BAWAG Group has delivered a robust financial performance in the first quarter of 2024, with a net profit of €167 million, marking a 20% increase year-over-year. The company, which trades under the ticker BAWG.VI, also reported a substantial return on tangible common equity of 24% and a solid earnings per share of €2.11.
Highlighting its financial stability, BAWAG Group boasts a low non-performing loan (NPL) ratio of 1% and maintains a strong CET1 ratio of 15.6%. Looking ahead, the company is set to focus on retail and SME businesses within the DACH/NL region and has earmarked its excess capital of €623 million for strategic M&A opportunities, including the acquisition of Knab Bank.
Key Takeaways
- BAWAG Group's Q1 net profit rose to €167 million, a 20% increase year-over-year.
- Earnings per share stood at €2.11, with a return on tangible common equity of 24%.
- Pre-provision profits were reported at €258 million and the cost-income ratio remained low at 33%.
- The CET1 ratio was a robust 15.6%, with excess capital at €623 million, signaling strong financial health.
- The company plans to utilize excess capital for strategic mergers and acquisitions, including the purchase of Knab Bank.
- BAWAG Group is focusing on retail and SME sectors in the DACH/NL region, with expected static to modest loan growth.
- The company reconfirmed its 2024 outlook, targeting a profit before tax of over €920 million and maintaining a cost to income ratio under 34%.
Company Outlook
- BAWAG Group anticipates static to modest customer loan growth and aims to concentrate on retail and SME businesses in the DACH/NL region.
- The company has reaffirmed its 2024 financial targets, including a profit before tax exceeding €920 million and a return on tangible common equity over 20%.
- BAWAG Group expects its cost to income ratio to remain under 34% and is targeting core revenue growth of 1%.
Bearish Highlights
- Customer deposits decreased by 3% in Q1, though average deposits increased by 1%.
- The real estate portfolio saw a 2% reduction quarter-over-quarter, primarily due to a decrease in the US office portfolio.
Bullish Highlights
- Core revenues increased by 7% year-over-year.
- The retail and SME business segment reported a 14% increase in net profit, reaching €134 million.
- The corporates, real estate, and public sector business segment saw a net profit of €39 million, up 5% from the previous year.
Misses
- Risk costs were stable at €30 million, consistent with the previous quarter, but the company indicates a review of the management overlay might occur in 2024.
Q&A Highlights
- Management discussed the disciplined approach to lending and the stability of deposits in Austria, expecting the trend to continue with the introduction of treasury savings options.
- The company noted that the peak in net interest margin has likely been reached and expects it to remain stable.
- Details on the acquisition of Knab Bank were provided, with the closing expected in the fourth quarter.
In conclusion, BAWAG Group has started the year on a strong note with positive financial results and strategic plans for growth through mergers and acquisitions. The company's disciplined approach to lending and proactive management of its portfolio underscore its commitment to maintaining financial health and delivering value to its stakeholders.
Full transcript - None (BWAGF) Q1 2024:
Operator: Good day, and thank you for standing by. Welcome to the BAWAG Group Q1 2024 Results Conference call. At this time, all participants are in a listen-only mode. [Operator instructions]. Please be advised that today's conference is being recorded. A transcript will be published on the company's website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk. Please go ahead.
Anas Abuzaakouk: Thank you, Operator. I hope everyone is keeping well this morning. I'm joined by Enver, our CFO. Let us start with the summary of the first quarter results on Slide 3. We delivered net profit of €167 million, earnings per share of €2.11, and a return on tangible common equity of 24% during the first quarter. The operating performance of our business was very strong, with pre-provision profits of €258 million and a cost income ratio of 33%. Other income of minus €9 million related primarily to other operating expenses tied to legal, tax, and transactional advisory costs on M&A deals. The bulk of these costs will be capitalized when deals are closed. Total risk costs were €30 million, translating into a risk cost ratio of 28 basis points. We did not release any credit reserves, with an ECL management overlay of €80 million. We have a low NPL ratio of 1%, and continue to see solid credit performance across our businesses. In terms of our balance sheet and capital, average customer loans were flat, and average customer deposits were up 1% quarter-over-quarter. Our CET1 ratio was 15.6%, up 90 basis points from year-end 2023, after considering the first quarter dividend accrual of €92 million. And we paid the dividend for the financial year 2023 of €5 per share, or €393 million on April 15. We have a fortress balance sheet, with excess capital now at €623 million, approximately €12 billion of cash, and LCR of 217%, and overall strong asset quality. We continue to see a market where customers are cautious and slowly adjusting to higher rates as we maintain our outlook for static to modest customer loan growth. We have earmarked our excess capital for the acquisition of Knab Bank, which we signed earlier this year, in addition to other strategic M&A that we are at an advanced stage. We have purposely maintained dry powder to pursue these strategic M&A opportunities that will be highly accretive to the franchise in both earnings, as well as allowing us to grow our retail and SME franchise and our footprint in the DACH/NL region. Today, our franchise is approximately 70% retail and SME-focused, with 70% of our customer business in the DACH/NL region. In the midterm, we see this migrating to 80% to 90% retail and SME focus, with 80% to 90% of our customer business in the DACH/NL region. The first four months of this year have been defined by M&A integration planning, ensuring constant dialogue with regulators, targets, and laying out our detailed day two plans. There has been a great deal of work taking place behind the scenes. We're excited about the opportunities ahead, and we'll provide more details as the year progresses. Moving to Slide 4, we delivered a net profit of €167 million up 20% versus prior year, and a record first quarter result. Overall, strong operating performance, with total pre-provision profits of €258 million, up 4% versus prior year. Tangible book value per share was €36.33, up 16% versus prior year, and 3% versus prior quarter. This assumes the deduction of the first quarter 2024 dividend accrual. On to Slide 5. At the end of the first quarter, our CET1 ratio was 15.6% after deducting the first quarter dividend. For the quarter, we generated approximately 90 basis points of gross capital through earnings. We also executed the corporate securitization transaction, which accounted for the majority of lower RWAs in the quarter. Our excess capital of €623 million, or 340 basis points, provides us with enough dry powder for strategic M&A opportunities, both signed and in the pipeline. On Slide 6, our retail and SME business delivered first quarter net profit of €134 million, up 14% versus the prior year, and generating a very strong return on tangible common equity of 36%, and a cost income ratio of 30%. Pre-provision profits were €208 million, up 9% compared to the prior year, with operating income up 7% and operating expenses up 4% versus prior year. Risk costs were €26 million. The retail risk costs run rate has now returned to pre-COVID levels as multiple stimulus and government support programs have now expired. However, we continue to see solid credit performance across the business, with an NPL ratio of 1.8%. We expect solid operating performance across the retail and SME franchise in 2024, but muted customer loan growth, given the overall economic environment. On Slide 7, our corporates, real estate, and public sector business delivered first quarter net profit of €39 million, up 5% versus prior year, and generating a strong return on tangible common equity of 22%, and a cost-income ratio of 27%. Pre-provision profits were €58 million, down 1% versus prior year. Risk costs were €5 million. We continue to see solid credit performance across the business, with an NPL ratio of 80 basis points. We pride ourselves on disciplined underwriting, focusing on risk-adjusted returns, and not blindly chasing volume growth, as we continue to remain patient and disciplined. We have the capital and liquidity to support our customers as we expect markets to normalize in the next few quarters. On Slide 8, an update on the real estate portfolio. We experienced a 2% reduction quarter-over-quarter in our real estate portfolio, the bulk of which was related to U.S. office. The portfolio continues to perform well, reflecting the underlying exposure to residential, logistics, industrial, and hospitality assets, which make up 75% of the total real estate portfolio, and 85% of our total U.S. exposure. Our office exposure in the United States stands at €371 million, down 19% versus prior quarter due to refinancings. The performing U.S. office portfolio represents less than 1% of total customer loans and 6% of our total real estate exposure. This remaining portfolio has a debt yield of approximately 9%, occupancy levels of approximately 80%, and a weighted average lease term of six years, with solid tenants and an LTV under 75%. We believe the worst is behind us in terms of stress on our portfolio, with our U.S. office portfolio reducing in size and other asset types continuing to perform well. For our remaining office portfolio, in certain cases, we've been able to negotiate equity contributions, resulting in de-leveraging and/or additional equity to improve the properties and attract additional tenants. As I've stated before, the stress we are seeing, particularly in commercial real estate, will differentiate banks in terms of underwriting and asset quality as we see greater dispersion across lending portfolios. With that, I'll hand over to Enver.
Enver Sirucic: Thank you, Anas. I will continue on Slide 10, a strong quarter, with net profit of €167 million, and a return on tangible common equity of 24%. While net interest income was down 1% versus prior quarter, the net commission income was up 4% in the first quarter. Year-over-year, core revenues were up 7% and flat versus prior quarter. Operating expenses up 2% in the quarter and cost income ratio now at 33%. Risk costs were €30 million in the quarter, stable versus the prior quarter. ECL management overlay remained at €80 million. On Slide 11, key developments of our balance sheet. A few things I would highlight here. Customer deposits were down 3% in Q1 and flat year-over-year. This was largely driven by seasonally high deposit balances at year-end versus first quarter. Our average deposits were actually up by 1%. Customer loans went up 1%, while our risk-weighted assets came down by 4%, and this is largely due to a corporatization transaction that was executed in the first quarter. Our cash position came down to €12 billion this quarter, also driven by the full paydown of the remaining TLTRO tranche. Cash and cash equivalents make up approximately 22% of the balance sheet, leaving us with a very comfortable liquidity buffer to address potential organic and inorganic market opportunities in the coming quarters. Next slide. Our customer funding, which is made up of customer deposits and AAA-rated mortgage and public sector cover bonds, grew by 1% since year-end, and 5% year-over-year to around €46 billion. Cash position now at €12 billion. In terms of customer deposits, no relevant structural changes in the first quarter. Repricing continues, in line with our expectations. Overall, deposit betas now at around 29%, expected to grow to 30% to 35% and peak in the coming quarters. With that, moving on to Slide 13, core revenues. Net interest income was down 1% versus prior quarter, with a net interest margin of 296 basis points. Overall, we have seen stable margins and volumes in the business, with a pickup of deposit betas from 25% to 29%, and lowered the account, leading to a slightly lower net interest income. In terms of net commission income, up 4%, with an overall good performance across securities and payments in our retail and SME segment. For 2024, our guidance remains unchanged. We expect core revenues and net interest income to grow by 1%. On Slide 14, operating expenses are up 2% versus prior quarter, largely driven by a full quarter of Idaho First Bank (NASDAQ:FRBA) in the numbers and some inflation effect. The cost income ratio increased slightly to now 33%. In March, the collective bargaining agreement for banking was finalized, with an agreed 8% wage increase in Austria, which is in line with our expectations. That will be partly offset by our ongoing optimization programs, mostly through further simplification and standardization across the group, leaving us with an expected cost increase of around 3% for 2024 before any MDA. Our expectation for regulatory charges in 2024 remains at around €16 million or €4 million per quarter for the remainder of the year. Moving to Slide 15, risk costs, overall continued strong asset quality, with a low NPL ratio of 1%. We booked €30 million of risk costs in the first quarter, which was in line with prior quarter. We kept our management overlay at €80 million, and we expect risk cost in 2024 in the context of 25 to 30 basis points. On Slide 16, we reconfirm our outlook and targets for 2024. This is based on current interest rate expectations and assuming no MDA in 2024. We are targeting net interest income and core revenue growth in 2024 of 1%, while containing operating expenses to 3% gross. Foreseeable regulatory charges are expected at around €16 million in 2024. Based on overall macro environment, the recent underlying trends and solid asset quality, the risk cost ratio is expected to be between 25 and 30 basis points. The financial target for 2024 is a profit before tax of greater than €920 million, return on tangible common equity greater than 20%, and the cost to income ratio under 34%. And with that, let's open up the call for a Q&A, please. Thank you.
Operator: Thank you. [Operator Instructions] We will take our first question. And your first question comes from the line of Vishal Shah from Morgan Stanley. Please go ahead. Your line is open.
Vishal Shah: Hi Anas, and Enver. Thank you so much for the call and hope you're doing well. My first question is on M&A. So, understand that you may not be able to share many details, but on the second M&A transaction that you had mentioned earlier in Q1, the deal is in advanced stages. Now, it seems like maybe something will materialize more likely in Q2. So, any color you can provide there on the discussions and what's affecting the timeline of announcement on this transaction. And then secondly, on the risk transfer, clearly that helped reduce the RWAs, I guess, significantly in this quarter, and provided a decent boost to the CET1. So, could you comment on how you see the evolution of RWAs for the remainder of the year, and do you see any such further opportunities to execute SRTs? Thanks.
Anas Abuzaakouk: Okay, thanks, Vishal. I'll take the first on M&A, and Enver, you want to take the SRT?
Enver Sirucic: Yes.
Anas Abuzaakouk: Okay. So, Vishal, you're right. Obviously, we're limited in what we can say with respect to M&A that's in the pipeline, or that's being currently assessed. I will say that we are at an advanced stage, I think I've said this before, as far as we like a retail and SME in the DACH/NL region. It's a product fit that we think is complementary to what we have in our existing product suite. And we hope that in the near future, we will be able to hopefully communicate more details with respect to our pipeline. I will say one thing, Vishal, and you saw it in the first quarter numbers, it was €9 million of other operating expenses. When you do deals, there's always a great deal of complexity, whether it comes in the form of legal work, tax work, just a whole host of other advisory transactional work that we need to account for. So, that was reflective, not just of the Knab deal, but of other deals that we're looking at. So, but hope to come back in the near future. I'll pass it over to you, Enver.
Enver Sirucic: Yes. So, Visha, on the question of RWA trends, I think it's going to be very much in line with the overall asset development, which we said is going to be muted on this side of the year. So, we said around 1%. So, that's going to be very much in line with that. In terms of potential further SRT measures, we're looking at different things in the existing book, but also we will consider it on the future MDA as well, and then it's going to be an economic decision, what makes more sense.
Vishal Shah: Thank you so much.
Operator: Thank you. We will take our next question. Your next question comes from the line of Gabor Kemeny from Autonomous Research. Please go ahead. Your line is open.
Gabor Kemeny: Thank you. Hi, team. A follow up from me on the synthetic risk transfer. Is this - has any of this been factored into the Knab capital consumption guidance of 100 to 150 basis points, or could such risk transfers potentially lower the capital consumption? There's the first question. My second question is on the deposit beta, which seems to be trending up. I mean, I understand your messaging that the increase from 25 to 29 mostly happened already in Q4, and this is the just the averaging impact. But how do you see the likelihood of the beta climb being above your target range of 30% to 35%? Maybe you can comment on the terming out behavior you have observed. And the other final question would be on CRE. I noticed that your total U.S. CRE book remained at €2.4 billion, despite this refinancing transaction. Can you perhaps comment on, I think it's residential, why you decided to provide additional financing in that segment? Thank you.
Anas Abuzaakouk: So, Gabor, let me start with the CRE, and then I'll give it over to Enver on SRT and the deposit beta. All very good questions. For the U.S. CRE, Gabor, obviously the focus has been on office. I think the performance quarter-over-quarter down almost 20% based on two refinancings, one which was expected, the other was not expected, but I think it tells you a reflection on the strong position that our senior debt had in the capital structure. Very positive signs. As for the other parts of our U.S. real estate exposure, we're quite happy to build up our residential. 85% of the book is residential, industrial, logistics, and hospitality, all asset classes that have performed very well. Quite frankly, it's been a challenge even to keep those levels, given just the level of refinancing activity, as well as just the limited opportunities that we've seen over the past 18 months. So, that's an area, at least residential, that we're very positive on. And that's where you've kind of seen the growth. But all in all, we're really positive as to development, in particular with office. And as I mentioned on - just going through the earnings, we do believe the worst is behind us. We're in a good position vis-à-vis U.S. office, but Enver will go ahead and give it to you, SRT and betas.
Enver Sirucic: Yes. So, Gober on the top transaction, simple answer is no. The 100 to 150 basis points does not include any SRT transactions. That would be incremental benefit if you consider it something, but as I said before, we'll consider it in the overall context if it makes sense or not from an economic perspective. On the second one, on the deposit betas, you’re right. So, we had an increase from 25 to 29, and as you rightfully said, it's an average effect. We have seen that towards the year-end, and it remained quite flat in the first quarter. So, we feel quite comfortable despite the changed short term interest rate outlook. We feel quite comfortable to get into that range of 30% to 35% at a peak for deposit betas, unless there is any significant change in the rate outlook on top of what you're seeing today. But otherwise, we should be fine with 30% to 35%.
Gabor Kemeny: Got it. Thank you. Small follow-up. Can you comment - is there anything you can share on the cost of the synthetic risk transfer and how it impacts your P&L?
Enver Sirucic: We don't give the specifics, but when we look at it, it’s always how much is the cost per RWA, if you like, because that's the only comparable metric, and that's been pretty much in line also with the prior ones, which is likely above 100 bps per RWA release.
Anas Abuzaakouk: And it falls in the risk cost line.
Enver Sirucic: And it's in the risk cost line.
Gabor Kemeny: Very clear. Thank you.
Operator: Thank you. We will take our next question. Your next question comes from the line of Mate Nemes from UBS. Please go ahead. Your line is open.
Mate Nemes: Hi, good morning. Mate here from UBS. Thank you for the presentation. Two questions, please. The first one is on still funding costs and deposits. I just wanted to ask you about the online retail savings product by the Austrian Treasury, I think launched about a week ago. What would you expect the impact to be on competition for depositors? What are the initial signs interest that you're seeing in your client base? Any comments on that would be valuable. The second question is on costs. I was wondering if you could provide some further details on the cost optimization this year that you're pursuing in the context of trying to offset that 8% wage increase you mentioned for a good three quarters of the year. That does not seem trivial, especially given the starting point in the cost income ratio you're at. So, any further color on that would be helpful. Thank you.
Anas Abuzaakouk: Thanks Mate. To start off, it is absolutely not trivial. So, you're spot on that 8%, on top of 8%, right, it starts to add up year-over-year, and just from a compounding standpoint, but this is not a large scale restructuring by any means. Enver had mentioned just that - we say various operational initiatives. That's from your physical footprint to your G&A, which is your non-personnel cost to your replacement ratio, in terms of retirements as well as attrition, we try to really manage that to the best of our abilities, keeping in mind that there's a significant wage inflation that you have to address when you start the year. And 3% is no small feat when you talk about cost growth year-over-year. But I think having the discipline and having the operating plans in place day one allows you to be able to make those - to capture the cost savings. But it's not something that happens overnight. It's something that has a significant lead time and we'll do our best to stay within the guidance. So, but it's definitely no small feat without a doubt. Funding costs.
Enver Sirucic: Yes. Mate, on the Bundesschatz, it launched last Monday, I believe. And we are look at it from the old perspective, just also interested to see how the customers will react. We've seen an uptick in activity the first two, three days. It slowed down towards the end of the week. It's really hard to judge after the first week. The first week was probably stronger than what we're expecting in the coming weeks to come. Overall, the fact is right now, not relevant, but I guess what could happen that it increases a bit the competition across the banks for deposits. That could be a side effect of this, but again, too early to say.
Mate Nemes: Thank you.
Operator: Thank you. We will take our next question. Your next question comes from the line of Mehmet Sevim from J.P. Morgan. Please go ahead. Your line is open.
Mehmet Sevim: Good morning, Anas. Good morning, Enver. I hope you're well. Just one follow up on the U.S. CRE portfolio, please, the refinancings that's brought down your exposure there meaningfully, clearly a positive sign. Are you able to provide more color on those transactions? For example, were these triggered by yourselves or by the debts? Have there been any financial impact for you there? And would you see any further refinancings or any abrupt volume changes, so to say, in U.S. office in the upcoming period?
Anas Abuzaakouk: Thanks, Mehmet. So, one of them was an early refinancing redemption, both - let me just start, both strong sponsors. One was in Washington, D.C., an early refinancing, but when you have a really strong debt yield at some point for the sponsors, right, that becomes injecting equity or refinancing yield is a good commercial decision. I think that was a good example of that. And then the other one is New York, which the sponsor was able to execute a securitization. And I think that was unique because of the quality of the asset, but also a positive sign that a securitization was actually pulled off. And that securitization obviously refinanced our debt position. So, two, I think really good signs. Probably more idiosyncratic on the D.C. deal, to be honest. And I think the New York deal was one that was just a broader reflection of, if you have a quality office asset, there's still - the markets are still open for business. But that's not broad-based, right, and that's why I said I think this - the development on U.S. commercial real estate, U.S. office, when I say U.S. commercial real estate, will truly be, I think, a reflection of the dispersion in underwriting. When we say being disciplined, being patient, follow - risk adjusted returns, I think this is a good proxy for that. And we'll see how things develop in the coming quarters, but I do believe the worst is behind us. As far as refinancing or redemptions this year, it's fairly minimal, but we'll see how the sponsors react. But we have a pretty, I think six years of weighted average lease term. We like the quality of the tenant. So, I think we're in a pretty good place for the remainder of the portfolio, the performing portfolio.
Mehmet Sevim: That's super. Thanks very much. And just on Knab, is there anything additional you can share at this stage in terms of the timeline from here? Is everything going according to initial plans, or any surprises you've seen, et cetera?
Anas Abuzaakouk: Still as positive as we were when we signed the deal. Obviously, spending a lot of time with the team, with the target, working with regulators, working with - there's a lot of different constituents. Hopefully, fourth quarter is kind of the planned timing, but we'll see. I mean, we're subject to regulatory process and we’ve got to be patient, but the idea is when we get close to closing or at closing, we'll provide a lot more detail, Mehmet.
Mehmet Sevim: Super. Thanks very much.
Operator: Thank you. We will take our next question. Your next question comes from the line of Johannes Thormann from HSBC. Please go ahead. Your line is open.
Johannes Thormann: Good morning, everybody. Johannes Thormann, some questions. First of all, my usual one on NII. We've seen a small decline due to probably less days in deposit beta. Is Q4 or was Q4 the peak, or do you expect an uplift in the next quarters again when business volumes normalize? And secondly, on the risk cost side, normally we have a pretty seasonal risk cost pattern. Now, with this single - with this case in the corporates, probably there was some distortion. Should we expect still a seasonal pattern for the rest of the year? And what will happen to the €80 million management buffer you have created? What do you think - you sounded quite positive on U.S. real estate as well. Do you expect to use it in in 202,4 or will it rather be released at one point in time?
Anas Abuzaakouk: Thanks, Johannes. I will defer to Enver on the NII and the risk cost, maybe the distributed (indiscernible).
Enver Sirucic: Yes. Good question, Johannes. On NII, I think it would be fair to say that we have seen the peak of net interest margin. In Q4, it was 300 basis points. It has slowly come down. I said on our full year earnings call that we expect a very similar net interest margin for 2024, which was 290 in 2023. So, it is going to be stable. In terms of peak, probably that was the peak then. In terms of NII, still too early to say that. We will keep the NIM quite stable, and if you see more growth on the loan side, obviously also the NII could be higher in the coming quarters. So, that's how I would phrase it. On the risk cost side, I mean, first thing is most of our risk costs are coming from retail, and most of that part comes from the unsecured part of retail. And what we have seen already over the last couple of months and quarters is that you're getting back to pre-pandemic levels. So, the fiscal support, the subsidies, less consumption that we have observed during the pandemic time is just disappearing, and now we are just seeing a back to normal scenario. That's why we guided to 25 to 30 basis points for 2024. Coming back to the corporate part is the - we have not seen a single case deterioration or any risk cost that we need to build for single cases in corporate, but what happened there is, was really ECL-driven. So, model updates, and one part of that was actually reflecting new macro parameters that drove a large part of that increase in Q1. So, seasonality, to some extent, you see seasonality towards year-end, obviously, but otherwise retail is more recurring risk cost line. So, I would say that should be fairly stable development for the rest of the year. And you mentioned the management overlay. So, I think probably 2024 is going be the year where we will start kind of reviewing the overall management overlay setup and what we will do with that. Again, it's a bit too early to decide what exactly is going to happen, but we will address management will it very likely in 2024.
Johannes Thormann: Okay. Thank you.
Operator: Thank you. We will take our next question. Please stand by. Your next question comes from the line of Noemi Peruch from Mediobanca (OTC:MDIBY). Please go ahead. Your line is open.
Noemi Peruch: Thank you and good morning. I have a few questions from my side. The first one is on stage three, if you could give us a little bit of color on the quarterly evolution there, and then on CRE. So, you gave a bit of color on U.S. offices, and that's appreciated. And here, I would like to ask you about some insights on your strategy and also on the market trends that you are seeing in Europe, especially in Ireland when it comes to offices. And then a follow-up on deposit in Austria. So, indeed we see the competition is on now. We have a new product hitting the market. And I was thinking just - I wanted to know how you're thinking about the trade-off between betas and outflows, if there is a certain maximum you can withstand on one hand or the other. Thank you very much.
Anas Abuzaakouk: Hi, Noemi. All really good questions. Let me see if I - so stage three, U.S. office, and what was the third one?
Enver Sirucic: Austria deposit.
Anas Abuzaakouk: Austrian deposit. Okay, so I'll take the stage three and the U.S. office, and then Enver can deal with the deposits. The stage three, Noemi, nothing in the corporate real estate public sector. That's just your normal build of NPLS and retail and SME, which we will do NPL sales, but we typically do that at the end of the year. So, you kind of see this buildup and then this absent if the markets are frozen to not sell the NPLs, but that's normal course of business, and you see it in the NPL ratio for retail. It goes from 1.7% to 1.8% and nothing on the corporate real estate and public sector. The question on commercial real estate, obviously a really positive development quarter-over-quarter. I think I addressed that with Mehmet's question on our own portfolio. To the broader, I guess, market question, if you had to differentiate between the stress that we see in U.S. office versus the stress in Europe, I would say U.S. office is more about vacancies and the permanency of cash flow or lack thereof because of just the secular change in terms of workers not going into the office. And that's a very unique dynamic to the United States. You see less of that in Europe. In Europe, it's a different issue, which is commercial real estate loans that were originated at 2% to 3% cap rates. That's going to be a real issue for whoever originated at those levels. That was not our book. I always - we've been pretty clear around being disciplined. When we say risk-adjusted returns, that can manifest itself in a lot of different ways, but you don't lend at 2% to 3% cap rates. That's just - you’re upside down. And I think that's where the real issue is, even though the occupancy, so it's less - like the building is doing well. There's cash flows. It's just a matter of the capital structure I think will undergo change. And that's just borne out of really low cap rates, which were not I think sustainable in lending in that type of environment. So, there is a - it's a good point that you bring up. There is really two different narratives in terms of the stress and what's driving that. The U.S. is obviously more acute. Europe is to some extent for the lenders, self-inflicted with low cap rates. So, for you, I think the deposits.
Enver Sirucic: The deposits, I mean, a lot has happened on the deposit side over the last 12 months. And I think that the retail team has done a great job balancing the right - finding the right balance between pricing, being competitive, and also keeping the deposit. So, if we look at the numbers, pretty much over the last three years, our average total deposits have remained very stable in a competitive market. Overall, the deposits in Austria haven't really moved. Just the total market hasn't really moved the last 18 months, hoovering around the €300 billion household deposit mark. And we do not expect that to change in the future. So, there's only two things that are still happening, not so much on price points, more on structural changes. We have seen a bit of a uptick in terms of customers switching to term deposit, but still very low. And it hasn't really happened as much as we expected that to happen for the last 12 months. That's one. And the other thing is what you mentioned before is we offer treasury savings for Bundesschatz that was launched last week, which is definitely an interesting offer for the customers, but we also try to match that offer with certain campaigns, especially through our online banking channels. So, overall, as I said before, I think our assumption, 30% to 35% still holds true and we are quite confident to be in that range for the rest of the year.
Noemi Peruch: Thank you.
Operator: Thank you. There are no further questions. I would like to hand back for closing remarks.
Anas Abuzaakouk: Thank you, Operator. Thanks, everybody. Thank you, everyone, for joining and look to touch base in the second quarter or earlier. So, all the best. Have a nice week.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
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