. This is something which is exactly as expected. Since people start realizing on the one hand there are better rates offered when they go for a one or two year savings book or savings account.
But what we see and this is the great advantage of our business model. While the mix is maybe slightly deteriorating on the interest rate front in Austria in the same moment, it's step-by-step improving now. For example, in another very important market Czech Republic, where we had the hard times in 2022 and end of 2022 and end up until summer 2023.
Here we see improvements and I expect clearly an improvement also throughout the year 2024. So I think it’s all about the total, total mix and all the components which I am – in the interest of your time not going through all of them. For example, in investment focus going to be supported. I am sure that that loan growth was slightly rates coming down in Czech Republic will be stronger.
And all these things together will lead to a total, total NII expectation that is still very supportive for our total returns. And I think the share buyback question, Willi you take up.
Willi Cernko
In respects of additional share buybacks, our approach is to take one step after another. So, our focus is first to complete the current share buyback and then decide about a possible second round in ‘24. If we look and I mentioned it already at capital allocation in more general terms than our priority order is still unchanged.
That means hunting gross funding of organic growth being a regular dividend within our target payout range of 40% to 50%. Looking at acquisition opportunities and finally considering share buybacks. This is the way we look at it. And I think, wait what is coming up in ‘24?
Benoit Petrarque
Great. Thank you very much.
Operator
Thank you. We will now move on to our next question from Mate Nemes at UBS. Your line is open. Please go ahead.
Mate Nemes
Hi, good morning, and thank you for the presentation. I have three questions please. The first one is on corporate loans or corporate lending. Could you give us a sense of the type of for lending that as you're doing these days? Are these primarily kind of shorter term loans? Or you are seeing perhaps somewhat longer duration investment type of loans as well?
And also I am just wondering what is your expectation going into 2024 given some concerns perhaps around the macro environment in Germany and in the region?
The second question would be on the potential introduction of retail government bonds. I was just wondering if you could give us some of your thoughts regarding potential impact on deposit flows and maybe deposit passthrough rates? How would that impact your business in Austria?
And a last question would be on NII. I wanted to zoom in a little bit on the 2024 NII outlook. And I was wondering if you could give us some sense of the tailwinds you're expecting from your bond portfolio into 2024. That would be the third question. Thank you.
Stefan Dörfler
So let me start with corporate lending. There are two - let's say sources. The first one is, yes, we're happy to say investment loans. This has a lot to do with transformation of the economy. Everything that is related to green deal related activities. And secondly, it's more working capital needed. Simply, it is slightly picking up. So there is much more positive than sometimes we follow the media.
So there are some really positive things we are quite confident that this keeps running as expected.
Willi Cernko
On your question regarding retail government bonds and I would assume and you correct me if I'm totally wrong and the fact that you are referring a little bit to the Dutch example - and the Belgium example, sorry, which was quite interesting to watch. Look, we have a little bit of experience with this in Hungary and Croatia and also in Austria.
There were a couple of - so to say activities from the issuer. Nothing spectacular on our end. We are very good, very good contact also with the issuer and then the respective perspective financing agencies and this is nothing that we expect to have a major impact on deposits, overall and in particular not on Erste and Erste quality.
The other question, NII outlook and here especially the investment book that you were referring to. Maybe let me first mention that the tailwinds, and I was referring myself to bonds before. Of course, also helps on the repricing of fixed loans. Let me just gave you the example of Slovakia where the typical average duration of the repricing of mortgage bonds is somewhere between three and five years, which means that step-by-step, we see a good repricing on the fixed asset.
I'm sure you have been observing that we didn't have this wild increase of NII in Slovakia on the one hand these days or this year. On the other hand, we see a very positive outlook there on the repricing going forward. So, that's, that's in terms of qualitative description.
In concrete numbers, we see about EUR20 billion of total assets repricing every year, which would result in a very nice, let's say EUR400 plus million positive impact, of course at current levels, which are not going to be the same throughout the years 2024, 2025 against this, of course, is the repricing of the deposit base. And all of that builds into our total assumption of NII. Thank you.
Mate Nemes
Thank you very much.
Operator
Thank you. Well I'll take our next question from Riccardo Rovere at Mediobanca. Your line is open. Please go ahead.
Riccardo Rovere
Thank you. Thank you very much for taking my questions. Three if I may. The first one is on the 15% indication of return on tangible equity for ‘24. Does this rely on recalibrating the common equity tier 1 ratio close to 14%? Or is it assumed to remain, say, like, it is today somehow 100 basis point ahead of that level – above the level?
The second question I have is on, deposit betas in Austria. In Czech Republic, since – ready started plus going around 7%, at least the data from the National Bank in Czech Republic shows no material deterioration for the deposit beta, it’s like the stock – right the once the stock rate to start going up. Is it something that you think might eventually happen in Austria and Slovakia and Croatia eventually too?
And then, the third question I have is on the digital euro. The ECB decided to go ahead with the project. Do you see challenges opportunities or do you plan any particular investment on the back of these over the next few years? Thank you.
Stefan Dörfler
Ricardo, thanks very much. And I mean, it’s for the very first question and the answer is very simple. We always talk about the actual real tangible equity. Not something which is in a perspective or what something might be a target. I understand that some others have been adapting the communication there. No, the answer is not about the 14, whatever it's always the real tangible equity that we also use for all the other calculations that we are referring to when we talk about the return. Very simple. Very clear.
Riccardo Rovere
Stefan, sorry to interrupt you. Sorry to interrupt you. Today, the equity base of the bank is compatible with above – roughly okay 100 basis point above 14. The question here was, this buffer of 100 basis point is it supposed to go away. So to say, common equity tier 1 ratio in 2024 being closer to 14%, rather than 15%. You see what I mean. So the equity base it would basically go down.
Stefan Dörfler
I hear what you mean, like this is a completely different discussion whether it will be at whatever point in time in ’24, ‘25 at 14.2% or 15.2% or whatsoever. That's a separate discussion. Your question was about whether or not we are a calculating our assumed return on tangible equity on the real tangible equity or any kind of, so to say management target. That was my answer that we are always referring to the actual and on the balance sheet registered tangible equity and not some fantasy number or whatsoever.
That's the one thing. The other question is a separate question. And I think Willi has been referring to that in terms of the use of the capital already and it can be one quarter little bit higher quarter little bit lower, but it's always the same reference we take in the sense of calculation methodology.
Riccardo Rovere
Okay, okay, that’s clear.
Stefan Dörfler
Good. On the - I can be sure on the deposit based look, it's difficult to predict, to be honest. Yeah, we expect the bit more in Austria as the CE deposits are more granular. That's one very important factor that, of course, the average depositor in - let's say, I don't know what the Romania holds much, much less actual money on his account, than an Austrian would have.
That's a certain indication that the passthrough at the end of the cycle might be a little bit higher. But honestly speaking, it's relatively difficult to predict, because you will agree that this mix of, let me say very much ample liquidity in the system on the one hand sharply rising interest rates in a generation where, let's say half of the population hasn't seen interest rates ever during themselves holding some money on the accounts.
It's relatively difficult to predict and we learn months-by-months. And honestly speaking, my assumption would be Australia little bit more than in countries, but nothing that would go way beyond about what we saw in Czech Republic. That's my personal assumption on this one.
Willi Cernko
Just briefly on digital euro. There are no particular investments plans for the time being. I think I think we're all aware now we enter into a phase of a political debate. Let's see what are the potential outcomes. But for the time being, there are no investments planned.
Riccardo Rovere
Thanks. Thank you very much.
Operator
And we will now take our next question from Johannes Thormann at HSBC. Your line is open. Please go ahead.
Johannes Thormann
Good morning everybody, it's three questions on my side, as well. It’s Johannes Thormann, HSBC. First of all on your savings plans and this increase every quarter, which is probably different to patterns we see in other markets. What is driving this sound success? And how much does it boosts your AUM inflows? Can you provide some more color on it?
Secondly, on the banking taxes, how do you see this progressing in Austria? Could you expect that politics go back to higher levels like we've seen some, in ‘16 or ’15 in 2015? And then also about Slovakia and Czech Republic, what is the state there?
And last but not least, on your cost of risk in ‘23 and ’24, less about the basis points, but the overall risk picture, we have still EUR900 million risk buffer on your balance sheet. And Alexandra said before, 20% maybe used this year and 80% taking into the next years. Is still is a fair assumption? Or should we expected EUR180 million to be booked in Q4 as because you can't take everything into ‘24 or will this - is changing now that you can take every focusing in ‘24, or is this is something coming in ‘24? Thank you very much.
Alexandra Habeler-Drabek
I will start, maybe immediately.
Willi Cernko
Yeah, yeah.
Alexandra Habeler-Drabek
With the third question. So cost of risk, you mentioned EUR900 million. When we take into account, what we booked in Q3 with a small increase on FLI, and also overlays we would even now arrive at EUR940 million. Out of this EUR940 million, and you all know in this macro and geopolitical environment, especially FLI is very hard to tell.
However, we plan or expect for this year that we will release roughly EUR100 million of this crisis related sales in ‘23. So, out of EUR940 million roughly EUR100 million. And next year, we expect another partial release of overlays and also a partial release of the FLI provisions in the amount of EUR250 million. Yeah, so, this is our current expectation.
Stefan Dörfler
Okay, let me come back to the first question savings plans. We have now more than EUR1.1 million savings plans issued. This is a payment, a regular payment, a regular savings on a monthly basis. On average, when we look at Austria, we are talking about EUR200 per month, when we talk at CE countries, then we talk about €100 per month.
So this is something that is a very sustainable, a very steady growing business. We are benefiting more and more from that initiative we have launched a couple of years ago. When it comes to the bank levy related question, Austria for the time, being nothing to be expected. But you never know what's going in your neighborhood. There is always a lot of learnings around. No, for the time being in Austria, nothing to be expected.
Johannes Thormann
Sorry if I follow-up. First of all, what is driving the easy continued uplift in savings plans now whereas in other countries people tend to cut on saving and then rather keep the money for other things and are less committed to entering because the number is increasing every quarter?
Stefan Dörfler
It's a question of penetration at the end of the day and I think it's a - in Austria, at least it is well known and well as established regular savings on a monthly basis. This long-term perspective, I wish I'd never forget on average, let's keep aside now the pandemic, but in Austria, normally the savings rates - the savings ratio of Austrian households is always around 8%.
In the - during pandemic, we went up to 14%. So there is, let's say, there is the necessary prerequisites given for such an initiative. And this is now also implemented and hold out in the CE countries and it works.
Johannes Thormann
Thank you.
Operator
Thank you. We will now take our next question from Gabor Kemeny at Autonomous Research. Your line is open. Please go ahead.
Gabor Kemeny
Yes, hi. A few short follow-up questions for me please. Firstly on the increasing the increasing capital hurdle to 14%, I guess, what drove this? I mean we knew the OSII buffer increase and countercyclical buffer increase, at least starting of the year and the Q2 stage. So, yeah, has it increased countercyclical buffer requirement expectations for next year or something else?
Secondly, on the buybacks, I think current consensus expectation is around EUR700 million, EUR800 million euros for next year. Can you perhaps comment if this is a reasonable expectation? And then, thirdly, on be the NII sensitivity to falling interest rates. If you could comment on that, please? I think it would be really useful if you could speak the CE rate sensitivity and then, including the Eurozone rates? Thank you.
Stefan Dörfler
All right, Gabor. First the increase I think I described. It's quite substantial overall increase over the last four quarters and going into 2024 that we simply reflect in our official targets. That's it. Nothing more or less behind it. On the NII sensitivities, let me let me distinguish here, because as you very well know, we have been reacting and also positioning ourselves to the extent of course, we could sense the market moves in the different currencies to the different directions. And we have, we have now a positioning that would whether that a better bank in CE in parts where we expect in the year 2024 rate cuts, we would benefit from those.
In particular, this is true for the Czech Republic. There, well, everyone - it's everyone's guess when the first rate cut will happen. You know that the Polish Central Bank was the first mover there. And there were speculations about Czech National Bank to move in November, December or January.
Frankly speaking, for the full year 2024, that's not so important as the magnitude of those cuts will be and we are positioned for lower rates in Czech Republic that I mentioned, I cannot specify you in very much detail, because we don't, we don't know how the shape of the curve will develop. But it's, of course, given the size of the bank it's quite significant.
On the other hand, in Euro land, we are still definitely positioned for remaining - rates remaining at this level or even slightly increasing further for let's say the next two to three quarters. Our opinion is that EZ piece either finished or will do another step. But the long end of the curve has shown that we see quite a stickiness in the higher rates.
That's why we don't believe that the euro rates will fall sharply in the next - let's say two quarters. And that's also our position. So all in all, we are positioned neutrally to slightly for lower rates in CE and we are positioned for remaining or still slightly higher rates in Euro Land. And that's the bottom line. It is fully reflected in our assumptions for the budgeting and our targets that we have communicated today.
Willi Cernko
Gabor, when it comes to share buyback, to be honest I can just refer to my statement they already made that means we want to first complete the current share buyback. And then decide about the pass of second round in ’24. If we look at capital allocation in more general terms, then our priority order is unchanged something organic growth, paying regular dividend within our target payout range of 14% to 15%; looking at acquisition opportunities and finally, considering share buybacks.That’s the way we look at it.
Gabor Kemeny
Okay. Thank you. Just a small follow-up on the rate sensitivity please, Stefan. Is the EUR200 million, EUR300 million sensitivity to 100 basis points you mentioned on the previous call is still valid?
Willi Cernko
That's still pretty okay for Euro lands, but we will certainly start to adjust to, let me say lower sensitivity when we feel the cycle of ECP rate hiking is coming to an end. So at the moment, yes, it’s still a very, very good assumption for the range, but I will definitely give you a little bit of a different message then going further in the year assuming that the current assumption of the ECP, so to say cycle that the market has a materializes.
Gabor Kemeny
Got it. Thank you.
Operator
Thank you. We will now take our next question from Hugo Cruz at KBW. Your line is open. Please go ahead.
Hugo Cruz
Hi, thank you. Just a couple of follow-up questions. One on loan growth for us next year. Do you expect to see more growth on the retail or the corporate sites? And in each country do you expect to see more loan growth? And then on the OpEx growth for next year, as well, can you be a bit more firm on what kind of growth you expect there? Thank you.
Willi Cernko
When it comes to loan growth in ;24, the way we look at it, we see in both segments a positive loan growth. When it comes to retail business, with housing loans is picking up. We see first positive results in a couple of countries. In more or less countries we see a very promising growth in consumer loans. When it comes to corporate, I already mentioned it.
It has a lot to do with Green deal with transformation of the economy especially those were more exposed to all those items. Therefore to start investing in new technology, new procedures, production procedures, and also working capital facilities are more than ever used. So, we see a positive environment for a positive loan growth in both key segments in all countries.
Stefan Dörfler
With regards to our expectations on costs, let me first repeat what I've said on a couple of calls already and this is very important also for - so to say, building into your models on 2024 expectations. The Austrian logic very much compared to the German one is based on collective bargaining and collective agreements, which are always following an average of a preceding period, which means that even if inflation rates CPI falls to - let's say give me a number 4% until April or whatsoever, the reference rate that they are referring to is the average of 2023, which we expect to be somewhere slightly north of 7%.
This was helping us in the years ‘22 or so where still the basis for negotiation was a lower interest rate. Sorry, a lower inflation rate and while already the blended inflation rate was higher. So, that's going against us. On the flip side, of course, we see the different reaction in CE where we had significant wage inflation in 2022 already and again in ’23.
Here the wage inflation pressure is significantly easing now. Labor markets still strong, but we have - we are expecting much less there. That's the barrack story and I give you a number, a rough estimate in a minute.
Second, the fact is that we are investing into our future. We have been really beefing up and I think Willi was describing what's going on, on the, on the retail front also in corporate front all these activities, especially into our digital footprint are coming along with significant IT investments. We've been talking about that. We are absolutely committed to also in the future undertake these investments because they are paying back substantially in our top-line.
Having said this, all in all, we - I don't give you a exact number, but we are making up for about one-third of the say, the blended inflation by efficiency measures, but definitely, we expect something like 5% plus also in the year 2024 for total OpEx, everything else is unrealistic as from today’s perspective and that's, of course built in our total operating - so to say performance assumptions. I hope this was helpful. Thank you.
Hugo Cruz
Very helpful. Thank you.
Operator
Thank you. We will have a follow-up question again from Riccardo Rovere at Mediobanca. Your line is open. Please go ahead.
Riccardo Rovere
Hello, thanks for taking a couple of follow-ups if I may. The first one is the risk-weighted assets that 2024 and maybe with – should we expect that anything particular that should make other vehicles deviating from whatever will be the low growth in the bank? And can you please remind us what is, if any the expected impact of BASEL 4 especially at the beginning of the phasing period, so start of ’25?
The second question I have is for Alexandra. I'm not sure I understood it correctly. I got that you expected to use to EUR250 million of FLI in 2024, which would mean that those FLIs will be captively, partially also going into 2025. I'm not sure I understood correctly.
And the last question I have is maybe on NII number. It’s been rather volatile. I was just wondering what could be demand rate we have seen in this quarter, could be a decent runrate for the future? Thanks.
Alexandra Habeler-Drabek
I would start with your second question. Yes, you understood correctly. So, after a small partial release until year end and another partial release of the EUR250 million that you have rightly mentioned, we expect to take forward another part in ’25. I think developments also that you political ones of the recent weeks have proven us right to keep this very, very prudent level of crisis-related overlays.
And please also not, not forget there is always some base on FLIs. Yes, so you will always have some stock of FLI overlays, but overall, yes, you're right. You understood right what you have repeated. The second on RWA in 2024. So let's start with ‘23. So in Q4 ‘23, we expect total RWA to remain headline stable.
We expect credit risk WA to be driven by slow business still by business growth and somehow offset by our regular currency measures that we are applying for fully quality. We also expect to remain relatively stable for this year.
In ‘24, the expected RWA development is not very spectacular. So nothing special to mention. It will be driven by some portfolio deterioration, partially offset also but modeling parameter effects. And of course, also business growth.
Basel 4, I can, I can confidently repeat that we expect an overall neutral to even slightly positive impact out of Basal 4. So nothing has changed on this assessment.
Willi Cernko
NII Hungary, if you allow me to make the disclaimer that in Hungary, always something spectacular can happen as we saw in the last couple of years, always with the add-on that we have been managing to a total both operating and net results which was very favorable. We expect a pretty much stable NII and 2024 is expected to be comparable to 2023.
So, we are talking about EUR350 million to EUR 380 million in euro terms that you have an absolute amount as well.
Riccardo Rovere
Thank you very much. Very clear. Thanks.
Operator
We will now take our next question from Simon Nellis at Citibank. Your line is open. Please go ahead.
Simon Nellis
Well, thanks very much. I may have missed it. But you said that you're not expecting any special taxes in Austria, at least at present. But what about Slovakia? I think they were talking about that if you could give us an update there? And also what level of windfall profit tax, do you expect to pay next year in Hungary? And then my last question would be, maybe if you could just provide also some color on the other division NII, because it's also been quite volatile. And if there is any sensitivity what should we be looking forward to kind of forecast other division NII? Thank you.
Willi Cernko
I want to start with the bank taxes. Austria, as already mentioned, nothing to be expected for the time being. Slovakia, still unknown. Yes, there was a statement made by the new Prime Minister that he intends to introduce a bank levy at what level, still unknown. Let's see what is expected. And Hungary, it is still unchanged also for ’24.
Simon Nellis
Interchange. And I think you can purchase securities, right, to reduce the impact?
Willi Cernko
Yeah. Everything is unchanged in Hungary, for the time being.
Stefan Dörfler
Yes, that would have been also my - just checking. We don't expect or we had, have no signs in the moment of any changes on bank levies in Hungary. Maybe let me let me mention to complete the picture, one other country where we have already kind of good indication what is, so to say tax environment, this is Romania. There we don't talk about an explicit bank levy or windfall tax or whatsoever.
There's an adjustment in the in the overall corporate taxation. That's my understanding and it's relatively minor on a group level. We talk about short of EUR35 million to EUR40 million impact for the full year 2024. Confirmation is yet due in the political decision-making process. But that's that sort of surrounding of the picture.
And I think Willi has committed already on the other countries that are sort of say in the focus in the moment. Czech Republic, just to complete this picture as well, nothing is expected for, for this year and no signs for ‘24 at this point in time either.
The other question was on other divisions and can you specify please once more? Do you talk about the Austrian other or what do you mean?
Simon Nellis
No the – I guess, other division. Sort of the corporate center, the NII is quite volatile, as well. If you could just give us or unpack what's driving that?
Stefan Dörfler
Now I got you. Sorry for my lack of understanding at the first place. Yes, this is the corporate center, no whatsoever major trends. It's a residual, like allocation from other segments. Logically, when rates are very quickly moving and the fund transfer pricing for the operating business segments like retail markets and corporates are, of course, adjusted to the markets conditions, there is always a bigger residual allocation to the corporate center, but no trends whatsoever.
I personally expect it to come down from this year’s levels, obviously, because the residual booking on the back of the sharp moves was relatively high and elevated this year. But again, no trends that I would be able to name here.
Simon Nellis
Okay. Thank you very much.
Operator
Thank you. We will now take our next question from Shane Mathews at WhiteOak Capital. Your line is open. Please go ahead.
Shane Mathews
Thank you for the opportunity. And congrats on the great set of results. Two questions from my end. One, on the stage two loans, it's in step little to 20%. I understand that a large part of it is due to FLI updates macro assumptions, et cetera. But can you give us a better sense of how much would be performing, how much of the sub-standard NPL as to have a more clear picture of the stage 2 mix?
And second question on Czech margins. Czech margins have been seeing some improvement in the past two quarters. How do you expect this to continue? And what are being the major drivers, higher loan growth, more repricing on the loan front?
Alexandra Habeler-Drabek
I will start with the stage 2. So overall the full stage 2 of course is performing. So the non-performing part you have in stage 3. So stage 2 is performing and as you rightly also indicated that really a very, very large extent of this stage 2 share and the reason for the high stage 2 share is due to or related to our stage 2 overlays that we have been applying now for quite some time as since in fact, since the COVID crisis. ]
Maybe also to add - to give some flavor on the outlook. For yearend, we would expect a decreasing trend in stage 2. So being around 17% in the similar trend of a slight decrease, we expect for ‘24. So, the current number of 19.6 we would consider simply.
Stefan Dörfler
Yeah, and let me take you your question on Czech margins. Now, if you if you look at the net interest margin development and the quarterly change most, pretty much everything in this small deterioration is due to a fix moving this in this quarter. And I personally expect the net interest margins in Czech Republic to stabilize, at least, at these levels now since we certainly have seen a very sharp drop here. And at the end of the day, it depends on the rate environment. It's a little bit hard to predict quarter-by-quarter.
But overall, I'm very constructive on the on the Czech market and the combination of volume development and stabilizing that interest margin should give us a good medium term outlook on NII in Czech Republic.
Shane Mathews
Got it. Thank you.
Operator
Thank you. We will now take our next question from Alan Webborn at Société Générale. Your line is open. Please go ahead.
Alan Webborn
Hi and thanks for taking my questions. In terms of the breakup of fee income in Q3, I mean, clearly, you highlighted payments services and securities have been both doing very well. I mean, is there much seasonality in those two areas or I mean do you think the sort of run rate that you saw in the third quarter is something that you can run with going ahead because clearly they are very good numbers.
So I want to - what you felt about that? And in general, in the payment services, easy sort of new the retail customers not that active. So what's actually generating the activity there? That would be that would be helpful.
And the second question was on the debate on minimum reserve requirements. So there have been couple of changes there in the Czech Republic more very expected to and what was your view on that? And how important is that for you in particular should the ECB change what they are doing at the moment? Thanks.
Stefan Dörfler
All right, Alan. Fee income, I think there is especially for this quarter, not too much of seasonality. There is always around the year end, if there are premiums of achieved volumes and so on, there is a little bit more of booking that direction. But, but not so much in Q3. What’s certainly has been driving our our dynamics is a flip side of the costs. So there are a couple of services which are indexed. There are a certain payments services which are indexed. But I think you should see that also in the industry. But it's much better in the translation to real P&L in our case since we are combining it with good volume developments, especially in CE.
Going forward, we are accounting on the on the full diversity of our fee income, structure. And Willi has already been describing that that we are re-accounting on a I would say, constructive macro outlook. Not fantastic, But I would say, reasonably positive and definitely a better performance of our country as compared to Euro land, which should give you so to say this edge that we can outperform, let's say peers or those who are only acting in Western European countries on fee income.
Q4, Q1, you will see one of the other seasonal fee booking, which I will then describe. So, thanks for the question.
Minimum reserve requirements, yeah, very interesting discussion that we see here across all jurisdictions in the ECP as well as in other central banks. I give you the hot numbers first and then one sentence of my opinion. The hot numbers are that, in the year 2023, the impact will only be in Q4. Obviously, on the Czech side, it will be EUR18 million on NII and on the Euroland side EUR16 million. So it’s heading up to a total of EUR34 million, which is simply the adjustment of the minimum reserve. So to say technicalities in Q4.
Assuming that all the rates remain the same which we don't assume for next year that would add up to something like EUR120 million EUR130 million in 2024. I don't expect this to be the case, simply because Czech rates will probably in average be lower. On Euroland, it's it's your call about what you think about it. Here we are definitely expecting a negative impact from minimum reserves so to say regime that has been introduced.
Do we see measures of comparable? So to say, kind in the other currencies, not really. Hungry has been a completely different regime in the past. The other countries are part of the Eurozone with the exception of Romania. And Romania I am not aware of any kind of such discussion. And if you allow me, I will not comment politically on the thinking of the Central Bankers in that that respect. There are others to comment. Thank you.
Alan Webborn
Thanks.
Operator
Thank you. We will take our next question from Olga Veselova at Bank of America. Your line is open. Please go ahead.
Olga Veselova
Well, thank you. I have two questions today. First question is, what part of your corporate loans have fixed versus floating interest rates? And if you could give it separately for Austria and Czech Republic, that would be great. And my second question is about Hungary. Hungary recommended banks to reduce a cap on new interest - on new mortgages – capital interest rates on new mortgages.
Do you follow this recommendation if it's not mandatory or correct me if it is? And what do you think about the old cap? Do you think it will be increased or it will be extended in its current form? Thank you.
Stefan Dörfler
I'm not exactly sure. Looking also at Alexandra and Willi. What - do you mean the overall mix of fixed and floating or any particular ones?
Olga Veselova
Oh, corporate loans. Do you have fixed versus floating?
Stefan Dörfler
Corporate loans are 80% plus floating. Yeah.
Olga Veselova
Great. Thank you.
Stefan Dörfler
And the second one was, do we follow so to say the rules of the game in Hungary? Well yes, we do because otherwise we wouldn't do business there. So, I don't know whether this was exactly the question. So can you also repeat this Hungarian question once more?
Olga Veselova
Yeah. So, I guess, the interest rate cap on new mortgages was a recommendation. It wasn't a legislation. If it was the case, so correct me if I'm wrong. Do you follow this recommendation or maybe it's mandatory? And also on the old cap, which was introduced quite a while ago, do you think it will remain in tactical be expanded or the level of cap will be increased?
Stefan Dörfler
Yes. So on your question, where we follow - a very short answer, yes, we follow it.
Olga Veselova
Thank you.
Operator
Thank you. We will now take our last question from Jovan Sikimic at RBI Raiffeisen. Please go ahead.
Jovan Sikimic
Good morning. Thanks a lot for the call. I think you had somewhere – you have stated somewhere in the presentation about healthy demand in commercial release date business. Can you maybe just add a bit of details or insights which really loan types are here standing out? And which markets are let's say more robust than then the others?
And also maybe if you give a - spend over on residential real estate current situation on CE and Austria? Thanks a lot.
Alexandra Habeler-Drabek
So I will take this question also start by confirming that overall our commercial real estate portfolio is really very sound. And as you rightly said, also is a source of loan growth. What we are observing is that it's currently more - the usage of already committed lines. Also some refinancings of fully rented and really very high quality assets.
It's currently less on development of new projects. This is a situation, which I think we are all very much aware and we expect that this should improve and accelerate again in the upcoming periods.
To your question on regions, so, it's quite across the board. In our region, we have commercial real estate business, also new business in Austria, in Romania, but also Hungary and Czech Republic rather little in Slovakia. Slovakia, the share of commercial real estate is very low and we stick to our core regions
Residential real estate, we have an extremely high share of the non-profit housing associations as you are aware. So overall, the mix, the resilience of the portfolio, the high collateralization and the low LTVs nothing has changed from previous quarters.
Jovan Sikimic
Okay. I appreciate your answers. Thank you.
Operator
Thank you. There are no further questions in queue. I will allow hand it back to Willi Cernko for closing remarks. Thank you.
Willi Cernko
Thank you very much for joining our conference call. And I should not forget to mention to invite you to our full year preliminary results ‘23 on 29th of February 2024. Thank you for joining. Have a nice day.
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Erste Group Bank AG (EBKOF) Q3 2023 Earnings Call Transcript