Erste Group Bank AG
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Erste Group Bank AG
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Good day, and welcome to the Erste Group Results Call for the First Quarter of 2018. Today's conference is being recorded. And now I would like to send the conference over to Thomas Sommerauer. Please go ahead, sir.
Thank you very much, operator, and good morning also on behalf of Erste Group to everybody.
Today's call will follow our usual procedure with Andreas Treichl, CEO of the Group; Gernot Mittendorfer, CFO; and Willi Cernko, CRO of the Group presenting you the highlights of the past quarter. For this, we will use the presentation that is available for download on our website. And after this, we are available to take and answer your questions.
Before I hand over to Andreas, let me highlight Page #2, the disclaimer on forward-looking statements. And with this, Andreas, please.
Thank you very much. Good morning to everybody. Let's start on Page 4, the result for the first quarter of '18 vis-à-vis 2017. A slight increase on the operating income side, I think, trading down. Net interest income, up. And good performance on the VISA, and we're going to talk about that later. Costs are up by EUR 47 million vis-à-vis the first quarter in 2017, and is due to higher personnel expenses, particularly in the CEE region, given pressure on wages but also due to the strong rise in deposits resulting in a substantially higher deposit insurance contribution than last year. Very positive performance on the risk side, with risk costs coming down substantially. On the other result, up again in the first quarter, hit by the upfront booking of the resolution fund fees and the booking of the full banking tax in Hungary. Taxes are slightly higher, and all in all, it resulted in net profit going up by over 20% from last year.
We turn to Page 5. Margins, given the strong asset growth, actually relatively stable with 2.27%. The cost income ratio, slightly worse vis-à-vis the fourth quarter but better than first quarter of last year. And return on tangible equity, up to 11.8%, return on equity. Real equity, up from 9.1% to 10.4%.
If we look at the balance sheet, you see a relatively strong growth overall. Net loans are up on an annualized basis by over 7%, but also cash and loan to banks are up. That trend will probably continue this year. The growth on both items, particularly due to the upgrade that we got from Moody's this week, we have now a lot more access to dollar funding. So we guess, that also not only euro but also dollar deposits will grow this year.
On the liability side, again, very strong growth on the client deposit side, mainly Czech Republic, Slovakia and Austria. We're growing in market share, and we're also -- a growth of 4% of total [ ForEx ].
If you look on Page 7, major ratios, loan-to-deposit ratio and loan-to-total-asset, relatively stable. You see net loans growing by 1.8%, so over 7% on an annualized basis. NPL coverage has improved to over 70%, again, with the NPL ratio dropping for the first time below 4% to 3.7%, a trend that we believe will continue this year.
If you look at capital, both ratios and also total capital are coming slightly down. That's different in valuation due to IFRS. And of course, as you know that we do not include first quarter profits into our equity. That will be reversed at half year, so capital ratios will go up strongly again this year. No major developments on the liquidity coverage ratio or the leverage ratio.
If you look at the business environment, it's been very good this year. We expect slightly lower growth due to slightly less domestic demand in some of our countries, but we're again looking forward to a relatively strong performance of our region in GDP growth in 2019, with continued strong domestic demand but also strong performance on the export side.
If you look at our region, actually inflation is, in general, at 2% or even more. So as a region, we would have only the Czech crown, but overall, a call for higher interest rates. Unemployment is coming down that basically full employment in some of our countries is also one of the major points of pressure on real wages. And I think everything else also a rather positive picture across the board with public bid coming down and state finances seeming to get better during these years.
On the Page 10, you saw over the course of the last year, base rates in the Czech Republic, going up by 70 basis points. And short-term rates, also going up slowly in Romania. And of course, completely flat everything in the Eurozone and in Hungary as a result of the rate changes and appreciation of the Czech crown vis-à-vis the euro, and no major developments on the FX side in Romania, Hungary or Croatia.
On Page 12, the market share development, actually that's turning to the positive now, with gaining market share in most of our markets, and I think you will see now also a positive development after many years in Hungary and in Romania on that front.
If we get to Page 14, you see loan growth, growth of performing loans in the different countries. You see the yellow line, so with strong loan growth across the board. And also in Austria, over 4% loan growth, and strongest performance again in Czech Republic and Slovakia. But after many years, now finally, we see also some loan growth again in Hungary and in Romania. And pretty much the same picture on the deposit side, strong growth across the board.
If you look at net interest income and the net interest margin, of course, the strong growth will continue to result in stronger NII growth than margin growth. I think that the net interest margins are on the business side and will continue to be relatively stable. But with more interbank business on our balance sheet, we will have a positive effect on NII growth this year, but not necessarily result in higher net interest margins, of course.
If you look on the operating income line, I think the quality of operating have actually improved. We're weaker on the trading side, but we are better than we actually expected on the fee income side, and that looks rather positive. We had hoped for a stronger performance given the efforts that we undertook last year, both on the asset management side and the bancassurance fee income, and that resulted in positive results earlier than we had expected, so we continue to believe that our fee income growth performed very well also this year.
On the expense side, Page 18, higher personnel costs, higher deposit insurance. Our personnel cost will continue to increase in the second quarter. But given all the undertakings that we managed to finalize during the last quarters, we still stick to our outlook for 2018, with operating expenses being slightly below 2017.
Then I think on the risk cost side, if you look on Page 20, a very good performance across the board, but I've taken over already 1 page from Willi. Sorry for that. That's your call.
Thank you. As Andreas slightly already briefly touched, asset qualities are improving. You may remember our guidance, we have given max 20 basis points. I think you can share with me that we're going to be likely to do better, given the strong start, but let's see what comes up until the end of the year, but there is some room for doing better.
When it comes to the nonperforming loans, now for the first time, we are coming down below 4%. I may tell you that this should not be the end of the development. We see further room for improvement. So it is coming down. Volume as well as the ratio is coming down. Also in all the countries we have listed here, we see a positive development. The same when it comes to the coverage ratio. As already mentioned, we are above 70%, and we are improving in all countries, predominant in Czech Republic, Romania, Slovakia, Hungary and Serbia.
And with that, I will handle over to Gernot Mittendorfer.
Good morning from my side. We continue on Page 26, just a quick look, loan-to-deposit ratio, mentioned already, down to 95.1%. We are seeing an increasing cash here, and this is a consequence of bank deposits and then the customer deposits as well. Other than that, no significant change.
More importantly, Page 27, there you see performing loans growing year-on-year 7.4%. And hand-in-hand with this reduction of 18.4% of nonperforming loans, we are down now to EUR 5.5 billion. And ratio significantly improved, and coverage increased.
On Page 28, the liquidity situation unchanged, very favorable LCR at 149%. No significant change. The usual picture that we are showing.
Page 29. Continuation of the last quarters, very strong customer deposit funding base.
Page 30, I skip. There's no real change vis-à-vis the last quarter.
Now interesting is Page 31, the maturity profile. We're still at maturities of EUR 2 billion this year. We've started issuance activities in January already and placed EUR 750 million ATM mortgage-covered bond at a spread of mid-swap minus 3 basis points, so we could take advantage of the still very favorable funding conditions. And issuance target for this year, slightly above the last year. Given the current development, we might be the same or lower than last year because still huge inflows of customer deposits.
We continue on Page 32. The capital development, given the IFRS 9 introduction, we had a slight negative effect on the CET1 capital. Regulatory capital is basically unchanged, and we saw an increase of RWAs. On the credit RWAs, half driven by increased business activities and half by implementing the Basel III effect into the now the capital Basel III phased-in ratio, which leads to a result that fully-loaded and phased-in ratio just moving together and are now just 10 basis points apart. The fully-loaded ratio at the quarter-end was 12.5%, and as already mentioned, doesn't include the quarterly profits at the half year. We will be again significantly higher. On the operating side, operational risk RWA, the -- our new op risk model was submitted for approval, and we expect a solution late in the second half of 2018, which should then have a positive effect on our RWAs.
Now with this, I hand over to Andreas for the outlook.
Okay. For the outlook, general macro outlook are positive throughout the region for 2018. So nothing -- no indications that would actually make us change our outlook from the macro point of view. Maybe even to the contrary, it might look a little bit better.
We stick to our dividend proposals for 2018. Given the changes on the equity side, you might add a 0.5% to the ROTE as added at -- from 10-plus percent to 10.5%-plus. Our assumption for 2018 is still slightly growing revenues. We will still see higher expenses in the second quarter but still stick to our outlook that expenses for the full year could come in slightly lower than in 2017. What could change that to the positive surprise move on the interest rate side? On the negative side, any political turmoils within our region in Europe or anywhere else. But downside risk from our point of view at this point in time, relatively low.
Thanks very much. That concludes our presentation, and we're now ready to take any questions you might have.
[Operator Instructions] We will now take our first question from Anna Marshall of JPMorgan.
A couple of questions, please. Firstly, just to clarify on your outlook for 2018. In terms of return on tangible equity, I think, previously, you mentioned that the plus sign, the 10% return on tangible guidance, is kind of getting fatter. So apart from the tangible equity impact, do you still feel that way? And if yes, what would be the key drivers apart from the interest rate environment? And the second question on dividend, please. So could you provide an update on the dividend outlook for this year? I think last time you said that there should be an increase, but it was too early to give more details.
Well, I think on the proposal that we will give to the AGM this May, it's EUR 1.20. No change to that. With regard to...
Sorry, I was asking about dividend from 2018 earnings.
That's -- I think that's a bit early to ask, but we stick to basically what we said last time that we would like to see a slow but steady increase of our dividend payout but right after the first quarter results to give an indication on what the payout ratio would be for 2018, seems a bit early. Give us time on that. We might give you a good indication of where we will go with third quarter results this year. With regards to sort of what makes us stick to our outlook, to the positive side, actually, I think NII comes in pretty much at the level that we expected. Expenses, we have a relatively clear plan for the year, where we are lower than expected is on the trading side, but much of that is made up by the fee income side. So if we see a continued trend on asset management, insurance business, bancassurance overall, payments, loan fees this year, given that our market share is growing, I think likelihood is that we come in with a positive surprise on the fee income.
We will now take our next question from Pawel Dziedzic of Goldman Sachs.
I have 2 questions. The first one is on your cost trends. Your cost income is still over 60%, and I think in the presentation on one of the slides, you mentioned that the positive revenue trends that you're seeing were at least partially overshadowed by higher expenses. Yet, in your outlook, you just mentioned that you still expect the cost to slightly decline this year. Could you give us more color on what should we expect from the cost base this year? What would drive the decline? And where can we start seeing this cost decline to start to materialize? And then the second question that I have is just on your cost of risk. You reported write-backs this quarter, and obviously, you're guiding for a slight increase, year-on-year increase, in cost of risk. So is there any seasonality or anything special, for example, related to IFRS 9 and so on this quarter that distort the picture? Do you see an indication that asset quality trends might start to normalize in the coming months and the risk charge could go up?
Yes, on the cost trends, we have effects seen in the first quarter, like currency appreciation in the Czech crown, you have EUR 10 million higher deposit insurance contribution. These are effects that were driven by -- I mean, the deposit insurance contribution was driven by higher deposit volumes. The Czech crown appreciation was something that we know -- we knew in advance. We've seen in some of the countries wage pressure, wage increases. This is something that we knew as well, and we were basing our plans for 2018 on a slight upgrade in some of the countries. What we have seen, generally, is that after stabilization of certain projects that went live around the year-end, we see an opportunity starting in second half of the year, third quarter, that costs will gradually go down, the link to these activities. And especially in the fourth quarter, where we have seen a significant uplift last year, we are positive that we will not see a similar drift in 2018. So second quarter will still be leftovers and elevated because of stabilization and the closing activities of projects, IFRS 9, MiFID 2 and the like. But we are positive that the second half of the year can show reverse of this trend. And overall, we should be flat to slightly down on the cost side. And the risk question...
When it comes to cost of risk, I simply want to confirm guidance. We have given up to max 20 basis points. Although, we expect for 2018 better results. This seems to be possible. But midterm, this is, we'd say, the guidance we want to stick to. Asset quality is in a proper shape.
All right. But there is nothing exceptional in the first quarter results related to, for instance, IFRS 9 or anything like that?
No, no.
We will now take our next question from Giulia Miotto of Morgan Stanley.
A couple of questions from me, please. So the first one is on Czech Republic. Loan growth sale is very strong. Rates are going up. The Central Bank is okay-ish. And yet, margins are -- seem under pressure. So I was wondering if you could please comment on competition dynamics in the market, and perhaps, any actions from the Central Bank on -- that you may foresee in the future on curbing the housing market growth. And then the second question, I would like to go back to the point of costs. So I understand, you expect them to start coming down from the second half of this year. But I was just wondering if you could share with us the progress on some key initiatives that make you confident on the outlook. Perhaps, I don't know, something you're doing on the IT side or on the back office on streamlining of infrastructure, anything which helps us put some color around the outlook of decreasing costs.
On Czech Republic, the Central Bank is monitoring the development of the housing market, and it's not as far as the Slovak Central Bank that is already taking actions starting in the second quarter. The Central Bank was indicating that they are still okay with the development and try to just simply create awareness around the very dynamic situation. Overall, we still see a solid demand and a positive development. On the margin side, we see an again opportunity to invest our surplus liquidity but not volume-wise enough that we could really see a significant impact. And one effect on the mortgage market was the risk competition and mortgage rates were not growing as fast as market rates were growing and especially on the longer end. So this is a situation that is driven by the liquidity of the main market participants, but we are not worried. In general, the Czech Republic is showing a very solid development. On the cost side, we are definitely having a cost initiative throughout the group. We need to carefully manage our costs and especially in those countries where we see wage pressure because we want to be active in the labor market and have the best employees in our networks. So there, you will see countries where we see some updrifts. In general, where we are more optimistic about stabilization or reduction in the costs is Austria and the headquarters, and they are one of the effects that we were showing last year. We had significant project costs and didn't have enough internal resources so we had to hire relatively expensive external resources, and this is now phased out starting with the second quarter, and then we should see an effect already in the second half of the year.
We will now take our next question from Riccardo Rovere of Mediobanca.
A couple of questions, if I may. The first one is on NII. If I look at your -- at the data sheet that the IR Department provides every quarter, I -- and I look at the breakdown of interest income and interest expenses, and especially, if I look at hedge accounting on interest rate risk, this quarter, the positive and the negative, the net impact of this line is EUR 4 million versus EUR 95 million in the previous quarter, EUR 79 million in Q3, EUR 90 million in Q2 and EUR 85 million in Q1 of last year. So there is, let's say, a kind of EUR 90 million, EUR 85 million drop on interest rate risk hedging. I was wondering why is that? What is the reason for that? Is -- what is your hedging strategy here? And is it something that you think is going to revert in the next quarter or is going to stay like that? This is my first question. The second question, if I understand it correctly, right at the beginning of the call, Mr. Treichl, you stated that you expect good improvement in the capital, if I understood it correctly. Would you be able -- in 2018. Would you be able to give us a little bit more color on that? And if I understand it correctly, too, you stated that you expect positive surprises in fee income going forward, if I understood it correctly. Would you be able to add a little bit -- comment a little bit more on that?
The hedge accounting topic, this is IFRS 9-driven because we changed the hedge accounting. We are not doing so much hedge accounting as we were doing in the past, and there you see some shift on the valuations. And you saw a significantly lower contribution to net interest income in the first quarter this year, and you will not see the levels that we've seen last year repeated. On the other hand, you will see some -- going forward, some positive valuation effects as well on the trading line. But overall, rightly, as you pointed it out, the line will be lower in the future.
On the capital side, I think it's rather simple. You have IFRS effects due to valuation, which reduced the count, but the main point is not inclusion of the net profit for the first quarter. For the first half year, the net profit mile, whatever, we retain for dividends will be added to the capital. And in the second half of the year, you will see the effects of modeling changes, which will result in capital ratios going up continuously towards year-end. Third quarter, you, again, will see a slight reduction because third quarter profits will not be included. But at year-end, you will see a substantially higher capital ratios than that. Okay?
Right. Yes. And on fee income, if you can add a little -- if I understand it correctly, you...
Well, on the fee income, what we indicated is that we are trying to push very hard on trying to structure investment funds for our mass affluent client in Austria, Czech Republic and Slovakia. We've been doing a bit better on that than we actually had expected. And the second issue was our cooperation with the IG group, where we started last year to basically include them on our platform, make them basically George-compatible for bancassurance products, which we then can link into the online sales process of mortgage loans and consumer loans. And we've made pretty good progress on that, and given that we are expanding our client base on George very rapidly. So the results are a bit better than we actually had expected -- or they come a little sooner than we had expected. So you could see a positive effect on that throughout the year.
We will now take our next question from Gabor Kemeny of Autonomous Research.
This is Gabor from Autonomous. A couple of questions on net interest income, please. Firstly, can you give us a sense of the magnitude of seasonality here? Because I recall, in the first quarter last year, your NII also dropped quite significantly, and then you did better in subsequent quarters. I was wondering whether we are underestimating the first quarter seasonality. And then secondly, on the segments, in Romania and Slovakia, specifically, your NII is not really growing, even though in Romania, we have the support from the rising interest rates, and in Slovakia, your volumes are growing nicely. Would you expect this to change over the coming quarters?
So on the seasonality, I mean, it's clear, the first quarter has 2 days less than the second quarter. So this is a EUR 20 million to EUR 25 million impact, and that should be better in the second quarter. On the Romania and then Slovakia question, Slovakia is showing a very tough competitive situation because everybody is trying to grab market share in the mortgages ahead of the introduction of some caps from the Central Bank, and this is having a negative impact on the margin situation. Hopefully, in the second half of the year, when we see lower volume growth, and margins will be improving there. But at the moment, it's due to the competitive situation in the country. Romania, they are -- we are seeing a stabilization and support from the growing interest rate environment but still no translation of higher market rates into our loan book. It should be similar in the Czech Republic, I'm expecting a stabilization improvement in the second half.
It's also in the EUR 6 million negative effect in Romania, very simply based on the move on the segment view. So it's not 100% comparable, but it's actually a slight increase in NII.
Understood. And just on in Slovakia, do you expect any significant impact from these new caps, which the Central Bank plans to introduce?
I think we will definitely not see double-digit growth rates in housing loans going forward as we've seen in the past. I don't see a significant impact, but there will be an impact.
We will now take our next question from Simon Nellis of Citibank.
Maybe a technical question. Last several quarters, gains and losses from financial assets and liabilities not measured at fair value through the P&L. They averaged around EUR 39 million. Obviously, you had a one-off participation sale last quarter, but this quarter it's 0, and it's kind of impacted the other -- the net other result that you show. Can you just elaborate on -- I think it's security sales. But what's the outlook? Will you be selling securities in the future? Are there some to sell? Or was the last 4 quarters kind of exceptional on that line item?
Yes, we have less sales through this less P&L contribution from this line.
So that means it will be closer to 0 going forward than the EUR 39 million that we've seen in the past?
Yes.
And maybe just one question on Romania. I mean, why has your loan growth been so slow? Why have you been so conservative? I think some of your peers locally have been growing faster than you. What makes you more cautious than them? And could that change?
Well, I think first of all, we sold quite a lot in Romania. And secondly, we have been, in '17 and also in the first quarter of this year, more cautious than most of our competitors on the local corporate side, so that's a relatively large segment. And we've been also more cautious on real estate lending than most of our competitors. But we're easing up, and I think that in 2018, we'll catch up with market growth.
We will now take our next question from Victor Galliano of Barclays.
Yes. My main questions have been answered, but just a follow-up again on costs. Just looking at your IT spend, the -- I know that the message is that this will come down in the second half, but we saw quite a significant increase year-on-year in terms of IT spend alone to EUR 103 million. That's about a 12% increase. How should we think about this and view the fact that maybe you're just sort of -- are you beginning or where are you in terms of the introduction and the implementation of the George build-out on the digital side in CEE? Is there a risk here that we could see some IT spend overrun into 3Q and 4Q?
Okay. I think you will have a very clear trend on IT spend. What you saw in 2017 and also in the first quarter of this year is higher IT expenses, but most of them are regulatory-driven. Biggest chunk, all of that, of course, IFRS 9, which resulted in high IT expenses throughout 2017. IFRS 9 still -- since now we are in the first quarter of IFRS reporting, most of that is done. There will be relatively few leftovers on the IT expense side for IFRS 9 in the second quarter of this year, and then that's over. Relatively, similar stories on MiFID, GDPR and other regulatory projects. On the George side, yes, there is room up and down depending on the 3 strategies that we readily have for George. Number one strategy is stabilization of George and completion of the product range in the countries where we have rolled out George. That's Austria, the Czech Republic and Slovakia. On that front, there is little to no risk that we will have a spend overrun in 2018. Second strategy of George has started and will continue throughout 2018, is the expansion of George into all our countries. For the moment, we are engaged in Romania. Later on, in Romania, Croatia and Serbia. That is pretty much planned there. There could be, not known to us yet at this point in time, hiccups along the way. But in our Ukraine league, nothing that could substantially eat into our expense base in 2018. And the third strategy, which is very clearly -- the third strategy, because we're concentrating on the stabilization, product expansion and the rollout of George throughout the existing group, is moving with George into a new market. There, yes, if we take that step, we could have investments into IT that are presently not foreseen, but very unlikely that this will happen this year. And if we are ready to move ahead with that, we'll let you know, and then we also give you the investment amount that will put into that.
Okay. Just a quick follow-up from me then. So would you expect to see a peak in IT spend? Is it behind us, Q1? Or would you expect to see that in Q2?
Well, overall, I think I would say -- I would not necessarily put it into IT only, but we would still see expenses in the second quarter -- operating expenses in the second quarter of this year being higher than last year.
Okay. And just on Hungary, where does that sit? In Phase 1 or Phase 2?
On what? On George?
Yes.
On Hungary, Phase 2 rollout later on this year.
We now take our next question from Brajesh Kumar of Citi.
Brajesh from SocGen Credit Research. In terms of your issuance plan, I see that you have increased the guidance from previous quarter of EUR 2.5 billion to EUR 3.1 billion. So I'm just wondering, what's driving that change? And more generally, can I get some more color around your sub debt issuance plan for the year? And where are you on NPS issuance? Any developments there?
[Technical Difficulty]
So the question was about the issuance plan. This is something that has no real meaning. I mean, we were reaching already EUR 1.75 billion with regard to issuance, and so the indication is that we might go for more because we -- as long as the funding conditions are as they are and expecting greater rise in interest rates next year, we might be doing some pre-funding this year. Whether it's EUR 2.6 billion or EUR 3.1 billion, it doesn't really make a big difference for us. So we were doing 2 issuances, EUR 1,750,000,000. And yes, we will continue being active in the market if conditions remain very supportive.
Okay. And where are you on NPS? I rarely got any clarity. I was hearing that you get some clarity in Q2. So what's happening there on nonpreferred?
There, we're still expecting to get some clarifications. No impact at the moment on our issuance plans.
We will now move to our next question from Johannes Thormann of HSBC.
Johannes Thormann, HSBC. Sorry, if I have to come back to cost. But what is the better run rate for your personnel expenses? Or the better -- the guidance? The gross run rate in Q1 or the absolute level? Secondly, looking at your cost of risk, do you expect more reversals in the next quarters? How high is the likelihood for that? And what is your current best guess for through-the-cycle cost of risk? And last but not least, if you talk about strategy step #3 for George going into new markets, will it be rather a small or a larger market as its first test?
Okay. Let me do the expense side. On the personnel expense side, in the second quarter, you will still see some of the effects of the wage negotiations in the Czech Republic and in Austria, so personnel expenses will be higher. And then you will see the counterbalancing effects of the actions that we have taken, some of them that Gernot mentioned, the reduction of hire and of externals in the second half of the year. That's basically on the expense side.
When it comes to cost of risk, again, I want to confirm our guidance up the max basis points we will see during the course of the year through the recoveries and no major substantial risk. We should come back to normality more or less.
Okay. And your last question on whether if we make the move into a new market, by which we mean a market in which Erste Group is not present yet and a market in which we would not move into with branches. It will be most likely, particularly from an Austrian point of view, a larger market. But from an Austrian point of view, I think everything is a larger market.
We will now take our next question from Hadrien De Belle of KBW.
Two quick questions for me. One, at the beginning of your comments, you mentioned that the rating of grade from P2 to P1 is going to help your business in dollars. Can you quantify how much money you can make from that? Or how much activity you plan to generate from this? So that's the first question. The second question is, in Romania, the NII was down. You say there was a change in the segmentation. When I look at the [indiscernible] numbers, they are up 5%, the NII, year-on-year, so which is in a more normal trend. Can you explain to us what has happened in the segmental disclosure for Romania? And I should leave it here.
First question, I take. Gernot can take over. Basically, it's the first time in a long time that we have the 2 P1 ratings back, which allow -- which we allow U.S. investors to place more and longer maturities with us. On that, we can produce NII 20 basis points or something like that. So it has a positive effect on NII growth. It does not have a positive effect on the net interest margin.
Yes, I agree. And is that, do we talk billions of dollars that are going to come through or a few $100 million?
Billions, not just millions, but billions. So $5 billion to $10 billion-plus.
What is your question on Romania, it was on a...
The NII on the segmental disclosure is down, but when I look at [indiscernible], like the local accounts of BCR, they are up 5%. And I think it was mentioned during the call that there was [indiscernible] in the segment, like change in disclosure or segment consolidation. I'm not sure. Just wanted to have an explanation on that if you can.
Yes, the segment in our segment report does not include the...
But one is down 2%. That's the only reason. One is down 2%, and the other one is up 5%. So it's the trend that is a bit weird. That's what I meant.
This is the question of how we are treating the equity -- the surplus equity allocation to the various segments in the countries, and this is something that has changed in this quarter because we were changing the methodology there. And this is just simply -- this is not coming from any business effects.
Okay. So the business is more rather the 5% plus year-on-year?
The business is rather a positive impact, yes.
Okay, okay. So you have a -- it's still a positive trend in NII on the line? Okay. Good. That's enough.
[Operator Instructions] Our next question from Alan Webborn of Societe Generale.
Could you just sort of tell us where the trading offs came in particular in Q1? I mean, I know there's an explanation between sort of fair value and trading, but that wasn't just a bad quarter. Secondly, where are we at in terms of -- with George? Is it selling products yet? Is it still maybe just transactional? I mean, where in terms of the markets that you rolled out in? I mean, what stage are you getting to? And do you have any idea of the change in the cost of delivery of products? You mentioned that you were making progress in insurance, putting it onto the George platform. I mean, they -- is it significant in terms of your cost of delivery of products? I mean, you've been doing it for a while now, and I just wondered at what stage you are at. And then for the final question, I mean, clearly, I think there was a bit of a benefit in terms of FX in the quarter-on-quarter or year-on-year loan volumes in the first quarter. But sort of the 7% growth in performing loans is pretty good. Where -- are there areas that are still surprising you a little bit? And what do you think the key drivers are going to be for loan growth in the coming quarters where you feel the margins are right? And what -- where you focus on? That would also be helpful.
So post-IFRS 9, you have to look at trading and fair value together and include the 2 lines. And yes, we were a little bit lower in the quarter, and I expect an improvement going forward. So I think that's -- as far as I could -- it was difficult to understand you on the line, so I hope I got the question right.
Can you repeat the George question again because it was very difficult to understand?
Okay. Sorry.
It's getting worse. Could you maybe call back because your line is really bad? It's very difficult to understand you.
I'll do that.
We will now take our next question from Stefan Maxian of RCB.
Actually, just one question remaining. With regards to the trading result that you booked in other -- in the other segments, I mean, what is that related to? Because that's quite large. It's EUR 79 million negative.
This is asset liability management banking book impact.
We should wait for Alan Webborn to dial back in because he was hard to understand.
[Operator Instructions]
End the call, Anton, and I will talk with Alan Webborn directly. So ladies and gentlemen, thank you very much for listening in. The next date that we have are the 24th of May, where we have our AGM; and results for the first 6 months of 2018 will be presented on Tuesday, the 31st of July.
Thank you very much for your interest in Erste Group, and have a good day.
Thank you. That will conclude today's Erste Group results call for the first quarter 2018. Thank you for your participation. You may now disconnect.