Nova Ljubljanska Banka d.d. (NLBR) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome, and thank you for joining the NLB Group conference call and live webcast to present and discuss the NLB Group's Second Quarter and First Half 2025 Financial Results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Blaz Brodnjak, CEO; Mr. Archibald Kremser, CFO; Mr. Andreas Burkhardt, CRO. Mr. Brodnjak, you may now proceed.

Thank you very much, and a warm welcome, everyone, to our semiannual webcast performance call. Let me draw your attention to the standard disclaimer and then start talking about what we believe, of course, is a transition to the future. Behind us, we are looking more or less to a very strong robust quarter. What we are specifically happy about is that, we are able to show growth, growth of business in all dimensions, be it from private individuals to corporates and geographies. So this is really a very solid output from this perspective. On the other hand, we have been able through this growth and of course, other measures we took more or less already 1.5 years ago, started taking them, a stable revenue evolution in the rate declining environment of 175 bps year-on-year, basically, we have been able to keep stable revenues. And that's, of course, due to M&A activity through the SLS acquisition, Summit Leasing acquisition, but also through predominantly organic growth. And this is really a strong boost for the future. On the other hand, we kept investing. So there is a bit of a hike in dynamics of investment, and this is really acceleration of digitization and proper awarding of talents group-wide. We really want to now accelerate client experience-related features that we offer to our clients. We are really happy that we were able to put in production a new mobile app in Slovenia, which was already in the previous version awarded as the best in the country, but now we added other features, and we further significantly improved client experience. Our hub in Belgrade has really become a powerful output engine. So this is really NLB DigIT, now more or less operating with a capacity that is approaching 150 people. And towards mid of next year, we would already be seeing somewhere close to 200 people. And this is one of the stronger ICT hubs actually in the region generally, but this is really going to help us enormously in scaling actually the platformization of the solutions we use. So NLB Pay has been the first such uniform platform and NLB Klik, so-called mobile app used in Slovenia is going to be rolled out also in Serbia and other countries in subsequent years, really in an accelerated way and pace adding client relevant features. And by that, really enabling end-to-end offering and hopefully, and for sure, improving also client experience. With that, so there has been significant progress already in digitization. If we're looking at, for example, just a couple of data points, 58% overall mobile -- more or less mobile app penetration in Slovenia, other countries catching up. But on the other hand, we are really also looking at, for example, overdrafts self-serviced that are close to 80% already credit card, self-service limits for credit cards, for example, self-service to the mobile app, well north of 70%. So these are really the first steps into the direction of more than 80% overall digital production with private individuals when it comes to standardized services. And that's a challenging target, but we believe we are well on track to deliver on that. It is really something that we believe is a key driver of success, and that's something that is going to be really focused -- focusing our activities moving on. We are specifically also adding now significant, I would say, attention to engagement through the robot-assisted processes through the use of artificial intelligence in all possible corners, meaningfully clearly. And by that, of course, adding relevance to what is end-to-end digitized service already. I would specifically highlight successful completion of the integration of both leasing entities in Slovenia. You know that we closed the transaction of acquisition of Summit Leasing on 9/11 last year, and I'm happy that it took us a bit more than 9 months only to have full completion of the integration. So on the 7th of July, the business was operationally merged, on the 4th of July legally, but on 7th fully operationally. And by now, no hiccups from this angle. So we are really happy that now this business is really already fully focusing on new production and growth. And the first synergies are kicking in already since as of 7th of July, we will already see the reductions of planned FTEs. We have been specifically proud collectively as a team that after quite some time, it was actually years -- measured in years, NLB was really the biggest advocate and promoter of bringing Apple Pay services to the last missing Southern European geographies. We're talking about markets of North Macedonia, Kosovo and both Bosnia and Herzegovina. And we were launching this among the first in Bosnia and Herzegovina actually, but the first and still the only one in North Macedonia and Kosovo. And this means that NLB is actually bringing modern contemporary services of payments -- from payments universe to these countries is actually a key promoter of it. And that's really something that the whole team collectively is enormously proud of. Strategy execution is well on track. We are really now talking about acceleration. So we really now in the narrative used internally in the house using more or less client relevant features to be delivered in an agile way quickly. Slovenia is the first, Serbia to follow and other geographies then, of course, immediately after. And by that, really addressing, I would say, value proposition to younger generations and affluent clients as well in a sense that they can really communicate with us 24/7 seamlessly. So we are talking about mobile first, 24/7 and easy but safe services to be offered in a relevant way. So not only reactively when clients need us, but also proactively in the sense that we anticipate when -- at which point of time, at what location and through which channel we would actually be offering the service. What is the next milestone we are hoping for in the not-too-distant future is actually reaching the A grading in terms of the rating. That's something that would be another really, not only emotionally, but also from a business perspective, extremely important milestone. So we're just one notch south of with the recent upgrade from Standard & Poor's and Moody's is also on that level. So we are really looking forward to the upcoming quarters and, I would say, 1.5 years or 2 where, of course, I can't anticipate that, but we would hope that there would be further recognition for such a milestone that will enormously impact, of course, the reputation of the business. We continue with our clear commitment to achieving ESG targets. I know this is these days not necessarily so popular topic, but NLB is not shying away from it. We believe in midterm and long term sustainability targets of the planet, but above all our regions. So poor quality of air in our region is still poor quality of air in our region, and this is affecting quality of life for our people. So, of course, we will still keep addressing it and addressing very intensively. And the same is true for other aspects of equal opportunities and principles of what the S and G pillar actually stand for. We have paid out the first half of the dividend foreseen for this year. So combined, this is EUR 12.85 per share, which is also at today's price is still a highly attractive dividend yield. And in this respect, we are, of course, creating value for shareholders. But looking back also to the share performance, it's been very solid throughout the last period. We've been growing asset base. So if you look at the banks around, our growth is significant. It is, of course, partly due to the M&A activity and acquisition of leasing. But on the other hand, also organically, it is very strong output. We're talking about 7% semiannual growth of assets -- of asset base, which is very, very solid. And if you, of course, look into combined, it is more than 20%. Deposits have been following. We have not yet even started properly or intensively attracting them, but somehow there is a shift towards side deposits, which is, I'd say, specific phenomenon, but not that specific necessarily in European terms. And on the other hand, this is, of course, the biggest treasure that our bank has been operating with, access to household accounts, access to corporate accounts and the side dimension of it is just of enormous value. Net operating income showed solid growth. So this is a 5% growth more or less in this period and 6% year-on-year, which is very, very solid. And I believe this is a good evidence that this growth is actually yielding the results also in terms of the revenue output. And once we see the rate environment hitting more or less the lending level. So it's not 200 basis points. Have we seen it already? Or is it 175? Let's see. But the further incremental effect should not be that detrimental. Once we see the floor more or less, we would, of course, at the same time, start really then, of course, benefiting from the growth as well. We are focusing on containing costs. So we don't see this as a challenge. We see this actually as conscious investment into talents and really accelerating digitization. So we are more focusing on overall efficiency of the business and focusing more on cost-income ratio than absolute cost level and 46.7% compared to, of course, peers is not standing out negatively. So this is something that we are really focusing on. We rather see it actually as a very solid performance still. Result after tax in terms of quarter, robust. There are, of course, some one-off effects coming from the cost of risk, which was not only benign, which actually even positively contributed to the results in the first half of the year. The health of portfolios is still very, very high, very, very strong. In this respect, of course, households are standing out still. There are some pockets, but overall, from a portfolio level, this is a very, very healthy portfolio. We've seen some hiccups in especially automotive sector. So suppliers to predominantly German automotive businesses have experienced trouble. And we've been dealing with this consciously. And that's why we have not yet moved the needle when it comes to the overall yearly guidance. I'll talk about this later on. But, of course, the first half result is, in this respect, extremely robust. Net interest margin has naturally been decreasing clearly due to the rate reductions. But overall, we keep the pace. We keep the level that we believe is very sound from a long-term perspective. We were talking about keeping the levels above 3%. We are still solidly above 3%. And we are very close to the lending rate. So this is something that we believe is here to stay in a sense of keeping the very, very solid levels of margins. And returns clearly impaired a bit given the rate reductions, but we will keep investing and we will, of course, I believe, now see more stable evolution of revenue, actually further growth of revenue and by that, address profitability overall solidly. By that, I would pass the word to Archibald to guide you through some details.

All right. Let me try to... So as usual, I start with a macro update. There is not too much to comment other what everyone follows in media. I think, broadly speaking, the region is fine and developments are still on average, visibly above what you see in Eurozone. So this is a growth area. It's a growth territory, both Slovenia and even more so our subsidiary markets. So -- and you'll see in the asset growth numbers that this delivers very, very solid asset growth potential, and inflation also a little bit elevated coming down in all markets. So in that sense, yes, still, of course, lots of news flow from global context to some extent also local developments. But broadly speaking, very solid environment and full of growth opportunities as we see it. I'm struggling a bit with the -- in terms of the banking markets as such, you see that, first of all, loan penetration still offer plenty of growth to the upside if you compare to Eurozone averages. You see that here and there, we had already catch up. So if you look at Kosovo, it's already fairly close. Other markets still have lots of room to grow. Also LTDs have gone up slightly, but still are in healthy territory. That's for sure. Blaz mentioned it some space that we start watching a bit more closely. And overall, you see that loan growth is phenomenal, and that's really a feature of this region that, to some extent, surprised us a little bit given all the headwinds that we face. But broadly speaking, solid environment, very bankable, very robust performance, we'll talk about our asset quality and still plenty of room to growth going forward. We talked about already last time the economic footprint of our geographies and the message is unchanged. This is a very diversified region in terms of production and segments of production and yields in the asset quality that so far, with a few exceptions, we are doing very well and diversification remains a key strength of our portfolio. In terms of the business performance as such, the headlines you heard, we are approaching EUR 30 billion balance sheet. So, on our journey to EUR 50 billion, EUR 30 billion is almost in reach. And when we published this strategy, we were closer to EUR 25 billion. So that's already a first good milestone. You see phenomenal loan growth dynamics year-to-date, 7%. That's really very substantial. And that is, of course, already baking in the leasing acquisition. So that's really organic growth. You see year-on-year 20%. That is, obviously, including the boost from leasing. But overall, very, very strong loan growth, something that we were even a bit surprised with. Deposits are following and not as strong as loans. Clearly, we've seen some of LTDs going up in subsidiary markets. But that's a sweet spot to operate in. It clearly helps profitability. And you see that -- you've seen before already normalized ROE substantially above 20%. So very solid performance. We are operating a sweet spot of balance sheet dynamics. Balance sheet itself as we call it rock solid. LTDs, as I said, coming a bit closer to sweet spot operating point, so not too low, not too high, and we'll try to keep it around this territory going forward. We also said that we are predominantly retail funded. You see deposits from individuals being 70%. I'm trying to go forward. Thank you. Loan dynamics, I mentioned it's really strong growth across the board. So not much else to say. It's both retail, it's both corporates. It's particularly strong in our subsidiary banks. You see SEE banks year-to-date 10%. That's really phenomenal. And of course, very helpful to keep revenue dynamics, which we'll talk about in a minute. The rate environment, of course, rates have come down. ECB, basically year-on-year, we heard 175 to 200, depending on what you look. And look at the margins and the rates coming down only basically something like 50 bps. So that's a fairly solid performance, of course, helped by the fact that we are predominantly fixed rate oriented these days. And that, of course, helps maintain interest income. Next slide, please. On the deposits, not much else to add. We are growing, that's important. There is a shift here and there from sides to terms to basically fund some of this phenomenal growth and, obviously, that comes at slightly higher costs. In Slovenia, actually, it's the other way around. With 35% market share and deposit taking, we are clearly dialing down a bit on term deposits simply because rates coming down, people are happy to invest more in higher yielding products such as, for example, our mutual fund universe. Next slide, please. So the funding costs in that sense are staying quite stable on the deposit side. And that is, of course, a bit of an offset of our very strong position in Slovenia with some of the dynamics I mentioned earlier on our subsidiary banks. Next one, please. On the P&L, we are happy to report that income year-on-year is rising. Revenues are rising 5%. And that is a combination of, of course, all the things I mentioned earlier, very strong loan growth, very disciplined balance sheet management, NII flat year-on-year, 1% up, and very good developments on fee and commission income. Of course, that's a highly competitive market. So -- but this year, we have been able to show fee and commission income growth across the board. If you look closer, you'd see that a lot of it comes, of course, from increasingly value-added services in asset and wealth management. Cost is a bit of a standout at the moment. But there were quite some one-offs and nonrecurring elements in this dynamic. The like-for-like cost dynamic is something in the ballpark of 7%, 8%. So something we feel comfortable with as we invest very deliberately in talent and technology. But, of course, at some point, and that's a discussion for sure next year, we will, of course, take out capacity where we can shift production to digital channels. And that's, of course, in markets like Slovenia already quite visible, in other markets to follow. Overall, very strong quarter with results after tax, EUR 148 million. So, of course, helped by cost of risk releases that we will hear of later. But also, please stay on slide before, pre-provision income, please the previous slide and one more. Thank you. Pre-provision income, very solid as 2% year-on-year and 3% quarter-on-quarter. So we feel very comfortable with where we are. We know there is work to be done, but that's a very robust platform for also net income growth going forward because cost is, of course, a game of investing and containment. And with specifically the CTO onboarding Reinhard is now taking a lot of attention also on process and efficiencies. So that's a theme for the upcoming quarters. Next slide, please. On net interest income, basically, the main things I've mentioned, we see a margin that is on the net interest margin side, of course, following a bit dynamics on the short end. Let's not forget on the long end, there is quite some upside that we have taken advantage of with deliberate investment in duration, stabilizing net interest margin, I think, quite nicely. And if you look at the business margin, overall, it's even more stable because of the positive developments on the fee side I mentioned earlier. Next, please. Next, please. NII sensitivity is something we kept managing very deliberate throughout last year and continuing into this year. Not much to say than it's basically a half the value it was a year ago. And of course, that helps a lot in, not just maintaining NII income, but also being a platform for NII growth going forward. Next, please. On the noninterest income side, I said we are very comfortable with our developments, especially around the investment universe. So you see here very strong developments. And increasingly, also with help of innovations we put in place, Blaz mentioned the deployment of Apple Pay across the region. We think we will be able to maintain and increase customer loyalty. And that will translate, not just into fee income, but ultimately also into keeping our funding base stable and at relatively low cost. Next, please. On the cost side, I think the headline number is showing quite some cost dynamic. But if you normalize for all the integration dynamics and some nonrecurring items, 8% is something we acknowledge is on the higher end. So we would not like this cost growth going forward necessarily. So there will be some cost mitigant measures taking place. And of course, we said at some point, the headcounts will come down on a global scale. You see that trend is, of course, playing out even this year. And let's not forget, we have integrated, of course, the new operation in leasing. We haven't done yet all the headcount reductions or they are not yet shown in terms of the leasing integration as such. But broadly speaking, we, of course, increasingly, as we get more digital, we'll also reduce employee numbers, mostly on a natural attrition basis. And besides, Blaz said, investing in technology is key to winning in that. We will not go bananas in terms of spend on IT, but certainly, we'll be willing to spend at benchmark levels of between 10% and 12% of revenues. Next slide, please. On capital, actually, not much to say other than, of course, we see a bit of reduction in the capital ratio, especially a function of the growth, the phenomenal growth. And in that sense, of course, we make sure that with appropriate measures in capital management, we still are able to fund future growth. So we will maintain payout ratios for the time being at around 50%. We have indicated landing zone between 50% and 60% also going forward. That should provide sufficient capital generation for strong organic growth. And of course, if and when M&A comes to play, we have opportunities in AT1 that at the moment, we are not using yet to potential. Next, please. With that, I hand over to Andreas to struggle with technology. And…

Thank you. Next slide, please. Yes. So on asset quality, I mean, on this slide, you don't see too many news anymore given what the colleagues already said. So in all areas, we see relatively strong loan growth. And of course, what you can see, and that was also mentioned before already is that, in the region outside Slovenia, we are growing even stronger than in Slovenia itself. That's why slowly after this increase also through leasing, we are now coming slowly again a little bit back in the percentage. Next slide. Asset quality, I mean, Blaz mentioned it. Quality is still very, very good. What you saw actually last year is a little bit of a jump in Stage 2 on the corporate side. We were discussing that. So here, primarily, we are talking steel and automotive. This is now, for the time being, largely stabilized. On the other side, you see now recently a little bit of a jump in retail. There is some inflow in Stage 2, but the much bigger effect here is actually that the statistical models in our subsidiary banks became much sharper and much more detailed. So you see movements much more granular, and this is, of course, also triggering more of Stage 2. So that's actually more precisely looking on items. But this is now a stable state from that perspective. So from methodological changes, you shouldn't see additional jumps here. Next slide. Yes, here, of course, no big news on the distribution. We are very well distributed between the industries. And that has, of course, since last quarter, not changed much. Next slide, please. On NPLs, you see still, I have to say, absolute volumes being very stable. So in the last half of the year, actually EUR 3 million plus. Of course, this translates still in percentage -- in slightly decreasing percentage because overall, we are growing. Also, we still see 1/3 of this NPL volume with no delays. So cases which mostly are on the way up rather than on the way down. And you still see a very strong collateralization. What has in the meanwhile, fully normalized is the distribution between the countries on the NPLs. So originally, if you go years back, you might still remember a stronger participation here of Slovenia due to historic reasons, and this is now much normalized. Next slide, please. I guess, that's from the risk side, the interesting slide for today. So you saw actually a very, very good second quarter, and this has turned for the time being, the provisioning into a slight release with the first half of the year. The biggest contribution here actually is the IFRS 9 review. This is happening every year in June, and we saw here mostly positive effects. Actually, we had a slight charge in Slovenia, a little bit more than EUR 2 million. And on the other -- in the other countries, releases, actually very much also in line with our expectation, honestly speaking, I was rather here expecting a net of EUR 10 million to EUR 12 million. So at the end, it ended up a little bit better. Then very, very moderate charges on cost of risk. And again, from written-off receivables, quite a nice contribution in a positive sense. So repayments here. And this ends up with, yes, well, actually a release of EUR 20 million in the second quarter, which makes our cost of risk, of course, at the moment looking very, very well. What I have to say is that, we are living in a very vivid environment. I saw already 1 case in this quarter, which is coming in from the not-so-small cases. If you ask me, I'm very confident that we will stay, of course, within the guidance of 30 to 50 bps cost of risk. But it would be, from my perspective, in this environment, for sure, premature now to give you a better indication than that. So if you ask me, we will come to that range, but probably -- most probably actually from my point of view, stay at the lower end of that. That's from my side for now. And with this, I'm handing back over to Blaz. Thank you.

Thank you. Let's move to the outlook slide, please. And by that, talk about what we expect towards the end of the year. Andreas was pretty clear when it comes to cost of risk. There is no change in guidance here. What is obvious is that, with 7% semiannual growth, talking about high single-digit annual growth is a bit conservative, right? So in this respect, we have improved the guidance here to low double-digit levels. We would see potentially in Q3, Q4, still some hiccups may predominantly from automotive and metal industry, but some restructuring cases have been well on track and has been wherever, of course, applicable, playing a very responsible role. And we believe that we will not see major fallouts. But of course, rather talking about 30 basis points from today's perspective is to be on a prudent side and not necessarily not, of course, ridiculous. We are keeping the efficiencies at the levels that we guided for, so 48%, depending now still a bit on the rate environment and further growth ability as something to be achieved. So we are currently at 46.3%. So we are still very well within. And other targets, we don't change as of now. Revenue dynamics is pretty solid. So, of course, we don't expect it to be below EUR 1.2 billion and where it ends, we'll see. We are keeping clearly the potential for the inorganic growth. We've been looking around continuously. We've said that always. And currently, there's nothing that we have been engaged in. There doesn't -- there don't seem to be many actionable assets. But here and there, there are some technical eventual opportunities in other areas such as fleet management, such as some portals and so on. But as I said, we have been analyzing potential opportunities from various industries, so be it insurance, be it classical banking, be it leasing, being other stuff. And we will, of course, communicate immediately when anything of that became relevant to be communicated. Currently, we have not been to a material extent, engaged in something like this. So we believe this is a very solid value proposition also for the upcoming year. As said, once we see the rates stabilizing, we -- with this growth and focus on efficiency of our investments and talent deployment, we believe we will be, again, growing the revenue base and by that, keep also, of course, the profitability levels, keeping the dividend payout ratios and in absolute terms, pretty attractive dividends. What is, of course, at the end, worthwhile mentioning at least Archibald mentioned that the arrival of Reinhard is, of course, significantly adding to the capacity of the Management Board to deliver the transition and execute the strategy. So we are very happy that he's with us now for 2.5 months already. On the other hand, today's decision of the Supervisory Board to grant further trust into the 3 of us is also pretty meaningful because this brings certain midterm visibility and predictability when it comes to the core of the Management Board. And in this respect, this is something that we believe is very important since you are looking in our eyes, and you are, by that, simply counting on us to be focusing for the upcoming strategic period until the end of 2030, full force and fully motivated on delivery. And by that, we officially, of course, thank the Supervisory Board for the trust, on the other hand, also to all of our clients and colleagues in the bank and the banking group staying with us on this exciting journey that we believe is yet to begin properly. So the best is still to come. By that, I would wrap it up and open floors for questions. Thank you very much.

[Operator Instructions] The first question is from the line of Sikimic Jovan with ODDO.

I would have several questions. I mean, I think Blaz you mentioned it several times about NII picking up. But can we be a bit more precise here? I mean, the growth has been really excellent with, what, 13%, 14% year-over-year. There is no -- apparently, there is no space to cut deposit costs into the rate drop apparently because you were previously quite at a low level, right? So you're exposed to -- on the loan side to downward repricing on Euribor, right? But which portion of loans still needs to be repriced down? And when would you really expect the NII pace to kind of pick up at least a bit given this kind of great loan growth?

Well, it would be very difficult to talk about picking it up. We are keeping it stable. We always said that we would believe that it would remain well above 3%, and this is what we are looking at. So I would not yet hope for a quick pickup in the rates and the margin, but keeping it stable is to me already a solid achievement. And it's a combination, obviously, of various measures. It's not only loan activity. Archie, you might add something here.

I mean, on the revenue side, I understood you look for revenue growth. And yes, I think with the loan growth remaining strong, and we see it strong. And you're right, the tensions are here and there in some pockets, the funding aspect of it because we maintain our principle of all entities, all subsidiaries remaining self-funded. But at margin of 3.5% and growth rates in the -- also next year, probably high single digits at least, I think there is a potential for a solid single-digit revenue growth. And what number it's going to be, there are so many elements going into that equation. But I think that's a good -- as a guidance I can give you for now. And that's what you see also in our outlook for '26 indicated, right?

We guide for EUR 1.3 billion growth...

Yes. Exactly. Exactly. Because I mean, if you make a run rate, what was the base of revenues in the first half was where...

Full year take something a little bit in excess of EUR 1,200, right, what we guide for?

Yes, exactly.

And again, fee and fee income growth year-to-date, something like mid-single digits. I see NIIs in an equal ballpark. Can be better with better circumstances here and there, but let's say, as a baseline, we talk mid-single digits in revenue growth. And that should deliver the outlook as you have it in front of you. So, I mean, it's always a combined equation, NII, non-NII, and there's always a bit of movement and shift. But I think it shows that there is revenue growth potential. Ideally, we exceed that. And I mean, our ambition to remind you is EUR 2 billion by 2030, right? So that suggests in itself CAGRs of revenue growth that are in the mid-single digits, right?

So mid-single digit, just to understand it, it would be for this year as well, right?

Well, it is at this level as of now, right? But we don't know yet what's going to be finally and terminally happening with the rates. So we are offsetting this with growth with some solid positioning of liquidity reserves on the longer end, where we see some promising yields and so on. So it's a combination of measures. So we can't be preciser than that. Very likely, we would show you more than EUR 1.2 billion this year. What exactly, let's see. And we are -- as precise as we can be for the next year, we are talking about EUR 1.3 billion, which is a solid growth of revenues, right? While we will, of course, focus still on accelerating investments. So '26 is still on the investment side. That's why you see cost/income ratio still at these levels, towards 2030, we would hope for being able to reduce this down to 45% as a ratio.

Okay. And you provided, I think, like-for-like OpEx growth, cost growth, 8% or 7% to 8%. What is the corresponding revenue growth excluding leasing?

Well, leasing is not yet very visible. We talk EUR 20 million or so on the half year mark. So it's not yet very visible.

Okay. And I have a last one on capital. I think last time you mentioned this Basel IV impact of around EUR 1 billion, if I'm not mistaken, on risk-weighted assets. So it's still not in the numbers, right?

No. Obviously not. So the trading book is still something that, as you know very well, is being debated at European level. When it eventually really comes or kicks in, we keep shifting the target, and we happily follow not booking it. So it helps.

But you don't have any kind of horizon when it may happen?

Well, I mean, the talk is '27 now, right? So -- but let's see. And yes, it's indeed still the same EUR 1 billion. And just to remind everybody, we don't really have a trading book. But for us, what matters is our equity participations in non-euro currencies, and they basically then amount to what the regulator considers a trading position. And that is actually the trigger for this EUR 1 billion roughly.

Ladies and gentlemen, at this time, we will go on with the questions submitted from our webcast participants. The first webcast question is from [indiscernible] with Erste Asset Management. And I quote, in terms of takeover targets, which regions would make the most strategic sense, potential size of acquisition?

I'm sorry, could you repeat? I didn't fully understand the question.

Which regions?

Which regions?

Which regions?

Okay. I mean, this would be, of course, our markets. This is what we've been telling throughout last -- also through the presentation of the strategy for the upcoming period. It would be, of course, our home region, which is predominantly, of course, former Yugoslavia territory. And we under our region also see Albania because this is one of the Western Balkans countries on the accession, it seems potentially accelerated accession. We see Prime Minister, Mr. Rama really acting very decisively in this direction. So Albania would be, of course, one of our desired market entries. We haven't found any reasonable opportunities by now, and we will simply keep analyzing eventual opportunities. So as I mentioned before, we have not been engaged in anything, but the region of interest is former Yugoslavia plus Albania.

The next webcast question is from Miguel Dias with Wood & Co. And I quote, congrats on the strong results. Just some questions from my side, please. NFC, seems like me and conscious were expecting a better performance here. How do you see development moving forward? Is this year development likely to be mid-single digit or high single digit is still within reach?

You're talking about net fee and commission income, NFC, right? I mean, it's between mid-single to high single digit. It really depends on also seasonality a bit. So I will be very confidently saying mid-single-digit, but there is some hope it might be better. There is strong pressure, obviously, from regulatory end, especially when it comes to payments, right? There is -- it seems a very strong focus of regulators even not only politicians, but also regulators on limiting certain fees. And let's see how this plays out. We've seen this in various geographies lately as a quite common phenomenon from, let's say, some things being enacted in Croatia, where we don't yet have a sizable banking operation. We've seen some stuff in Montenegro. We've seen some announcements and halfway threats in some other markets. So depending on where this ends, more or less, it would more or less determine. I would not see it below, let's say, mid-single digits, but can you do more? It's also a bit of a function of to what extent the environment will be susceptive for it.

And I would just add that particularly strong, and we are very happy our developments in asset management. So part of the answer is simply also finding new services as we did in Slovenia with wealth and asset management because providing value-added services is the best protection from competition. And here, we found something that, as you know, we are deploying now in other markets. So there is room to grow. It's on us to find these niches and pockets. That's for sure one of them. And we have 1 million customers in Serbia not serviced with these products, so that we sell very successfully in Slovenia. So part of the answer is external pressure and part of the answer is our ability to continue to add to the service spectrum, which we are, of course, very actively working on.

We have an audio question from the line of Dodig Mladen with Erste Bank.