Addiko Bank Aktie

Ladies and gentlemen, welcome to the Addiko Results Q1 2026 Conference Call. I'm Moritz, the Chorus Call operator. [Operator Instructions]. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Herbert. Please go ahead, sir.

Good afternoon, ladies and gentlemen. Dear operator I have been echoing. So maybe you can adjust it.

There is no other line currently open.

So when I'm talking I've been echoing.

I'm sorry, ladies and gentlemen, we seem to have some technical difficulties, please hold the line while we solve the issue. Ladies and gentlemen, we will now resume to the conference. Please go ahead.

Good afternoon, ladies and gentlemen. Very welcome to the presentation of the first quarter results 2026 of Addiko Bank on behalf of my colleagues, Ganesh, Tadej, Edgar and Stefan. We have prepared the following agenda for you. I will start with the highlights of the first quarter and then hand over to Ganesh, who will update you on the development on the business side. Afterwards, Edgar will provide you with more insight on our financial performance, and Tadej will inform you about the situation in the risk area. At the end, I will do a short wrap-up and comment on our outlook for 2026 before we move on to Q&A.

Let me start with the earnings and asset quality. In the first quarter of 2026, we achieved a net profit of EUR 10.1 million. This is around 30% below the strong Q1 result due to several onetime effects and environment-related factors that we will address during our presentation. Nevertheless, the result is also around 16% above the result of the fourth quarter of last year. The return on average tangible equity amounted to 4.7% with earnings per share at EUR 0.52. The operating result came in at EUR 20.1 million compared to EUR 25.3 million in Q1 2025. On the risk side, the picture remains very stable. The NPE volume stood at EUR 132 million with the NPE ratio stable at 2.6%. At the same time, the coverage ratio improved further to 81.9%. Cost of risk remained very low at 0.2%.

Turning to business development. In consumer lending, we once again delivered strong growth with new business up by more than 12%. In SME lending, new business development continues to differ by country, and we are working on targeted measures to further reinforce growth in this segment. Ganesh will give you more insights in his part. Net interest income remained stable. The growth in consumer lending and contributions from the sovereign bond portfolio largely offset the impact of the lower interest rate environment. Net commission income amounted to EUR 18 million, broadly in line with the prior year. Overall, we managed to keep our net banking income stable despite severe negative effects coming from the regulatory front and a significant lower interest rate environment compared to last year.

Let me briefly touch on funding, liquidity and capital. Our funding position remains very solid with customer deposits of EUR 5.3 billion, a loan-to-deposit ratio of around 70% and a liquidity coverage ratio well above 290%. Our capital position is also very strong with a total capital ratio of 21.7% entirely in CET1. Finally, on ESG and regulation, I would like to state that we have implemented CSRD compliant ESG reporting for 2025 and that the impact of the new NaBeG requirements for 2026 is currently under evaluation with expected relief on our disclosure requirements. Overall, we started 2026 with a resilient business model, strong capital, ample liquidity buffers and a clear growth momentum in our core consumer business.

Let me briefly comment on our Annual General Meeting. The AGM was held on 20th April 2026 and all agenda items were approved as proposed. Around 69% of shareholders registered to attend the meeting with approximately 51% ultimately participating. At the AGM, all agenda items were approved with vote levels of 99% or higher. Shareholders also approved the extension of the term of office of Kurt Pribil for 1 year and Frank Schwab for 3 years.

Turning to the shareholder structure and dividend topic. In line with supervisory expectations and regulatory requirements, the dividend remains suspended, taking into account ongoing regulatory considerations related to the current shareholder structure. While voting rights restrictions for a shareholder group were lifted in early February 2025, the banking supervisory authorities continue to identify uncertainties regarding the overall shareholder structure. These concerns may extend to potential limitations on certain recovery options in the conceivable event of a stress or crisis situation. Against this background and in the interest of the bank, the Management Board maintained its position of not resuming dividend payments as long as the ownership structure has not conclusively clarified and the related supervisory concerns have not been fully resolved. Finally, as announced in our last earnings call, Addiko shares were reclassified effective 1st of April 2026 from Prime market to Standard market of the Vienna Stock Exchange.

I will now turn to the intended voluntary takeover offers. On the 8th of April 2026, Raiffeisen Bank International AG announced its intention to launch a voluntary public takeover offer to acquire control of all Addiko shares at a price of EUR 23.05 per share. The offer is intended to be subject to a minimum acceptance threshold of more than 75% of the outstanding Addiko shares and does not constitute a delisting offer within the meaning of the Austrian Stock Exchange Act. In addition, RBI announced its intention to enter into an agreement with Alta Group d.o.o. from Serbia, which subject to a successful completion of the takeover offer would provide for the sale of Addiko's subsidiaries outside the European Union. The envisaged purchase prices are intended to correspond at least to the respective fair market value of the companies concerned. The completion of the so-called carve-outs is subject to the usual antitrust supervisory and regulatory approvals.

Let me now turn to the voluntary takeover offer announced by Nova Ljubljanska banka d.d. or NLB. On the 9th of April 2026, NLB announced its intention to also launch a voluntary public takeover offer to acquire control of all Addiko shares. The announced offer price amounts to EUR 29 per share. NLB's objective is to acquire a significant majority shareholding in Addiko through this offer. NLB intends to integrate Addiko's banking subsidiaries in the 5 overlapping markets into its existing operations. For subsidiaries outside the European Union, NLB announced that it will initially conduct a cost-benefit analysis. Should a divestment of individual subsidiaries be deemed appropriate, the envisaged sale price is intended to correspond at least to the fair value of the respective subsidiary. The publication of NLB's takeover offer was published out today in the morning. The minimum acceptance threshold was set at 75%, replacing the prior reference to a significant majority.

Today, at 10:45, RBI announced that they increased the offer price from EUR 23.05 per share to EUR 26.5 per share cum dividend 2025. The publication of RBI's takeover offer is expected to take place between the 14th and 19th of May 2026. These takeover offers will create additional costs that were not included in our original planning assumption. As customary, the Management Board and the Supervisory Board will carefully review them and within the legally prescribed time frames, position themselves accordingly vis-a-vis the shareholders in line with the statutory duties. The statements as well as the take offers themselves will be published on our website at www.addiko.com.

Let me now come back to our internal key initiatives. We already introduced the specialization program and its overarching goals in our last investor call. Today, I would, therefore, like to focus on what is new and more importantly, on the concrete topics we are working on in 2026.

Let me begin with business expansion. This year, our focus is on selectively broadening the product set where we see clear incremental risk-adjusted revenue potential. Concretely, this includes expanding products such as investments, digital insurance and factoring with a strong focus on attracting new customers while deepening engagement with our existing client base. In parallel, we are working on increasing digital channel usage and strengthening primary banking relationships, ensuring better product penetration and higher lifetime value across our customer base. In addition, we are evaluating new market opportunities. We will enter selected priority segments with tailored offerings, evaluate partnerships and further scale point of sales and partnership-driven acquisition models.

The second area is engine and platform with a strong emphasis on decision models, analytics and AI. This year is about translating these capabilities into tangible business impact. We are rolling out AI-enhanced decision models to improve decision quality and speed while significantly shortening development and delivery cycles across the organization. At the same time, we are accelerating end-to-end automation across risk and service processes. The objective is clear: reduce manual workload, lower FTE intensity, shorten turnaround times and improve both customer experience and compliance outcomes.

Finally, competencies and people. In 2026, the focus here is on measurable productivity gains and skills readiness. We want to increase efficiency through digital tools and automation, optimizing FTE allocation and ensuring 24/7 operational continuity and resilience. In parallel, we are investigating in building capital, data and AI skills across the workforce, retaining key talent and strengthening a culture of innovation and continuous learning to support the execution of the specialization agenda. We will keep you updated on the progress of the program.

With that, I would like to hand over to Ganesh, who will present to you the progress on the business development.

Thank you, Herbert. Good afternoon, everyone. Moving to Page 7. The first quarter 2026 was characterized by a lower interest rate environment, continued competitive pressure and ongoing regulatory limitations in our key markets. These factors affected demand, intensified competition and contributed to further price pressure. Despite these negative effects, our specialist strategy continued to show resilience. Consumer segment remained the key growth engine on the first quarter. The new business increased around 12% year-over-year despite the debt-to-income limitations in Croatia and Montenegro. This demonstrates the strength of our digital lending and POS proposition, the quality of our customer base and our ability to continue generating alternative volumes even under regulatory constraints.

As a result, consumer loan book grew 9% year-over-year with a new business yield of around 6.3%. The SME environment was more challenging in the first quarter. Nevertheless, the SME loan book grew 4% year-over-year with a yield of around 4.6%. I will explain the key reasons for softer SME new business development on the next page. Overall, our focused loan book expanded by 7% year-over-year with a blended yield of 6.2%. As a result, the focus book is now representing 92% of our total loan portfolio, demonstrating the resilience of our specialist strategy.

Please turn to Page 8 for more detailed insights. Looking more closely at the consumer segment, regulatory interventions continue to affect market dynamics in our key markets. In Croatia, the 40% debt-to-income cap introduced on July 1 last year, tightened lending conditions and affected demand. In Serbia, the mandated lending rate cap led to reduction in interest rates and added further pressure on pricing and liquidity. In addition, the implementation of 3 accounts in Croatia created a negative impact on fee income. Together, these measures affected both lending volumes and profitability, requiring us to adjust pricing, product design and mitigation actions accordingly.

Looking ahead, we are taking further actions to support profitable growth. First, in Croatia, our mitigation measures are now fully launched. This includes consolidation loans and co-debtor product improvements, which allows us to increase the customer eligibility within the new regulatory framework, while maintaining prudent risk standards. Second, we continue to expand our partnership ecosystem. This includes the onboarding of a new major partner in Serbia and the continued development of our partnership business in Croatia. Third, we will continue to optimize our digital lending funnels in key markets to improve conversions, speed and customer experience. Fourth, we will expand revenue pools through a focused set of new products, including home equity loans, digital insurance, digital investments and stronger customer engagement initiatives.

And finally, we will selectively increase lending prices across markets where feasible, supported by new dynamic pricing tools, which continue to optimize deposit costs to improve our net interest margin. Together, these measures will allow us to better balance growth, margin and risk appetite across markets. We believe these measures will support further profitable growth under the new regulatory framework and strengthen the resilience of our consumer business.

Let's turn now to SME. The SME environment was more challenging in the first quarter. The overall SME new business declined around 5% year-over-year, mainly driven by a double-digit decline in January and February in Slovenia and Croatia.

There are 3 main reasons for this development. First, in Croatia, the major trade-driven project on the digitalization of invoices created operational strain for entrepreneurs for the implementation. This impacted their day-to-day operations and reduced lending demand, especially in the micro and small segment. Second, in Slovenia, macroeconomic volatility and investment uncertainty led many entrepreneurs to preserve liquidity and postpone investment decisions. Third, the market remains highly competitive, particularly in standard working capital and unsecured lending, which continues to put pressure on volumes and pricing. In response, we have launched a clear turnaround growth agenda, particularly in Croatia and Slovenia. The key objective is to evolve our SME business from a pure fast unsecured lending model towards a deeper business relationship with SME clients. This includes a stronger focus on limited ticket investment loans, secured lending and multipurpose credit frames.

At the same time, we are also working to bring -- build stronger brand awareness and consideration for Addiko as a relevant SME banking partner, not only for fast working capital financing, but also for broader and deeper financial relationship with entrepreneurs. This shift is already visible in the portfolio with the medium SME segment strongly growing year-over-year, while micro and small SME remained under pressure. In parallel, we are launching a new factoring product in Slovenia in partnership with a leading digital factor company, starting with a controlled pilot before scaling the proposition further. This enables us to support financing with SME supply chain while maintaining and exposure to more established premium clients. We are also improving operational efficiency by automating credit decision processes, digitalizing origination for our broader SME products and expanding self-service capabilities in digital channels, including loan initiation through mobile app.

In addition, we are adjusting the sales operating model for further lending needs and SME customers will value targeted relations support. Therefore, our model will contribute digital efficiency and scalability with selective relationship management. Overall, our SME strategy remains unchanged. We want to be the fastest and most convenient provider of financing to underserved micro, small and selected medium-sized enterprises, but we are also adapting the model to current environment by building a stronger brand consideration, broadening secured lending, improving our digital origination and making the sales force more scalable and resilient.

Let me also touch briefly on technology and AI. In 2026, our focus will be on using AI to enhance business automation, improve digital funnels, support better pricing and risk decisions and further reduce manual processing across consumer and SME. To summarize, Q1 confirms that our specialty strategy remains resilient. Consumer continues to deliver solid growth despite regulatory headwinds in SME. We saw a softer start of the year, but the turnaround actions are clearly defined and are already under the way. Looking forward, we will continue to focus on profitable growth, prudent risk discipline, digital execution and expansion of fee-driven revenue pools.

With that, I hand over to Edgar.

Thank you, Ganesh. Good afternoon, everyone. Let me speak about Page 10, where we summarize our financial performance for the first quarter of 2026 and then turn to Page 11 to cover our capital position, which continues to be a clear strength of the group.

Starting on Page 10 and top line. Despite a significantly lower rate environment compared to the first quarter of last year, we managed to keep our net banking income broadly stable, supported by strong consumer lending volumes, disciplined balance sheet management and a resilient funding profile. Net interest income increased slightly by 0.4% year-on-year. This reflects high average loan volumes, in particular in the consumer business as well as continued contributions from our sovereign mainly government bond portfolio. These positive effects largely offset the ongoing loan yield compression and lower income from Central Bank placements following the ECB rate cuts. The lower interest income was more than offset by a meaningful reduction in funding costs, driven by deposit repricing and an improved deposit mix, including a higher share of a-vista deposits.

With that said, competitive dynamics in Serbia and Montenegro led to some quarter-on-quarter pressure on deposit costs. Net fee and commission income came in at EUR 1,818 million, down slightly by 0.9% year-on-year. This development is mainly driven by lower transaction-related fees and card revenues, while bancassurance income contributed to perform well and partly compensated the decline. Overall, our core fee base remains stable and largely driven by the consumer segment.

Turning to costs. Our general and administrative expenses in short OpEx increased by 6.1% year-on-year. This was mainly driven by wage increases, including inflation-linked adjustments and specifically government-driven minimum wage changes as well as seasonality effects. In addition, OpEx includes a nonrecurring EUR 0.8 million effect related to the remeasurement of share-based compensation following the recent increase in Addiko's share price. As a result, our cost-income ratio for the quarter came in at 66.7%, up year-on-year, reflecting the low interest rate environment, market-driven deposit pricing dynamics in selected countries and the cost effects I just outlined.

Looking at the other operating results, this line was mainly impacted by higher deposit insurance contributions in Slovenia, which were fully booked in the first quarter this year, whereas the prior year charges were largely recognized later in the year. In addition, the net result on financial instruments was negative in the quarter, mainly reflecting FX volatility as well as a one-off effect from a targeted bond sale.

Now briefly on the other results, which came in benign in the first quarter. However, we continue to monitor developments in Slovenia closely, in particular, regarding the stat of limitation assessment by our courts, and we expect some normalization in the form of related charges and legal costs to materialize in the following quarter. In this context, we are also observing the upcoming changes in the composition of the Supreme Court in Croatia. Putting it all together, the operating result declined by 20.6% year-on-year to EUR 20.1 million. Risk costs remained very benign with an expected credit loss expense of EUR 6.2 million, corresponding to cost of risk of 0.17% on net loans, not annualized. The result after tax amounted to EUR 10.1 million compared to a very strong first quarter last year that also benefited from some favorable one-offs and a different rate environment.

On that note, the tax line also benefited from a small one-off deferred tax adjustment, resulting in a lower effective tax rate compared to the prior year period. Overall, while earnings in the first quarter are below the exceptionally strong prior year level, they, however, demonstrate the resilience of our core business model in a charatively speaking, more challenging operating environment.

Let me now turn to Page 11 and our capital position. Our CET1 ratio stood at 21.7% at the end of the first quarter compared to 22.4% at year-end 2025. This figure includes the audited profit for the full year '25 and in line with the supervisory expectations and regulatory considerations related to the current ownership structure, no dividend has been deducted. You will also see a slight negative movement in OCI, reflecting global market volatility with fair value reserves on debt instruments at minus EUR 18.2 million compared to minus EUR 16.3 million at year-end 2025.

Risk-weighted assets increased by around 3% in the first quarter since year-end 2025. This was well contained and mainly driven by loan book growth as well as the ongoing phase-in of regulatory effects, including the Article 500a of the CRR. So the main driver was credit risk RWAs, which increased by EUR 97 million, in line with business development. Importantly, our capital buffers remain clearly and well above regulatory requirements and guidance giving us sufficient flexibility to support disciplined growth, absorb volatility and manage the evolving regulatory environment.

So to summarize, and I will echo some of the points that we've already made, we delivered stable net banking income in a materially lower and quite operationally challenging rate environment. Consumer lending volumes continue to support revenues despite new regulatory restrictions, curbing revenue generation year-over-year, while cost discipline and benign risk costs underpin profitability. Our capital and liquidity position remain very strong with ample buffers.

With that, I will hand over to Tadej, who will walk you through the risk development in more detail.

Thank you, Edgar. I will provide an overview of our credit risk performance for the first quarter of 2026. As indicated on the slide, we continue to see balanced development in our NPE portfolio. NPEs in the first quarter slightly increased to EUR 132 million, primarily driven by somewhat higher inflows from SME defaults as well as movements within the consumer portfolio. Nevertheless, NPE volume is much better than our expectations for the first quarter. The overall NPE ratio remained stable at 2.6%, underscoring the continued active portfolio management. Looking at the quarterly dynamics, both NPE formation and exit remained well controlled, confirming broadly balanced development and continued stability across the portfolio.

Moving to loan loss provisions and cost of risk. In the first quarter of 2026, credit loss expenses amounted to EUR 6.2 million, resulting in a cost of risk of 0.17% on net loans. Breaking this down by segment, the cost of risk stood at around 0.2% in consumer segment and 0.3% in SME, while the non-focus segments continued to show releases of around 0.3%. The increases in provisions compared to the previous year's -- previous year was mainly driven by lower releases in the non-focus segment and higher provisions in SME. The overall post-model adjustment remained unchanged at EUR 1.2 million.

Stepping back, the first quarter was a good one from a risk perspective across practically all segments. The level of provisions came in below our expectations and default rates remain within or even slightly better than what we had anticipated. At the same time, we remain mindful that the current global situation, particularly developments related to the conflict in the Middle East, increases uncertainty. This makes it more difficult to predict how our clients will be impacted going forward and which industries may come under greater pressure if the situation remains unresolved for a longer period of time. Therefore, maintaining a prudent risk approach remains key. We continue to closely monitor developments across segments and geographies and stand ready to react quickly where needed. To summarize, our portfolio position remains resilient, supported by stable asset quality, balanced NPE development and a low cost of risk, while we remain cautious given the elevated level of external and global uncertainty.

Thank you. With that, I go back to Herbert.

Thank you, Tadej. Let's move on to our outlook. In the upper part of the page, you see our current outlook figures for 2026. Here, the key message is we keep this outlook unchanged.

Now let me briefly give you our perspective on the environment. Global uncertainties increased significantly during the first quarter due to the war between the U.S., Israel and Iran. The mid- and long-term consequences on the economy and knock-on effects on our region are currently difficult to forecast. In addition to potential negative influences coming from this agenda and as already reported, we need to address government and regulator-driven constraints that limit our revenue generation. Nevertheless, so far, the macro backdrop in CSEE remain broadly stable for the time being. We are confident that we will be able to continue solid growth in our consumer business. Furthermore, also we expect the SME environment to remain highly competitive. Our targeted initiatives are expected to create new growth opportunities also in this business segment.

As mentioned, the Serbian market is currently challenging to a highly competitive environment and unreasonable pricing. However, we continue to pursue growth based on disciplined and reasonable pricing. Altogether, speaking for all markets, we will keep our prudent approach in terms of risk management to balance growth versus risk appetite as a priority over volume growth. With regards to the intended offers, I would like to reiterate that the Management Board and the Supervisory Board will carefully review the relevant documentation and will take a position towards the shareholders in due course in line with legal obligations. In parallel, we will do our best to encourage and motivate our teams in order not to lose focus. Therefore, together with our teams, we will continue to work towards our goal of becoming the leading specialist bank for consumers and SMEs in Southeast Europe. On that basis, we continue to work with full energy to further improve the bank to create value for our clients and for our shareholders.

With that, I would like to conclude the presentation. Our next earnings call to present to you the half year results is scheduled for the 13th of August. I would like to thank you for your attention. We are now ready for your questions. Operator, back to you.

[Operator Instructions] And the first question comes from Mladen Dodig from Erste Bank.

Can you hear me?

Yes.

Well, as always, congratulations on the results in quite a challenging environment. Thank you for mentioning Serbian market so many times. It really makes me proud too, as I'm looking at your numbers here. And obviously, the recovery is quite visible. And could you just maybe elaborate a little bit? I know that there is quite a fight for deposits here. Do you think that it will and in asset yields going slightly up as the demand is still kind of healthy or there will be more of a pressure. Basically, the question is related to whether you see your NIM stable ahead.

Thank you, Mladen. Thank you. And also thank you for your kind words. I would suggest maybe to give a brief comment from my side, and then I would hand over to Ganesh to give you his view from the business perspective. We anticipate the situation, especially in Serbia to continue for the time being. So meaning the price pressure on both sides on the asset and on the liability side. Nevertheless, we also decided for ourselves to not attend and do any unreasonable business. So we will further adjust our yields on both ends of the balance sheet in the right direction in order to improve further on the margins in this year.

But I would hand over to Ganesh to give you more background on this.

Mladen, this is Ganesh. I would just extend what Herbert said. So I think we have some record months in consumer. A lot of refinancing is happening. We are doing quite a double-digit 44% growth in the recent months. So it's a very high volume growth is happening on the lending side. But then the margins are under pressure, as you know. And what we are doing basically is also increasing our pricing wherever it is possible. As you know, there is a lending cap by the government by NBS. So we are increasing our prices regardless of how competition will progress. And we want to have more profitable business from a lending perspective. And we are doing everything to collect deposits more in a cheaper way, but it's very tough currently in the market. That's what we have seen.

Understand. And with all these specific stories around SMEs in particular geographies, plans it's, let's say, resolved or the situation stabilizes, do you expect that your SME part could really work a little bit better because with this, I don't know how much 4-point-something percent lower new business. Do you think that, that could level balance or level up or?

I certainly think because as I mentioned in Croatia, we had this onetime effect in a couple of months where the SMEs have been affected by this digital invoicing story, and that is done. Also immediately, people have dropped price in Croatia. So that we -- I'm sure we can actually turn around this Croatian business in there. And we are moving towards a bit higher ticket size and multipurpose cranes. as I mentioned in the call. So we are actually not only just -- we are also reinventing ourselves on the medium segment and more secured lending side. So that would help us in Croatia turnaround. And in Slovenia, we are also launching this partnership with a new factoring opportunity there, and that would also started as a pilot, but that would also help us long term. So we do have some measures. We have seen the blueprint of Serbia, how it's working. We are in a very healthy double-digit growth, and we want to copy this in Croatia and Slovenia, so to get a healthy turnaround.

So there will be more like medium SME tickets ahead also.

Correct.

Okay. One question for Edgar, if I may. I had some interference on the line. So if Edgar, could you please just on operating costs, a few details why the such increase?

Sure, Mladen. Thanks for joining the call. Always great to have you. Look, I mean, on the operating costs, we all have seen governments increasing minimum wages last year. We had it in the course of the year in the Republic of Srpska. We also had smaller adjustments in one of the other countries. So this year, we actually had it as -- probably as an election -- pre-election present also in Slovenia. So a small part of that will be reflected in Q1 as well. So increase in minimum wages cost a couple of hundred thousand on a year basis.

Point two, it unfortunately also affects to a certain extent, the whole staffing pyramid because it still needs to work out among the different employment levels. So this is clearly driven by not only inflation, but also by one of the other political priority. On top of that, what we had, and this is a larger effect in Q1 '26 due to the increase of the share price, we had to revalue our phantom shares on stock, so to speak. This impacted OpEx as well. And on top of that, you have all the nitty-gritty inflation adjustments of IT service contracts, rental contracts that were not yet fully adjusted in the first quarter last year, but starting this year or during the first quarter have been adjusted.

Yes. And this preloading of deposit insurance cost, that's in other items, right?

That's in other operating income, and that's actually new that came last year, partially in the first quarter, partially in the second quarter. So a new request from the local -- from the Bank of Slovenia towards all banks to front-load the deposit insurance costs on one hand and on the other hand, also increased the costs related to deposit insurance. This year, these increased costs are fully reflected in the first quarter.

Any upticks from Romania, some palpable developments or still early to say?

Maybe I'll start on the cost base. So we did have some marketing activities. This is also part of front-loaded marketing costs that Herbert pointed out. But when it comes to the rest of Romania, maybe Ganesh wants to chime in.

Yes. So Romania, as you know, we tried the B2C model, and we continue to expand there. But still, it's still a slow cooking process. We have not seen a significant effect on the business yet. So we are also -- on top of it, we are taking a couple of bets in Romania, especially expanding with B2B2C model with the brokers and also adding a more refinancing capability there. So we are really hoping to expand more in the alternative channels and see if we can further grow there in Romania.

Well, I'm sure there is no questions regarding the takeovers you could answer. But maybe just -- you mentioned a couple of times a legal obligation to give opinion on the -- is there a certain period in terms of days or you can wait for the other official terms coming from RBI or we might see something earlier on NLB thing?

So as you know, we -- NLB came out today. And RBI needs to come out between tomorrow, so the 14th until the 19th with their offer. And our reaction time is 10 trading days.

10 trading days.

Within 10 trading days, we have to file our statement. The statement will be done by us. There will be a statement from the Management Board. There will be a statement from the Supervisory Board, and there will be a statement from the works council. So as we had it last time when we got the offers from Agri and NLB, at that time, all these offers were aligned and the same. We will see how it will be this time. But for that, we first need to see the offers.

So basically, it's possible that you might come out with the opinions on the same date for the -- both?

It is possible that would mean we are faster than law on RBI that it needs to come out first.

Yes, of course. Well, what can I say, thank you very much and yes, I hope to hear from you in the next update.

Thank you very much, Mladen.

So there are no further questions on the telephone line at this time. So I would like to hand back to the team if there are any questions on the webcast.

Thank you, operator. We have no questions on the webcast.

Then I would like to turn the conference back over to Herbert for any closing remarks.

Thank you very much. Thank you for listening and for the attention. As said, our next call is on the 13th of August, where we will present the half year's results. Otherwise, thank you very much, and have a good day. Goodbye.

Ladies and gentlemen, the conference is now over. Thank you for joining, and have a pleasant day. Goodbye.

Ladies and gentlemen, welcome to the publication of the consolidated Annual Report 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead, sir.

Good afternoon, ladies and gentlemen. Let me welcome you to the presentation of the results of the business year '25 of Addiko Bank on behalf of my colleagues, Ganesh, Tadej, Edgar and Stefan. We have prepared the following agenda for you. I will start with the key highlights and the related achievements of '25. After that, I will pass on to Ganesh, who will update you on our results on the business side. In the second chapter, Edgar will share insights into our financial performance, while Tadej will outline the progress made in the risk area. At the end, I will present to you the cornerstones of our new midterm specialization program and our updated guidance 2026. After that, we will move on to Q&A.

So let's begin with the highlights. I'm confident to inform you that despite negative influences coming from the legislative changes in several countries, we were able to close '25 with a net profit of EUR 44 million. These results includes a net profit for the fourth quarter of '25 of EUR 8.7 million, which is EUR 1 million higher than the result of EUR 7.7 million in the fourth quarter of 2024.

Our earnings per share for '25 amount to EUR 2.28 and our return on average tangible equity comes in at 2.5 -- sorry, 5.2%, also influenced by the increased equity base.

Overall, 2025 was a challenging year for Addiko because of reasons we will come back later on. Nevertheless, we were successful to achieve a 20% growth rate on new business in consumer lending and finally, to return to a positive trend in SME with an 11% growth rate on new business.

Net interest income was with 1.8%, slightly lower year-on-year, driven by the impact of the lower interest environment on our back book and on our national bank deposits. A key positive is that thanks to our strong sales performance and the strategic cooperation agreement in our insurance business, we were able to increase our net commission income by 7.6% year-on-year. Altogether, we managed to slightly improve our net banking income by 30 basis points despite a significantly lower rate environment. Ganesh will give you more insights into the business development during his presentation.

Because of our strict cost management, we accomplished to limit the increase of our administrative costs below inflation to only 1.6%. Nonetheless, due to the factors mentioned before, our operating result ended up at EUR 109.8 million compared to EUR 112.3 million in '24.

Let's briefly comment on our positive risk performance. We successfully reduced NPE volume further to EUR 125.5 million compared with EUR 144.7 million at the end of 2024. Consequently, our NPE ratio also improved to 2.5%, down from 2.9% in the previous year. On top of that, our coverage ratio continued to improve to 81.7% from 80% at the end of last year. Ultimately, the cost of risk on net loans ended up at 0.96% or EUR 35.2 million compared to EUR 36 million last year. Tadej will give you more details on the risk development later.

Our funding situation remained quite solid with EUR 5.3 billion deposits and a loan-to-deposit ratio of 70%. Our liquidity coverage ratio is currently comfortable above 300% at group level. And finally, our capital position gets even a bit stronger with 22.4% total capital ratio, all in CET1 based on Basel IV regulations compared to 22% based on Basel III in the previous year.

Next page, please. As mentioned earlier, Addiko faced interventions from regulators and governments that negatively impacted the bank's performance in several of our markets. Croatia introduced a 40% debt-to-income cap for nonhousing loans effective 1st of July '25 and required banks to provide essential banking services free of charge since January '26. Serbia, Republika Srpska and Montenegro introduced interest rate caps, fee restrictions and debt caps. Overall, these measures are having a significant negative impact on our core revenues. Consequently, we have introduced initiatives to counterbalance the income reductions and to develop new income sources. Going forward, all regulatory effects, as known of today, are already reflected in our updated guidance.

As reported in our earnings calls last year, we entered the Romanian market via our Slovenian bank through EU passporting, offering a fully automated digital lending solution for consumers. In the second half of '25, we launched several marketing campaigns to build awareness and strengthen our brand positioning. Although we achieved our recognition and recall targets, the conversion rates were below our expectations. Consequently, we refined our marketing approach. The new marketing campaign supported by an Addiko Song with life-size Oskar combined with targeted brand-building initiatives was launched in mid-February. We will keep you updated on the progress and will conduct a results-driven review in the second half of this year.

Now with regards to our ESG program, I can confirm that all initiatives remain on schedule and are advancing in line with plan. Additional information is set out in the appendix of this presentation.

Let me briefly touch on our regulatory sustainability disclosures. As part of the updated EU taxonomy framework, the commission has introduced a temporary opt-out for financial institution. In our case, this is fully aligned with our business model. Addiko made use of its opt-out as we do not engage in taxonomy-relevant lending activities. This approach avoids unnecessary administrative burden while maintaining full transparency in our ESG reporting.

Next page, please. Let me briefly comment on our share performance and the scheduled changes to our listing. Addiko's share price increased noticeably during 2025, closing the year at EUR 22.5 and continued to rise further in 2026 to EUR 27.4 as of yesterday evening. At the same time, trading volumes and overall liquidity has remained persistently very low, making professional market making difficult and not economically viable for providers. As a consequence and in line with the Vienna Stock Exchange rules, our shares will be reclassified from the Prime Market to the Standard Market with effect of 1st of April 2026. This reclassification has no impact on our strategy or operations, but better reflects the liquidity profile of the stock.

Let me now address the regulatory concerns regarding our shareholder structure. Following the sanction imposed by the European Central Bank in 2024 for exceeding the 10% ownership threshold without prior approval, certain regulatory uncertainties continue to persist. Although the voting restrictions applicable to a specific shareholder group were lifted in early February 2025, the supervisory authorities continued to identify residual uncertainties concerning the bank's shareholder structure. The bank remains fully committed to maintaining a transparent, cooperative and constructive relationship with all relevant regulatory bodies and we continue to engage actively with them to address the outstanding supervisory considerations. In this context, I need to mention that the current shareholder situation continues to create significant additional efforts and a severe distraction for the bank. Nevertheless, we will carry on to do our best to fulfill the increasing related demands put upon us by our regulators.

In line with supervisory expectations and regulatory requirements, the dividend distribution for the financial year 2025 remains suspended, taking into account regulatory considerations related to the shareholder structure.

From the perspective of the bank's long-term stability and in the best interest of all stakeholders, the Management Board maintains its position that dividend payments will not be resumed until the share -- until the ownership structure has been conclusively clarified and the related concerns raised by the supervisory authorities have been fully resolved.

Now let me briefly outline how we performed against our '25 guidance. The positive message is that despite headwinds, we delivered on our '25 guidance. In income and business, our loan book grew by 7% year-on-year, supported by strong consumer demand and the renewed pickup in SME in the fourth quarter. Our NIM ended up at 3.7% and net banking income held stable. Costs were managed well with OpEx at EUR 195.4 million, coming in below guidance. In risk and liquidity, performance remained fully in line with expectation. We kept the cost of risk below 1%, achieved an NPE reduction to a level of 2.5% and closed the year with a loan-to-deposit ratio of 70%. In profitability, we reached a return on average tangible equity of 2.5% (sic) [ 5.2% ]. Overall, these results reflect our disciplined approach in a demanding environment.

Now let me hand over to Ganesh for further insights into the business development.

Thank you, Herbert, and good afternoon, everyone. Moving to Page 7. As Herbert mentioned, 2025 has been a challenging operating environment. Credit demand remained resilient across our markets. However, interest rates declined rapidly during the year. This intensified competition and created significant pricing pressure. As a result, loan book retention also became more challenging as customers increasingly refinance their loans at the lower rates. At the same time, unexpected regulatory interventions also affected market dynamics. The most notable example is Croatia, where a 40% debt-to-income cap was introduced on July 1. In Serbia, authorities mandated lending rate caps, which led to interest rate reduction. These measures tightened our lending conditions and also affected our pricing in both the markets.

Nevertheless, despite these headwinds, our continued focus on digital-savvy customers, the micro SME segment and point-of-sale financing combined our strategy of offering lower-ticket, high-margin loans with speed and convenience while maintaining prudent risk discipline enabled us to deliver strong growth.

Consumer new business strongly increased by 20% year-over-year, resulting in 10% growth of our consumer loan book with an attractive new business yield of around 7%. In the SME segment, the new business grew 11% year-over-year with a yield of around 5%.

Overall, our focused loan book expanded by 7% year-over-year with a blended yield of 6.4%. As a result, the focus book now represent 92% of our total portfolio, demonstrating the resilience of our specialized strategy, even in a more competitive and regulated environment. Please turn to Page 8 for a more detailed outlook.

Looking more closely to our Consumer segment, the strong double-digit growth we delivered was driven by several key factors. First, we benefited with solid market demand across our core geographies. Second, we successfully launched full digital end-to-end lending with zero human interventions in 3 of our core markets, clearly differentiating our offerings from competitors and significantly improving speed and customer convenience. Third, our point-of-sale proposition continues to perform well, delivering 14% year-over-year growth, further supported by the launch in Bosnia and Herzegovina. Fourth, we identified a sweet spot between growth and pricing, allowing us to proactively retain customers and protect the loan book through disciplined repricing actions.

In addition, we launched newly redesigned mobile app with the introduction of new card features, including Google Pay and Apple Pay integrations, which contributed to a 12% year-over-year increase in net commission income. Finally, in response to evolving regulatory environment, we are already implementing mitigating measures, including downselling, introducing co-debtor structures and focusing on high-quality customer segments with larger ticket size. We are confident that these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward in 2026.

Let's turn into SME segment. Our core business model remains unchanged, to be the fastest provider of unsecured lower-ticket loans to underserved micro and small enterprises through our digital agents platform. As mentioned earlier, the market environment remained challenging due to aggressive pricing, which has created some pressure on our loan book retention. However, with improving market demand, we implemented several targeted initiatives to reignite the growth.

First, our turnaround plan in Serbia supported by new leadership team delivered strong momentum with 43% year-over-year growth in new business. Second, we placed a strong emphasis on retaining quality clients and protecting the loan book through more targeting pricing, loan prolongations and enhanced service delivery. Third, while maintaining our core focus on unsecured lending, we broadened our product offering by placing also greater focus on slighter larger tickets and secured lending, supported by experienced and high-quality teams to ensure continued risk discipline. This resulted in double-digit year-over-year growth in investment loan volumes. Finally, we launched a new digital SME tool designed to process high ticket loans, faster and with greater simplicity, providing a clear competitive advantage. Overall, we believe these initiatives will position us well to return to sustainable growth in the SME segment going into 2026.

Lastly, let me briefly touch on our progress in AI adoption last year. We are actively investing in AI technologies to enhance both operational efficiency and customer experience across the organization. The 2 AI applications are already live, one supporting employees by handling HR-related inquiries and others assisting our call center by analyzing customer inquiries and generating response recommendation. In addition, we are currently exploring further AI use cases across IT, risk and marketing with the aim of strengthening operational efficiency and enabling core data-driven decision-making across the bank.

To summarize, while 2025 presented a challenging operating environment, it also pushed us to further refine our specialist business model and adapt our pricing approach. Most importantly, we launched several new propositions that enhance speed, convenience and value for our customers across Consumer and SME segment, positioning us well for continued growth going forward. Looking ahead to 2026, we will continue to focus on profitable growth while implementing measures to mitigate the impact of the recent regulatory restrictions, in particular, we aim to accelerate growth in Romania through a refreshed marketing approach and strengthened broker partnerships, and we will launch our point-of-sale lending business in Croatia. At the same time, we will further enhance our end-to-end digital value proposition and refine our dynamic pricing capabilities to better balance growth and profitability.

In parallel, we are developing a new specialized program focused on new lending products aimed at deepening customer engagement and further expanding our fee-driven income streams. Herbert will provide you more details on this later.

Please let me hand over to Edgar.

Thank you, Ganesh, and good day, everybody. Let's turn to Page 10 for an overview of our performance for the full year 2025. Despite a challenging interest rate environment and cost pressures, we delivered stable results, supported by a resilient consumer lending, strong fee income and a robust capital position. Now let's take this one by one.

Our net interest income came in at EUR 238.4 million, a slight year-on-year decrease of 1.8%. This reflects the lower rate environment, which weighed on income from our variable back book, so circa 13%, 1-3%, of our book and the income on National Bank deposits. At the same time, balanced treasury and liquidity management activities as well as lower funding costs acted as a stabilizer. As a reminder, the rate backdrop shifted materially throughout the year with 4 rate cuts totaling 100 basis points during 2025, which also pressured pricing on new loans and elevated early repayments of higher-priced parts of the back book.

On the business side, as Ganesh pointed out already, momentum in our Consumer segment remained quite strong, with interest income up 6.3%, driven by the 10% growth in the Consumer loan book. Overall, the focus book grew 7% year-on-year, showing also a slight improvement during the last quarter of 2025.

On the fee side, we delivered solid growth. Net fee and commission income rose 7.6% to EUR 73 million, driven by bancassurance, accounts and packages and card business, which altogether grew 13%, 1-3%, year-on-year, with bancassurance as a key contributor.

Looking into the year 2026, those new regulations in Croatia limiting fees on banking products already have an impact on fee generation today and we'll keep having an impact going forward. Putting it together for 2025, net banking income came in at EUR 316.9 million and was broadly stable year-on-year despite a challenging environment.

Our general administrative expenses, in short OpEx, increased slightly to EUR 195.4 million, up 1.6% year-on-year, mainly due to wage adjustments, targeted operational investments and general indexation increases. When excluding the EUR 3 million in extraordinary advisory costs related to the takeover offers in the year 2024, operational costs were up just 3.2% year-over-year.

Our cost-income ratio came in at 61.7%, which is a tad higher than last year.

The operating results landed at EUR 109.8 million, down 2.3% year-on-year. The other result, which includes costs for legal claims as well as for operational banking risks remained manageable for the full year. We have allocated some additional provisions for new legal claims in Slovenia and made a rather small top-up in Croatia as part of the year-end closing also to reflect increased lawyer costs. The main point in Slovenia remains what the higher courts will rule upon regarding the applicable statute of limitation and if that will be in line with the currently dominant legal opinions.

When it comes to risk costs, our expected credit loss expenses were EUR 35.2 million, which translates into a cost of risk of just south of 1% on net loans for the full year. Tadej will provide more insights in just about a moment.

All in all, we delivered a net profit after tax of EUR 44 million, which translates into a return on average tangible equity of 5.2%. So while operating in a lower rate environment and managing cost pressures and new regulatory constraints, our focus business remained resilient with solid momentum in consumer lending and continued support from fee-generating activities last year, while also SME lending started to pick up again during the fourth quarter last year, specifically also in Serbia.

Turning to Page 11 and our capital position which remains a real strength. Our CET1 ratio came in at a very robust 22.4% at year-end 2025. For context, that's slightly up from the 22% at year-end 2024, which, however, was based on Basel III. While as we all know, for 2025, the new Basel IV or call it CRR3 rules apply. This CET1 ratio now includes the audited profit for the year with no dividends being deducted in line with supervisory expectations and taking into account regulatory considerations related to the current shareholder structure.

You will also notice that our risk-weighted assets increased and that's mainly driven by changes in risk weighting under Basel IV as well as the new interpretation of EBA guidelines on structural FX, which we discussed in previous earnings calls. Looking ahead, we have already reported on the final SREP for 2026, which includes a small increase of our Pillar 2 requirement, so up by 25 basis points to 3.5%, while the Pillar 2 guidance remains unchanged at 3%.

So in short, our capital is strong and our buffers are ample, supporting controlled growth while we navigate the evolving and not often straightforward regulatory landscape.

With that, I will hand over to Tadej for more on risk management.

Thank you, Edgar, and good afternoon, everyone. Let me provide an overview of our credit risk performance for the year 2025. As indicated on the chart to the left, one of our key risk management initiatives was reducing of NPE volumes. We achieved this through proactive portfolio management, portfolio and forward flow sales, write-offs, targeted restructuring and collections. The result is clearly visible. We achieved a significant EUR 19 million reduction in NPE volume compared to the end of the previous year. Out of that, as illustrated on the right-hand side of the slide, the NPE portfolio decreased by EUR 14.5 million in the last quarter alone, driven by high NPE outflow and a well contained inflow. Consequently, we concluded 2025 with an NPE volume of EUR 126 million and attained a record low NPE ratio of 2.5%.

Throughout the year, we placed significant emphasis on developing statistically driven credit risk steering approaches and enhanced monitoring tools. This allowed us to promptly identify subsegment and channel developments that did not align with our expectations, enabling swift implementation of risk restructures or also relaxations to positively influence the bank's portfolio quality. Particularly in declining interest rate environment, rigorous oversight of our risk profile and optimization of risk return balance remain essential to operate within our risk appetite, mitigate adverse selection and ensure the resilience of the bank's balance sheet.

However, not all regions performed entirely in line with our forecasts. The micro segment posted ongoing challenges in Croatia, Serbia and Slovenia. And furthermore, the SME sector in Slovenia exhibited variances from our 2025 outlook, necessitating additional controls within the credit process. We are confident that the refined risk criteria and enhanced controls introduced will help mitigate further adverse selection.

Moving to Slide 13. Loan loss provisions totaled at EUR 35.2 million in 2025, resulting in a cost of risk of minus 0.96% on net loans, both figures notably better than anticipated. This positive outcome was largely attributable to exceptional late collections, an area we have improved as part of our acceleration program during '24, which exceeded even our ambitious targets. The segment's breakdown for '25 is as follows: the Consumer segment recorded a negative 0.79% cost of risk; SME segment, minus 1.9%; while the nonfocus segments contributed to provision releases with a positive cost of risk of 1.88%. In the final quarter, that means Consumer provisions were EUR 1.7 million; SME segment, we generated EUR 8.6 million; and in nonfocus segment, we saw a release of provisions in the amount of EUR 1.4 million. The SME segment figures were impacted by a single large case in Slovenia, I elaborated on in previous earnings calls already. The post-model adjustment was slightly reduced from EUR 1.4 million to EUR 1.2 million.

To summarize, Addiko's portfolio position remains robust and resilient, supported by strong collection performance and active portfolio management. Our focus remains on decision models, intelligent risk rules, advanced and automated statistical monitoring and rapid response when every critical risk indicators or the risk return balance require attention.

Thank you. And with that, I'll go back to Herbert.

Thank you, Tadej. Now I would like to present the highlights of our new specialization program to you. The new specialization program has just been launched and is designed as a 3-year program running from 2026 to 2028. It supports the execution of our specialist banking vision and aims to unlock additional value through a focused performance and transformation agenda.

The first pillar is business expansion. Here, we will broaden our product stack and strengthen our ecosystem, meaning we will enhance our core offering, add relevant adjacent products and create a more connected experience for our customers. In addition, we will explore selective new market opportunities in a measured and disciplined way, focusing on areas where our digital lending capabilities can be applied effectively, where fee-based revenues can be expanded and where we see sound risk-adjusted potential.

The second pillar focuses on our engine and platform. We will upgrade our platforms and decisioning capabilities with AI-enabled tools to further strengthen analytics, risk processes and service excellence, supporting greater efficiency and competitiveness.

The third pillar is competencies and people. We'll continue to invest in skills, training and development while ensuring the right capacity and efficiency across our teams to support the next phase of our strategy. We consider this an important investment in order to enable the successful implementation of our ambition on Pillar 1 and Pillar 2.

Overall, our approach is to expand our offering, grow fee-based revenues, strengthen customer engagement and continue optimizing costs through automation and AI-assisted processes. This program sets the foundation for scaling our specialist model and supporting sustainable growth in the year ahead. We will present more details of the program in our presentation of our Q1 results on the 13th of May.

Now let's move on to the final page. Before I walk you through our updated guidance, let me briefly outline the context behind our assumptions. Despite the fact that the global economic environment has become increasingly unpredictable, our CSEE markets continue to show comparatively resilient performance. We expect our region to deliver higher growth rates over the next 2 years than the European Union average. Nevertheless, the combination of regulatory fee and rate restrictions, aggressive pricing behavior by several competitors and cost pressure driven by governmental-related factors such as increases in minimum wages requires us to further strengthen our operating model. This is precisely why our specialization program will play a key role. It is designed to enhance efficiency, strengthen competitiveness and improve risk-adjusted performance in the coming years.

Now let me walk you through our operating guidance, starting with loan growth. We expect our loan book to continue expanding at a healthy pace with a CAGR of more than 6% over the period from '25 to '27. This reflects the momentum in our core segments and the continued scaling of our specialist model. Looking ahead, looking at our interest margin, for the coming years, we anticipate the NIM to remain above 3.6%, taking into account the regulatory environment, interest rate caps and a more moderate rate trajectory.

Based on impacts resulting from the latest regulatory-driven measures, we expect NBI to remain broadly flat in 2026, before returning to growth above 5% in 2027 as our business mix evolves and the effects of our specialization program begin to materialize.

Operating expenses. Our focus on efficiency continues. We keep our OpEx below EUR 205 million in both '26 and '27, while still investing selectively to support our transformation agenda and competitiveness.

Cost of risk and risk -- and asset quality. We expect a cost of risk of around 1.3% going forward, reflecting prudent underwriting and disciplined risk-adjusted growth. At the same time, we aim to keep the NPE ratio below 3%, which remains our guiding principle for portfolio quality.

Capital and liquidity. We expect the total capital ratio to remain above 18.8%, subject to the yearly SREP outcome. Our capital strength provides a solid foundation for controlled growth. Accordingly, we plan to gradually increase the loan-to-deposit ratio towards 80%, supporting loan expansion while maintaining a conservative liquidity profile. Based on this assumption and the higher capital base, we expect the return on average tangible equity to be around 4.5% in 2026, rising towards 6% in 2027, supported by growth, efficiency measures and the contribution from the specialization program.

Regarding the dividend, I addressed the situation earlier. However, in this context, I would like to stress again that the current shareholder situation continues to create significant additional efforts for the bank, which is a severe distraction. Nevertheless, we will carry on to do our best to cooperate and to fulfill the increasing related requests put upon us by our regulators. The management of the bank is fully focused on protecting the bank and acting in the best interest of all stakeholders. In this spirit, we will continue working with full energy to make Addiko the leading specialist bank in Southeast Europe, creating value for both our clients and our shareholders.

With that, I would like to conclude the presentation. Our next events are the Annual General Meeting on the 20th of April 2026 in Vienna and the presentation of our Q1 results on the 13th of May. Thank you very much for your attention. We are now ready for your questions. Operator, back to you.

[Operator Instructions] The first question comes from the line of Dodig, Mladen from Erste Bank.

It's not Madlain, it's Mladen. Congratulations on the results, and I particularly congratulate on the revamped growth and movements finally in SME, that where my first question comes. If I look at the guidance and the last year update for '25, '26, it appear a little bit conservative, if I remember correctly. Actually, I'm looking at it, it was more than 7% CAGR, and now it's more than 6%. I mean it's a small tweak, but would you consider that a little bit conservative considering the effect that you have started -- finally started to catch up with the market and competitors? And just for the moment, I will forget now about the whole situation right now, we have geopolitically.

So first of all, thank you very much, Mladen. Before I hand over to Ganesh, I would say we looked at it. And I mean, you call it conservative, but we also need to see the restriction put upon us coming from the regulatory front in several markets, which are also influencing the overall growth potential. But Ganesh, you want to comment this?

Yes. Mladen, so I think we believe the 6% CAGR is a reasonable growth, considering all the restrictions what we have. We do have some challenges also in SME in some other countries, which we need to work on. So yes, I mean, considering all these facts, that's why we revised from 7% to 6% CAGR.

And a little tweak on return on average tangible equity, I would say that also comes from the fact that your equity now keeps growing without chance to moderate it, right?

That's right. That's right. So I mean, as long as -- as I said, as long as the shareholder situation does not change and the regulatory fuel to that, we will not pay out the dividend. And consequently, the equity base will increase.

Of course, yes. And second question or third, 0.96 basis points risk versus 1.3 guidance, do you think that this might still go lower below this 1.3 in '26?

I think today speaking here, I think, yes, I think it will be below 1.3. This is our expectations also, also driven by coming back to the limitations in each individual country, right? They protect us to play in the subsegments that are a bit more risky, but where we achieve higher interest rate. But of course, cost of risk at the end will also be lower due to that. It will be below 1.3% is expectations, I can estimate, yes.

Just looking also on net banking income last year, the guidance, '26, you just molded to '27, the growth more than 5%. And for '26, you expect flattish development. Of course, I would say, as you mentioned in the call, aggressive pricing from the competitors too. But do you expect that there might be some more decreasing interest rate environment, although now it's very difficult to make such a statement as we already these days are seeing the inflationary pressures coming from the Middle East conflict? I mean probably I would like to see in outlook '26 some percentage for the net banking income growth, but as you stated flat, perhaps this is kind of a global explanation, right?

Mladen or Modlin whatever you prefer. This is Edgar speaking. So a straight answer, our rate assumptions are flat. So as you rightfully say, who knows what the reality will be what's going on in the Middle East. But we assume a flat environment, so deposit facility rate 2% throughout our guidance. When you compare also movements in terms of net banking income, please don't forget that all these regulatory and legal restrictions that have been put in place either last year or starting this year, for example, the Croatian topic on free accounts, et cetera, et cetera, this has a full year 2026 impact of EUR 10.5 million on the top line alone. So you will...

EUR 10.5 million only in Croatia?

No, no, not only Croatia.

No, fee and income, okay.

Yes. Croatia would be roughly 70% if you take the NCI and the DTI restriction. I think we disclosed that in the Q3 earnings call. So you will probably find this in the script as well.

Okay. And a final question from my side, again, of course, about dividend. So let's assume that some situation gets resolved and you get a nod from the regulator to pay out something, what do you think how that might look like? And what would be your -- where will you be leaning to paying a lot immediately or some gradual payments, of course, provided that a regulator would agree to that, too?

Well, so first of all, we will decide it when this situation is here. I mean our clear ambition as a general comment as a management is to pay a dividend. I mean that's the whole purpose of the thing. And we had this -- our guidance was around about 50% before this was introduced. So I think this is an area we are aiming for. You also know that if you want to pay out a dividend, which is above the yearly profit, you need -- so out of equity, you need the approval of the regulator for that. So what we would do is when the situation is solved, we will look at it. We will look at the state of the bank, what is healthy and what we can do and then we will judge and decide on that. But for the time being, we don't want to comment it. We feel also obliged vis-a-vis our supervisors, and we share with them the view that currently, we will not pay out something.

There are no more questions on the phone at this time.

Okay. Do we have any other questions?

We also have no questions on the webcast.

Okay. So as there are no further questions, we thank you for your attention and wish you all the best. Thank you for dialing in. Goodbye.

Ladies and gentlemen, welcome to the Addiko Bank Results Q3 2025 Conference Call. My name is Youssef, the Chorus Call operator. [Operator Instructions] This conference is being recorded. The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead.

Good afternoon, ladies and gentlemen. I would like to welcome you to the presentation of the results of the third quarter 2025 of Addiko Bank AG on behalf of my colleagues, Sara, Ganesh, Edgar and Tadej.

Let me show you today's agenda. In the beginning, I will present to you the key highlights of our results. Ganesh will continue with our achievements on the business side. After that, Edgar will give you more details on our financial performance. And Tadej will inform you about the developments in the risk area. Finally, I will do a quick wrap-up before we go on to Q&A.

So let's start with a quite positive note. I'm happy to inform you that in Q3, we achieved a record operating performance with an operating result of EUR 31.2 million quarter-to-date due to a strong business performance of our team and due to good cost management. This represents the highest quarterly operating results so far, achieved entirely under the new business model.

On a year-to-date basis, the operating result ended up at EUR 82.9 million despite the significantly lower interest rate environment and based on our measures to manage the inflation-driven updrift of our administrative costs. The strong business performance is based on a 17% growth rate in new consumer lending business and on a 9% growth rate in new SME lending business.

However, the positive effects from new business were, to a certain extent, neutralized by lower income from variable back book and national bank deposits as well as by repayments of loans driven by aggressive competitor attacks.

Nevertheless, we were able to grow our net commission income by 7.8% year-on-year or even at 12.5% if you compare the third quarter with the third quarter last year. Moreover, we managed to expand our active customer base by 5% year-on-year. Altogether, we could keep our net banking income stable, compensating the mentioned negative effects.

Let's briefly comment on our risk performance. We were quite successful in reducing our NPE volume further to EUR 140 million at the end of Q3 compared with EUR 145 million at the end of 2024. Our NPE ratio is kept stable at 2.9%, while our coverage ratio continued to improve to 82.2% from 80.8% at the end of June. Our cost of risk on net loans ended up at 0.7% or EUR 25.5 million compared to EUR 25 million last year. Tadej will give you more details on the risk development later.

So in summary, we achieved a net profit of EUR 11.3 million in Q3, which results in a year-to-date profit of EUR 35.3 million at the end of the third quarter 2025. Consequently, the return on average tangible equity stands at 5.6% and the earnings per share at EUR 1.83.

The funding situation remained quite solid with EUR 5.2 billion deposits and a loan-to-deposit ratio of 69%. Our liquidity coverage ratio is currently very comfortable, above 380% at group level. And finally, our capital position continues to be very strong with a 21.3% total capital ratio, all in CET1, based on Basel IV regulations.

Now what else is worthwhile to mention? As presented in our last earnings call, we have laid the operational foundation for our market expansion into Romania in the first half of 2025 and started our fully automated consumer lending business based on a very diligent and prudent risk approach.

On that basis, we have started at the end of August with a 360-degree marketing campaign to raise awareness, to build the brand, to position our product and to start generating business. The campaign included TV and out-of-home advertising as well as digital integrated marketing campaigns and was able to create noise and positive reactions in the market.

Despite significant parallel marketing efforts by incumbent banks, we view this initiative as a strong starting point for building our brand in a new market and is a solid foundation for continued marketing activities to drive sustained traction. Ganesh will provide further details in his section of the presentation.

Now let's come to a different topic. In 2024, Addiko decided to get a listing on the Frankfurt Xetra platform to improve the trading liquidity and to increase the attractivity to a wider range of potential investors. Now after 1.5 years, based on the very limited trading volume in Frankfurt and due to the given changes in the shareholding structure, we concluded to discontinue the Xetra listing in Frankfurt as of 1st of January 2026, as the defined targets were not met.

Concerning our ESG program, I would like to inform you that all initiatives are on track and progressing as planned. You will find more information in the appendix of the presentation.

Next page, please. Unfortunately, I have to inform you about several unpleasant changes driven by local governments and local regulators with significant impacts to our business revenues. I will explain them country by country.

In Croatia, we are confronted with a series of measures with severe impact on our earning capacity. As of 1st of July this year, the Croatian National Bank introduced preventive macro potential measures restricting consumer lending criteria. Amongst other regulations, a debt-to-income ratio of 40% for nonhousing loans was introduced. The effect of this new rule was already visible with an approximately 30% reduction of our new consumer -- Croatian consumer business generation in the third quarter vis-a-vis last year.

Now the experience with our respective vintages does not provide the evidence that such a measure was needed. Moreover, we anticipate detrimental consequences for the concerned customers as those affected may be excluded with their loan demand from the banking system and cover it with unregulated providers. Tadej will give you more background later on.

Furthermore, the Finance Ministry of Croatia supported a new regulation to restrict and cut banking fees as of 1st of January 2026. This means that we have to offer free account packages, which shall include opening, maintaining and closing the account, Internet and mobile banking, depositing money, issuing and using debit cards, incoming euro transactions and executing payments with debit cards.

Additionally, we have to provide a fee-free channel for cash withdrawals for all customers, while for pensioners and vulnerable client groups, both ATM and branch must be free of charge. On top of that, from the 1st of January 2027, 2 cash withdrawals on ATMs of other banks must be offered for free. All of that eats directly into our core business revenues. And one can ask the question, why do banks have to provide such core services for free?

In Serbia, starting with the 15th of September, the National Bank of Serbia asked all banks to reduce the interest rate by 300 basis points to maximum 7.5% for citizens with an income of up to RSD 100,000 per month. This reflects almost the average salary in Serbia. In addition, no loan processing or account maintenance fees shall be charged. Unfortunately, this will affect the vast majority of our customers.

In the Republika Srpska, the banking agency decided to restrict specific banking fees. As of 9th June 2025, fees for credit party account maintenance, ATM account balance checks and for sending warning letters of delayed payments are not allowed anymore.

And finally, in Montenegro, effective 1st of November 2025, a new regulation will introduce a debt-to-income cap of 50%. This will be accompanied by a restriction on maximum interest rates, limiting them to no more than 100% above the average consumer rate in the market, including non-payroll loans and credit cards.

Now to summarize. Altogether, the measures depicted on this page would lead to an unmitigated potential impact of just above EUR 10 million on our revenue base. Nevertheless, we are actively working on solutions to mitigate these effects and to create new offers to our customers to enable new growth opportunities.

Now with that, I would like to hand over to Ganesh to give you more insights on how we are reacting in this respect and first of all, to inform you on our business development.

Thank you, Herbert. Good afternoon, everyone. Moving to Page 6, I'm pleased to report strong third quarter performance in our Consumer segment, delivering 17% year-over-year growth in new business with a premium yield of 7.2%. This was achieved despite a persistently low interest rate environment and supported 9% year-over-year growth in the loan book.

On the SME side, the new business origination grew 9% year-over-year with a solid yield of 5.1%. However, we continue to face a challenging market with competitors sharply lowering prices to stimulate demand. This has prompted many existing clients to repay loans early, particularly those with higher fixed rates originated last year. As a result, the SME loan book declined 2% year-over-year, mainly due to reductions in large tickets, medium segment loans.

I will share more updates on SME turnaround plan on the next page. Overall, our focused loan book grew 5% year-over-year, and this focused book now accounts for 91% of our total loan portfolio, underscoring our strategy to prioritize high return and scalable lending.

Please turn to Page 7 for a detailed outlook. Let's take a closer look at our Consumer segment. Year-to-date, we have delivered double-digit growth while maintaining premium pricing, driven by several key factors: number one, strong market demand across our core geographies.

Number two, the launch of fully digital end-to-end lending with zero human interventions in 4 of our core markets clearly differentiates us from the competitors.

Number three, our point-of-sale lending proposition continues to perform well, achieving 17% year-over-year growth.

Number four, we have identified a sweet spot between growth and pricing, enabling us proactively to retain customers and the loan book through disciplined repricing actions.

Number five, additionally, we are redesigning our mobile app, introducing new card features with Google Pay and Apple Pay integrations, which has contributed to an 8.5% year-over-year increase in net commission income.

As Herbert mentioned, our business model has been affected by new regulatory restrictions. We are already implementing mitigation measures, including downselling, introducing core debt structures and focusing on high-quality customer segments with larger ticket size.

Furthermore, we are developing a new specialist program that focuses on non-blending products, aiming at fee-based income growth, and we will share more details once the program is launched. We are confident that these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward.

Over to SMEs. Our core business model remains unchanged, to be the fastest provider for unsecured low-ticket loans to underserved micro and small enterprises through our digital agents platform.

As mentioned earlier, we are facing market challenges due to aggressive pricing, which has led to some loan book contraction. However, we are now seeing a recovery in the market demand. And to reignite growth, we have taken several strategic actions.

Number one, our turnaround plan in Serbia, supported by new leadership team, is delivering 20% year-over-year growth in new business. In fact, all countries are recording double-digit growth, except for Slovenia.

Number two, we are placing strong emphasis on retaining quality clients and the loan book through better pricing, loan prolongations and superior service delivery.

Number three, we also have broadened our product range while maintaining our focus on unsecured loans, we are also expanding to secured investment loans with slightly higher ticket sizes, targeting both existing and new customers. And this has resulted in a 69% year-over-year increase in investment loan volumes.

Finally, we have launched a new digital SME tool to process high-ticket loans with a greater speed and simplicity, providing a clear competitive advantage. Overall, we believe these initiatives positions us well to return to a sustainable growth in the SME segment going forward.

Lastly, let me touch on our progress with AI adoptions. We are investing in AI technologies to enhance efficiency and customer experience across the organization. Two AI-driven applications are already live, one supporting employees with HR-related inquiries and the other assisting our call center by analyzing customer inquiries, feedback and creating responses.

Additionally, we are exploring AI use cases in IT, risk and marketing, further strengthening our operational excellence and data-driven decision-making.

To summarize, 2025 is a transitional year, focusing on refining our SME business model and launching new USPs that enhances speed, convenience and value across consumer and SME segments.

These investments are essential, not only to drive future growth, but also to strengthen our specialization, stay ahead of the competition, compensate regulatory restrictions and justify high-margin premiums in a low interest rate environment. We are building the foundation for stronger, faster and more profitable growth in the years ahead.

Please let me hand over to Edgar.

Thank you, Ganesh, and good afternoon, everybody. Let's turn to Page 9 for an overview of our performance in the first 9 months of 2025. Despite a challenging interest rate environment and cost pressures, we delivered stable results, supported by resilient consumer lending, strong fee income and a robust capital position. Now let's take this one by one.

Our net interest income came in at EUR 177.8 million, a slight year-on-year decrease of 2.2%. This marks a modest recovery compared to the 2.4% year-over-year decline, as reported in the first half this year. The decline was mainly due to the lower interest rate environment, which impacted income from our variable back book, so roughly 14% of our book, [ 1-4 ], and on National Bank deposits.

As a reminder, the ECB implemented 8 rate cuts since June 2024, totaling a reduction of 2 percentage points, a faster pace than we initially anticipated. This also caused pressure on interest rates we can charge on new loans. Importantly, our Consumer segment performed quite strong with interest income up 7.3%, driven by 9% growth in the consumer portfolio. Overall, the focus portfolio grew 5% year-on-year, slightly ahead of the previous quarter.

On the fee side, we delivered solid growth. Net fee and commission income rose 7.8% to EUR 57.8 million, driven by bancassurance, accounts and packages as well as card business, which altogether grew 11.6% year-on-year, with bancassurance as a key contributor.

Now looking ahead, new regulations, respectively, law in Croatia, limiting fees on banking products will have an impact on fee generation going forward.

Coming back to the end of the third quarter, as a result, net banking income remained stable at EUR 235.6 million despite the challenging environment. Our general administrative expenses in short OpEx increased slightly to EUR 144.5 million, up just 1% year-on-year, and that's mainly due to wage adjustments and operational updates as well as increases.

When excluding the 3 million in extraordinary advisory costs related to takeover of [ what we had ] last year, operational costs were only up 3.2% year-over-year. Our cost-income ratio came in at 61.4%, which is a tad higher than last year. The operating result landed at EUR 82.9 million year-to-date, down only 0.8% year-on-year, supported by an exceptionally strong operational third quarter, as Herbert pointed out already.

The other result, which includes costs for legal claims as well as for operational banking risks, remained manageable. We have allocated some additional provisions for new legal claims in Slovenia and made a small top-up in Croatia, also to reflect further increased lawyer costs.

The main point in Slovenia remains what the higher courts will rule upon regarding the applicable status of limitation and if that will be in line with the dominant legal opinions. As usual, during the fourth quarter, a further deep dive will be conducted in the context of the year-end audit. So there is a possibility for some additions here.

When it comes to risk costs, our expected credit loss expenses were EUR 25.5 million, which translates to cost of risk of 0.7% on net loans year-to-date. Tadej will provide more insights in just about a moment.

All in all, we delivered a net profit after tax of EUR 35.3 million for the first 9 months. As of today, we do expect the fourth quarter contribution to be less pronounced. So while operating in a challenging rate environment and managing high cost pressures, our focus business remain resilient. And we are seeing solid momentum in our consumer lending and fee-generating activities this year, while also SME lending has started to pick up again in September.

Turning to Page 10 and our capital position, which remains a real strength. Our CET1 ratio remained at a very robust 21.3% at the end of the third quarter. For context, that's only slightly down from the 22% at the end of 2024, which was under Basel III rules, while third quarter is calculated under the new Basel IV or call it CRR3 rules.

You will notice that our risk-weighted assets increased, and that's mainly driven by changes in risk weighting under Basel IV as well as the new interpretation of EBA guidelines on structural FX, which we already discussed on the back of the half-year results.

Looking ahead, we recently received the final SREP for 2026, which includes a small increase in our Pillar 2 requirement, up by 25 basis points to 3.5%, while the Pillar 2 guidance stays unchanged at 3%. So in line with the draft that we disclosed earlier.

In summary, our capital position is very strong, giving us a solid foundation for future growth and the flexibility to navigate regulatory changes with confidence.

With that, I'll hand over to Tadej for more on risk management.

Thank you, Edgar, and good afternoon, everyone. Let me walk you through the credit risk section for the first 3 quarters of 2025.

I'm glad I can report that in the first 9 months, we achieved excellent collection from defaulted clients, surpassing our goals and positively impacting loan loss provisions. At the same time, we managed risk rules dynamically and decisively to keep portfolio quality and NPE inflow under control on the group level. All that led to the NPE decrease, low NPE ratio and the level of loan loss provisions. I will talk about on this on the next page.

As we see on the right-hand side of the slide, NPE portfolio decreased by EUR 2.5 million in the last quarter, which brings it to the EUR 4.9 million decrease on a year-to-date basis. NPE volume decreased to EUR 140 million, which is reflected in a stable [ NPE ] ratio of 2.9%. Short-term NPE initiatives are still ongoing, like, for example, further portfolio sale to dynamically drive further NPE portfolio reductions.

At this point, I would like to refer to local limitations that central banks are imposing and were before mentioned by Herbert, specifically DTI limitations.

Although these regulations will restrict more indebted and therefore, higher risk clients from obtaining larger loans with banks, which will result in an improved consumer portfolio quality; the excluded clients do not have a risk profile that would not be acceptable for Addiko.

For context, clients who are no longer eligible due to new regulation limits have on average a default rate twice as high as those that remain eligible. However, the default rates in both groups remains below 2%. Using nearly 10 years of consumer behavioral data, we know that clients who have become noneligible demonstrate a risk profile well aligned with Addiko's business model and profitability objectives.

Before going to the next page, let me revisit the topic from the previous calls. This is consumer portfolio in Slovenia. We see that smart risk restrictions implemented in the previous months have already a positive impact on the portfolio quality, which is getting gradually closer to our expectations.

Let's move on to Slide 11. Loan loss provisions amounted to EUR 25.5 million in the first 9 months of 2025, resulting in a cost of risk of negative 0.71% on net loans basis. Segment breakdown is as follows: in Consumer, we recognized minus 0.7% cost of risk; in SME, minus 1.3% cost of risk, while nonfocus contributed to loan loss releases with a positive cost of risk of 1.6%.

Development in SME segment was impacted by a black swan event, which represent almost 1/5 of loan loss provisions recognized in 2025. We talked about this case already in the previous earnings call.

Loan loss provisions also include additional post-model adjustments recognized in the third quarter in the amount of EUR 3 million. The post-model adjustments will be netted out by model changes that will take effect in fourth quarter this year. This amount is in addition to EUR 1.2 million previously booked post-model adjustment to cover sub-portfolios where insufficient data is available for precise calibration.

In conclusion, overall, Addiko's risk position remains stable and resilient, further supported by a strong collection performance and active portfolio management, resulting in a reduction of nonperforming exposure and lower loan loss provisions.

Thank you for your attention and go back to Herbert.

Thank you, Tadej. Let's move on to the wrap-up. At the top of the slide, we present our current 2025 outlook figures. While our guidance is currently under review, due to the potential impact coming from the regulatory front, we have decided to maintain the stated outlook for 2025. We will update our guidance in line with the revised midterm plan and disclose it together with the year-end results for 2025 on the 5th of March 2026.

Now we currently operate in a macroeconomic environment marked by global uncertainties, driven by conflicts such as the war initiated by Russia, shifting tariff conditions and persistent supply chain disruptions. Europe and the European Union are very much affected by these developments. However, if we look at the markets where we are operating in, they are performing better than the EU average and are also expected to sustain this outperformance.

On that basis, we will concentrate our efforts to further innovate our product offerings and services to our customers in order to initiate sustainable growth in both business segments, Consumers and SMEs.

Therefore, we are working on the preparation of our new midterm specialization program, which shall be launched and presented to you in the first quarter of 2026. This program shall enable further optimization of our cost base, expand digitalization capabilities and contain projects to exploit productive and profitable AI-based solutions.

Altogether, we are confident to find the path to compensate the negative effects coming from the regulatory front and to prepare Addiko for future growth. Of course, by doing so, we will keep our prudent risk approach as one of our strategic anchors.

Together with our dedicated team, we remain committed to delivering our best as we pursue our ambition to become the leading specialist bank for consumers and SMEs in Southeast Europe. On that basis, we will work with full energy to further improve the bank to create value for our clients and for our shareholders.

With that, I would like to conclude the presentation. Our next earnings call to present to you the year-end results of 2025 is scheduled for the 5th of March 2026. I would like to thank you for your attention. We are now ready for your questions. Operator, back to you.

[Operator Instructions] Our first question comes from Ben Maher from KBW.

I've got a couple. The first one is just on Romania. I was just interested to get your views on why the market is seen as particularly attractive. Is it seen as an underserved Consumer segment? Or is there other reasons that you're targeting a particular market for growth?

I understand you're going to give your targets with full-year results, but it would be helpful just to get a sense of how important Romania will be as kind of a share of the business or a share of the loan book in kind of the terminal kind of state.

And my second question is on the competitive pressures you note. Is this concentrated in a specific market? Or is this seen across your footprint?

And then the third question is just on capital. As you said, it's very solid. I see the dividend still suspend. So I'm just interested for your thoughts on how you plan to monetize the excess capital next year.

And then sorry, just a final clarification. Was it a EUR 10 million unmitigated revenue impact from the regulatory changes? I think you said, but perhaps I misheard.

Okay. Thank you for your question. Maybe we start one by one with Romania. I will give a brief feedback and maybe also, Ganesh, if you can then add your view on that.

We consider Romania as an attractive market, given the digital capabilities given to us and also the stage of development of the market overall and the size of the market. So if you consider our existing markets, we lack scale there because of the size of the given countries.

So we see that as an opportunity with our business model. We differentiate ourselves with a solution, which is very, very efficient straight through online. And we differentiate ourselves also with the USP that customers don't need an account with us when we do business.

But I also have to admit that we are currently in a starting phase, we have a good engine, but our brand is not known. So that's what we are currently focusing on building up our brand there and getting traction on our business.

Maybe, Ganesh, if you want to add something?

I think you mentioned well there. But additionally, we would like to expand this not just solely on the B2C level, we are also looking at expanding other channels digitally going forward. So we are exploring that options as well. And we will be also enhancing the product features with more refinancing capabilities.

So yes, there's more things we are working on, which would help us to position more stronger than what we are today. But I think Herbert covered it with the USP, there's a distinct proposition we have in Romania.

And maybe just to add or conclude on the Romanian questions, if I remember all of them correctly, so you asked about the impact or kind of the contribution in the results. So this year, we are not expecting any noteworthy contribution. It's rather the opposite due to building up the engine and also having some kind of a marketing push, as we disclosed. There is costs.

It will take a bit of time for kind of a positive contribution to materialize. But overall, it's rather negligible in the short -- near and short term.

Okay. Let's go on to the second question.

So the second one was, and Ben shout, if I misunderstood you, on the competitive pressure that we're seeing if this is like specific markets or across the board.

Thanks, Ben, for the question. So yes, on the SME level, we are seeing competition really pricing it quite low. They're looking for low margins and higher volumes in the loan book. We have also -- we faced this pressure already in a couple of quarters. We are also adjusting some price going forward and so focusing on growth. You already saw we have recovered well with the growth around 9%.

So yes, I mean, we will continue to go forward. So -- but the competition is pricing across the markets, not just a specific market. We are seeing this quite extensively there.

On the Consumer side, obviously, the whole Euribor changes is reflecting a much more lower interest rate environment. We see a big pricing pressure and also in Consumer side. And additionally, if you heard Herbert, he also mentioned we have in Serbia, a special situation where we have to drop our price 3% based on the new regulation. So yes, so a lot of pressure across the markets on the pricing side.

And the last question was on the capital and on the dividend. So if I understood you correctly, the question was, how is our view there and how do we want to continue here?

From -- so according to the current situation, the shareholder situation did not change. So also, our perspective on the dividend is not changing. So there is no change for the time being.

So what do we do with the additional capital? Of course, we will use it for further growth. But on the other hand, if the situation with the shareholders would change, we would also return back to the payout. Our dividend policy did not change. So we still are committed to the 50% payout ratio. And as soon as the topic is solved, we would return to that.

And I think, Ben, you had one more question on the EUR 10 million unmitigated potential top line impact, but I didn't get the full question.

No. So just checking out the correct number. I want to make sure I didn't mishear -- it was that EUR 10 million unmitigated revenue impact.

Yes, it's just above EUR 10 million.

Next question comes from Mladen Dodig, Erste Bank.

Congratulations on the third quarter. If you allow me, I'm happy to see that in Serbia, you have finally managed to capture the decline -- to arrest the decline in the credit portfolio. So congratulations to that, too. As you explained, the moves with the interest rates, very difficult to grasp with also in Serbia. But again, it's a market battle.

I already wrote my questions in the Q&A, so I will try to repeat them. IR sensitivity and breakdown of fixed and variable interest rate arrangements, if I'm not mistaken, there is -- that slide is missing in the presentation or not.

Mladen, good to have you on the call. This is Edgar speaking. So you're absolutely right, it's missing because we only publish it on a half yearly basis. But if you would go back to the half-year results, I think it's Page 34, 35 or something, you would actually have it there. And given the structure of our balance sheet, it hasn't changed much.

It hasn't changed.

Not much. So 14%, 1-4, is variable in our total loan book.

So the colleague already asked about Romania. You said a couple of things about the specialization program. So looking to extend the digital proposition efficiency and AI-based solutions. Any other details, maybe duration or some -- anything else on this?

Yes. I mean we will disclose it next year, but -- and we are currently in the process of finalizing our new midterm plan, and the specialization program will be part of that. So it's still under construction, but we aim -- it will have three different layers, the program, and it will be a midterm program. So it will last at least 2 years, potentially a bit more. So intended to bring the bank to the next level. And we will present it then, as said, together with the year-end result in 2026.

You already talked about the dividend and the shareholder structure. Could you tell us anything -- I bet you can't, but I need to ask. So is there any kind of event on the horizon that might trigger either the recall of this recommendation or some other action by the regulator?

Well, we are not aware about anything which would release or change our perspective on the dividend for the time being. But we are also prepared -- as I said beforehand, if the shareholder situation would change, we would be also ready to take actions on our side and to adjust accordingly. But if there was something already known today, we would, of course, disclose it.

And final question regarding Romania. I was recently in Bucharest and wanted to ask you, could it be possible that I heard commercial on Addiko on the radio...

Yes, this could be well because we -- as I said beforehand, we started our marketing campaign in August. And we will continue with this marketing campaign, and it also includes radio and TV.

Yes. I was driving there, and I heard something on radio because I don't know one word of Romanian, but I think I recognized the Addiko.

Good that you recognized it.

Yes. So yes, as you said, you are there, but it needs -- it takes time. Sorry for this mess-up with the call. Obviously, I changed recently with my computer. So obviously...

No worries, Mladen. All good.

Any other questions?

Ladies and gentlemen, that was the last question from the phone line. I would now like to turn the conference back over to Sara for questions on the webcast.

Thank you, operator. We have not received any further questions on the webcast. I'm handing over to Herbert for closing remarks.

So in this case, I would thank you very much for your attention. All the best from our side, and we hear each other then in March next year with our year-end results. Thank you very much for attending.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines.

Ladies and gentlemen, welcome to the Addiko Bank Results First Half '25 Conference Call. I am George, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead.

Good afternoon, ladies and gentlemen. I would like to welcome you to the presentation of the half year results 2025 of Addiko Bank AG on behalf of my colleagues, Sara, Ganesh, Edgar and Tadej. We have prepared the following agenda for you. I will start with the highlights of the first half year and the adjusted outlook for 2025. Then I will pass on to Ganesh, who will update you on the achievements within our core business. Afterwards, Edgar will provide you with more insights on our financial performance and Tadej will give -- will inform you about the development in the risk area. At the end, I will give you an update on our Romanian project and finally do a short wrap-up before we move on to Q&A.

So let's begin with the highlights. We achieved a net profit in the first half of 2025 of EUR 24 million compared to EUR 25.5 million last year. This results in a return on average tangible equity of 5.8% and in earnings per share of EUR 1.25. The operating result ended up at EUR 51.6 million. The main differences compared with the first quarter 2024 are based on a significantly lower interest rate environment and on increased administrative costs due to the catch-up effect from 2024. Until the end of June, we were able to grow our active customer base by 4% year-on-year. Moreover, based on our initiatives on the business side, we managed to again achieve a strong double-digit growth in our new Consumer business. However, on the SME side, we are still working on measures to reinforce growth. Ganesh will give you more insights into the topic in a few minutes.

On our net interest income, our net interest income came down by 2.4% year-on-year, driven by factors related to a lower interest rate environment. In this context, we want to mention that we managed to compensate a part of the negative effects coming from lower income on the variable back book and the national bank deposits with the increase of our Consumer business and with new investments into our sovereign bond portfolio. Our net commission income grew by 5.6% year-on-year on the back of good sales performance. So altogether, we were able to keep our net banking income stable despite the lower interest rate environment.

Let's briefly summarize the development at the risk side. The NPE ratio is stable at 2.9%, and our NPE volume slightly decreased from EUR 145 million at the end of 2024 to EUR 143 million at the end of June 2025. Our coverage ratio also slightly improved from 80% to 80.9% (sic) [ 80.8% ] in the same period. Our cost of risk on our net loan ended up at 0.4% or EUR 14.4 million compared to EUR 15.5 million last year. Tadej will give you more insights on our risk situation later. The funding situation remained quite strong with EUR 5.3 billion deposits and a loan-to-deposit ratio of 68%. Our liquidity coverage ratio is currently above 400% at group level. And finally, our capital position is also very strong with a 21.3% total capital ratio all at CET1 based on Basel IV regulations.

Now let me report on a few more topics not directly related with our results. First, there is no change on the stance of the ECB concerning the shareholder matters and on their recommendation not to pay dividends. Furthermore, based on the preliminary 2025 SREP result, our P2R will increase by 25 basis points to 3.5% starting from the beginning of 2026, while P2G will remain unchanged at 3%. And last but not least, our ESG Action Plan, including all its initiatives is progressing as planned. All initiatives are on track.

Now let's look at the outlook for the remaining year. Based on the experiences of the first half year, we reviewed our outlook figures for 2025. Hence, we would like to inform you on our current assumptions for the remaining business year 2025. We are still confident that we will be able to continue to achieve double-digit growth rates in our Consumer business in most of our markets in the second half of this year. Furthermore, in the past 2 months, we saw first positive signs in the SME business growth in Serbia, resulting from our recent leadership changes. We expect this development to continue in the second half of the year. However, based on regulatory-driven limitations to mention the lending restriction in Croatia and due to the adjusted anticipated growth rates in the SME business, we expect a compound average loan growth rate of more than 6% compared to previously more than 7%.

The stock of our loan book is also influenced by early repayments due to increasingly aggressive competition. Moreover, by taking into account that the rate cuts of the ECB drove the average deposit facility rate more than 60 basis points below our planning assumptions and by incorporating the adjusted SME loan volumes, we currently expect a flat development on the net banking income for the full year. Previously, we expected a growth rate of circa 2%. Consequently, based on the lower interest environment and the already mentioned topics, we expect a return on average tangible equity of more than 4.5% compared with previously circa 6%. Nevertheless, the clear target of the Management Board of Addiko is to improve these figures.

Now in parallel, we started the process to plan the business year 2026. In this respect, we are also preparing a new program for 2026 to further enhance and grow the bank. Therefore, the previous guidance for 2026 is currently under review and will be updated together with the disclosure of the year-end results on the back of the updated business plan.

Now I would like to pass on to Ganesh to give you more background on the development in the business area.

Thank you, Herbert. Good afternoon, everyone. Moving to Page 5, I'm pleased to report a strong first half year performance in our Consumer segment, delivering 15% year-over-year growth in new business with a premium yield of 7.3%. This growth was achieved despite of persistently low interest environment and regulatory changes, contributing to a 9% year-over-year growth of the loan book. On the SME side, new business origination grew 7% year-over-year with a solid yield of 5.1%. However, we continue to face a challenging market. With competition sharply lowering prices to stimulate demand by refinancing, this has prompted many existing clients to repay loans early, particularly those with a higher fixed rate originated last year. As a result, the SME loan book declined 3% year-over-year, mainly due to reductions in large ticket medium segment loans.

I'll share more details on the SME turnaround plan on the next page. Overall, our focus loan book grew 4% year-over-year or 5%, excluding the medium SME segment. This focus book now accounts for 91% of our total loan portfolio, focusing our strategy to prioritize high-return scalable lending.

Please turn to Page 6 for a detailed outlook. Let's take a closer look at the Consumer segment. I'm pleased to share that this half year marks a significant digital milestone for Addiko. We have successfully launched end-to-end digital lending without any human interventions in 4 of our core markets. With this launch, new customers can now apply for loans entirely online without needing to open a current account. This allows them to compare our loan offers with those of their house bank within minutes from anywhere and without stepping into a branch. We are proud to be the first to offer this fully digital product in these markets. Today, 36% of our new business originations are digital, and we aim to transition them fully to our non-touch process, improving productivity and enabling branch optimization. We will continue to sharpen our focus on retaining quality customers by proactively offering them better price and loan prolongations to keep them in our franchise to drive loan book growth.

Our point-of-sale lending proposition remains strong with our partner network now at 465 partners across 960 locations, driving 21% year-over-year growth in new business. We've also launched a new partnership in Bosnia and Herzegovina and we will also roll out Croatia next quarters, supporting growth in the coming quarters. Finally, we continue to drive non-lending revenue through improved features in cards, Google Pay, bancassurance and accounting packages in our mobile app, leading to an 8.5% year-over-year increase in net commission income.

In summary, our strategy of targeting digitally engaged and point-of-sale finance customers with lower ticket, high-yield lending followed by upselling in branches into high-value Consumer loans is delivering strong results with 15% year-over-year growth in our Consumer business in the first half of the year.

Over to SME. Our core business model remains unchanged to be the fastest provider of unsecured low-ticket loans to underserved micro and small enterprises through our Digital Agent platform.

As mentioned earlier, we are facing challenges related to demand and aggressive pricing in the market. To respond effectively and reignite growth, we have taken several strategic steps. Number one, turnaround plan in Serbia. A newly appointed SME leadership team is already delivering encouraging early signs in H1, and we continue to see large -- a better performance in the coming quarters. Second, pricing adjustments. We are fine-tuning our pricing strategy to retain and win back market share, particularly in refinancing loans from competitors. Number three, broadening product range. While keeping focus on unsecured loans, we are starting to lend more secured investment loans with slightly higher ticket size, targeting both existing and new customers. This helps us to retain valuable relationships while balancing risk and demand.

Number four, extra focus on keeping existing quality clients and loan book through better price prolongation and better service. Number five, new partnerships. We are exploring merchant financing partnership to expand our SME reach. Number six, strengthening core competitiveness. We have launched a new digital tool, which focuses on reducing time to cash on larger tickets and enhancing client experience with simpler and faster processes. Additionally, we are growing our client base through new products launched last year, such as auto-overdraft and insurance offering, which further enrich our SME ecosystem and diversify revenue streams. Overall, we believe these initiatives will help us return to growth in the SME segment with Serbia as a key performance gap we determined to close.

To summarize, 2025 is a transitional year focusing on refining our SME business model and launching new USP that enhance speed, convenience and value across Consumer and SME segments. These investments are essential, not only to drive future growth, but also to strengthen our specialization, staying ahead of the competition and justify our high-margin premiums in a low interest environment. We are building the foundation for stronger, faster and more profitable growth in the years ahead.

With that, please let me hand over to Edgar.

Thank you, Ganesh, and hi, everybody. We are on Page 8, where we printed the composition of our results for the first half of 2025. Let's take a look at how we performed. First off, our net interest income came in at EUR 117.8 million. That's a slight decrease of about 2.4% compared to last year, and it's mainly because of the lower interest rate environment, which impacted income from our variable loan portfolio, which is now roughly 15%, so 15% of the total book and from national bank deposits, as Herbert pointed out already. It's worth noting that the ECB implemented 8 rate cuts since June 2024, totaling a reduction of 2 percentage points. This pace of easing has been quicker than we initially anticipated and stands out as a key factor driving the recent developments.

However, I want to highlight that at the same time, our Consumer segment actually saw an 8.4% increase in interest income, which helped to cushion the impact of lower rates elsewhere. This is also a result of strong growth in the Consumer portfolio of roughly 9% year-over-year, while the focus portfolio overall grew by 4% year-over-year. In general, we do see more dry powder, and we are working on better balancing our prudent risk approach with pricing discipline to unlock additional growth. On the fee side, we did quite well. Net fee and commission income was up by 5.6%, reaching EUR 37.3 million. This growth was driven by strong results in bancassurance as well as our accounts, packages and card business. In fact, bancassurance and card business were key contributors.

And we also saw continued improvement in accounts & packages, up 3.2% year-on-year and bancassurance up 15.5% year-on-year. As indicated in the last call, this new law in Croatia curbing fees on banking products will weigh in on the NCI momentum going forward, but it will now come into effect at the beginning of 2026 instead of mid-2025. So net banking income stayed stable at EUR 155 million despite the rather challenging environment. On the cost side, our general and administrative expenses -- rose -- expenses rose a bit to EUR 97.4 million, and this was mostly due to wage increases that took full effect this year.

Operationally, costs were up 3.6% year-on-year when excluding the EUR 2.9 million in extraordinary advisory costs related to the takeover offers in the same period last year. Our cost/income ratio came in at 62.8% year-to-date, which is a touch higher than last year. The operating result landed at EUR 51.6 million, that's down 4.4% year-on-year.

Over to the other result, which includes costs for legal claims as well as for operational banking risks and it remained relatively benign in the first 6 months of this year. We have allocated some additional provisions for new legal claims in Slovenia and made a small top-up in Croatia. The main point in Slovenia will be what the higher courts will rule upon regarding the status of limitation that shall be applied, and if that will be in line with the dominant legal opinions. When it comes to risk costs, Herbert already mentioned, we came in at EUR 14.4 million. This translates to a cost of risk of 0.4% on net loans year-to-date. Tadej will provide more insights into our risk metrics in a moment. All in all, we delivered a net profit after tax of EUR 24 million for the first half. Despite the challenging rate environment and some cost pressures, our focus business remains resilient, and we are seeing solid momentum in our consumer lending and fee-generating activities this year.

Now let's talk about our capital position on Page 9, which continues to be a real strength for Addiko. Our CET1 ratio stood at a very robust 21.3% at the end of June. For context, that's only slightly down from the 22% at the end of 2024, and it's calculated under the new Basel IV rules. The strong capital base includes the full audited profit from the year 2024 since in line with the recommendation by the ECB. As you all know, we did not distribute a dividend out of 2024's profit. You will notice that our risk-weighted assets increased, and that's mainly driven by changes in risk weighting under Basel IV as well as a new interpretation of EBA guidelines on structural FX. We are planning to submit a request to the ECB for obtaining a structural FX waiver, which could reduce our RWAs by about EUR 63 million as of the end of June this year.

Now as you probably remember, our disclosure in the first quarter was based on preliminary Basel IV calculations. Since back then, the provider covering many banks here in Austria was not yet fully done with the implementation. The June 2025 figures, however, are from the production environment, which essentially confirms our first quarter '25 disclosure as well. Looking ahead, as Herbert pointed out already, the draft SREP to be valid for '26 suggests a small increase in our Pillar 2 requirement, so up 25 basis points to 3.5% with P2G staying stable at 3%.

In summary, our capital position is very strong, giving us a solid foundation for future growth and the flexibility to navigate regulatory changes with confidence.

And now over to Tadej to share insights on risk management.

Thank you, Edgar, and good afternoon, everyone. Let's move into the credit risk section, starting on Slide 10. The second quarter of 2025 was, for the most part, quite uneventful from a risk perspective. Apart from one notable exception, we did experience a default on a large corporate exposure in Slovenia. This was unexpected, especially given the client's strong market position over the past 2 decades. However, I want to emphasize that our team was able to absorb this event, and we maintained a stable NPE development overall. The decrease in our NPE portfolio this quarter was driven by a combination of repayments, recoveries to performing status and both batch and individual NPE portfolio sales.

In fact, we managed to reduce the NPE portfolio by EUR 4.6 million in second quarter, thanks to active portfolio management and successful exit strategies. I'd also like to revisit the topic from previous calls, the Consumer portfolio in Slovenia. We put smart risk restrictions in place there, and I'm pleased to report that we are now seeing better performance and a lower default rate than we have in the recent past. Our mitigation measures are working, and we are continuing to monitor this portfolio closely. Meanwhile, our Serbian entity continues to show good risk performance, which is encouraging. So despite the isolated corporate case, we closed the quarter with an NPE ratio of 2.9%. And to further accelerate the reduction of our NPE portfolio, we launched a short-term initiative in several countries to increase the dynamics of NPE reduction.

Let's move on to Slide 11, where we look at the loan loss provisions and cost of risk. In the second quarter, credit loss expenses totaled EUR 9.7 million, which translates to a cost of risk of 0.19% on net loans basis. About half of these provisions related to the corporate default I mentioned earlier. For the first half of 2025, total credit loss expenses came in at EUR 14.4 million, as mentioned already before, representing a very reasonable 0.4% cost of risk on net loans. As usual, we saw provision releases in the non-focus segment, resulting in a positive cost of risk of 1%. And in our focus segments, provisions were allocated with a negative cost of risk of 0.4% for Consumer and 0.8% for SME. Our post-model adjustments remained stable at EUR 1.2 million, which continues to cover sub portfolios where we don't yet have enough data for precise model calibration.

In summary, our overall risk position remains stable and robust, even in these unexpected default event in Slovenia. Loan loss provisions for the first half of 2025 were below our expectations, and I would say that the overall portfolio quality trends are positive.

Thank you for your attention, and go back -- I go back to Herbert.

Thank you, Tadej. Let's have a look on the progress of our expansion into Romania. At the end of March, we successfully entered the Romanian market with a fully automated consumer lending solution. Remember, our customers do not even need to open an account with Addiko by using their existing accounts for their loans. Romania is a very interesting market for our business model given its size and its digital maturity. Nevertheless, as our business solution is fully automated, we do not underestimate connected risks coming from organized fraud organizations, which are attacking financial service providers in the Romanian market.

Hence, as mentioned in our last call, we started cautiously to avoid risks and use the last months to check all dimensions of our application in a real-life environment. This means that we did only limited marketing activities so far to gain experience in the Romanian market with reduced volume.

In summary, we can state that our risk and our fraud engines work quite effectively. On that basis, we are starting now in August with a 360-degree marketing campaign to get awareness, to build the brand, to position our product and to start generating business. The campaign will include TV and out-of-home advertising as well as digital integrated marketing campaigns. Moreover, we will start additional activities to identify and develop new digital product opportunities, which might be launched later next year. On top of that, we are also exploring potential opportunities to establish new distribution partnerships in order to scale our loan business in Romania. We will keep you informed on the development on an ongoing basis.

Now let's go to the wrap-up. In the upper part of the slide, we have depicted once more our reviewed outlook figures as explained in the beginning of the presentation. In this context, I would like to mention that global uncertainties increased significantly during the first half year due to several factors, like the new presidency in the United States or ongoing wars in the Ukraine and Gaza or additional war-like activities in the Middle East. On top of the negative influences coming from this agenda, further obstacles were introduced by government and regulators, which will limit our revenue generation. These regulations are significantly impacting our underwriting criteria and are reducing our revenue potential coming from interest and fees. However, based on latest forecasts, the positive macro backdrop in the CSEE region remains intact. Consequently, we keep on being positive on our ambition to grow our customer base further.

At last, we also see an improvement in the growth rates of our SME lending business, although our competition initiated fierce price reductions to acquire volumes. Nevertheless, we will continue our work there to stay on track and to foster a steady growth path. As a matter of principle, we will keep our prudent risk management approach to find the right balance between business growth and risk appetite. Together with our team, we strive to do our best to be the best specialist bank for consumers and SMEs in Southeast Europe. On that basis, we will work with full energy to further improve the bank to create value for our clients and for our shareholders.

With that, I would like to conclude the presentation. Our next earnings call to present to you the results of the third quarter is scheduled for the 6th of November. I would like to thank you for your attention. We are now ready for your questions. Operator, back to you.

[Operator Instructions] Our first question over the phone comes from Mladen Dodig with Erste Bank.

Congratulations on the result, EUR 24 million. Maybe just -- we are witnessing and it's surprising everyone, very strong growth of lending credit activity in the region. Okay, you have explained a lot about the SME. But on the Consumer side, do you think that -- I don't know how to formulate it, do you think that you could do even stronger on that side too, maybe? For SME, I did notice that you are printing some good results in the month of June.

So thank you, Mladen, for the question. I think in general, we are quite positive on the Consumer side to continue with the trend. But maybe, Ganesh, if you can cover the question.

Yes. Thanks, Mladen. This is Ganesh. Yes, so consumer lending, currently, it's growing at 15%. We believe also we could go -- grow in the double digit, I think Herbert mentioned in his call, but also at a lower price. So I think the market is also helping us overall, except for Croatia, where there will be an impact on the regulatory changes. I believe rest of the markets, we can definitely grow double digit.

What is exactly in Croatia, which regulation is changing and will affect the -- I believe you said SME, right, or the whole market?

No, we are -- Tadej here speaking, Mladen. Actually, you're talking about limitation imposed by the regulator regarding the maximum DTI for Consumer segment, it is pushing some of the segment out of market for loans due to that limitation starting from 1st of July.

Okay. Okay. And one more question. I know it will be probably difficult for you to comment, but regarding this ECB recommendation and events related to this, do you have any expectations going forward? Or I don't know, yes. So if you can share some views. Thank you. If not, thank you, again.

So we are addressing this topic in our conversations with the ECB management when we have conversations, and we have them in a periodical manner. And so far, as we said in our call, there is no change in the stance of the ECB. So we expect that this situation will continue until whatever the regulator is expecting on the shareholder situation, as long as this shareholder situation remains, we expect that this measure will continue.

Ladies and gentlemen, that was the last question over the phone. I turn the conference back over to Sara for questions on the webcast.

Thank you, operator. We have not received any questions over the webcast. So I would like to hand back to Herbert for closing.

Thank you very much. We thank you for your attention and wish you all the best, and we hear each other the next time in November when we present the third quarter results. Have a good day.

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