Erste Group Bank AG
VSE:EBS
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Erste Group Bank AG
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Good day and welcome to the Erste Group Bank AG First Quarter Results Conference Call. Today's conference is being recorded. I would now like to turn the conference over to Mr. Thomas Sommerauer. Please go ahead, sir.
Thank you, operator, and also a very warm welcome to everybody who is listening in from Vienna. Today, we follow our usual conference call routine, as I'm sure everybody knows by now and my colleagues Bernhard Spalt, Chief Executive Officer of Erste Group; Stefan Dörfler, Chief Financial Officer of Erste Group; and Alexandra Habeler-Drabek, Chief Risk Officer of Erste Group, will host the call.
They will give you a brief overview, a couple of slides, as usual, on the key achievements and developments of the first quarter. And after this, they are ready to take your questions. Before handing over to Bernhard Spalt, let me draw your attention to Page 2, which contains the disclaimer. And with this behind, please take it away.
Thanks very much, Thomas. Good morning, ladies and gentlemen. Welcome to our Q1 earnings call. Let me start the presentation by maybe a little bit of a picture. For those of you who have followed us for longer, you will see from the presentation style that we're returning back to a structure, which is pre-corona, in a way that over the last couple of quarters, we tried to sort of put an emphasis on the corona-specific elements of our economies and how it plays out. But we're now returning to the old structure in terms of going through balance sheet P&L and main business development and risk. It's a reflection also that we firmly believe and it's our confidence that we are into a year 2021, which will be a year of recovery and rebound and where corona will still play a role, but will not hopefully dominate the economies.
With this, let me take you to Page 4 of our presentation in terms of the key developments and setting the frame for today. You see that the macro developments in the -- in our region have been very robust we're showing, and we're expecting, a very robust rebound this year in recovery after a difficult year 2020 with growth rates of real GDP up to 4.5% in our region. This is reflecting an improving health situation we get to vaccination rates a little later down the line. But what we see and what could not be expected 12 months ago was that the availability of vaccines and the logistic preparations will allow us to go into a summer where, hopefully, a substantial part of the population will be vaccinated and where severe lockdowns further ahead will be avoided.
So we see an improving health situation. We see vaccination progress. If you look at Hungary, very robust and we see that -- and this has been already true for a while, that industrial production is already pre-crisis levels. I think the outstanding development for this quarter is the fee and commission income line, which has been very positive. It was very much reflecting in the context of this ultra-low interest rate environment situation. The success of our strategy, which we presented on our Capital Markets Day in 2019 where we said it is at the core of our strategy to turn 0 yielding deposits into assets under management to convince our customers that they can, on a monthly basis, save on securities and also to offer to our corporate population, alternatives are to negatively yielding cash deposits.
So I think this is something which we have understood relatively early on and which we have been successfully building upon ever since. And we're on our way to reaching all our targets which we put in place pre-corona.
At the same time, I think it is very important to say, and Alexandra will speak about that later, that obviously, credit risk deterioration, even though we have been applying a very much forward-looking approach and a very much front-loading approach, credit risk deterioration is not a major feature of this century dimension crisis.
So we see a quarter where we still see recoveries. We see a quarter where delinquencies and insolvencies are still low. So we have relatively low-risk cost at that quarter. And while this is not the time to revise our guidance on risk costs, which we have put in place in the last couple of quarters, there is an opportunity to undershoot this guidance forward-looking. So I think this will mainly depend on what is happening now in the second and third quarter with the vaccine strategies of the countries, but there is some reason to be confident.
Now if we turn to Page #5, the group income statement performance. And I would like to take you to the left-hand, sort of, chart. You see clearly that the uplift of the net profit after tax by over 50% is clearly dominated by low-risk costs, as I've said, and also normalization of trading and fair value income line. You remember, our Q1 last year was dominated by a double shock, corona plus an oil price shock.
So the volatility hit our income line very heavily last year. Now we're back to normal, I would say. If you can speak about the run rate in trading and fair value at all, I think we're at the run rate, so that should be relatively sustainable. So this is how we end up with EUR 355 million for the quarter.
And if you look at year-on-year, I think what you see is that operating income has been very strong compared to last year and very much also supported by our fee income line. And next page, Page #6, the key data. In a situation where, in the Czech Republic, we have seen massive interest rate cuts in a situation where on the Eurozone, there is, of course, 0 movement on the interest rates, margins continue to be under pressure.
You see that net interest margin is now, for the first time, falling below 2%. And the other sort of major features, operating income, as I said, because of trading and fair value and good fee result moving up, cost of risk being very benign. And this leads us to return on equities and return to tangible equities, which is now again back to double-digit levels.
On Page #7, I think this is a very important page. If you look at the development of our balance sheet, our balance sheet is expanding. And the major driver of the balance sheet expansion is, of course, the liability side, where we see a very significant inflow of customer deposits to start with.
So in this crisis situation, in this situation of uncertainty, customer deposits, both from the retail side as well as from the deposit side, keep flowing in and are expanding our balance sheet. We are participating, as you know, in the TLTRO. This is also reflected in our balance sheet positions when it comes to the cash positions on the asset side.
So I think what we see is a moderate loan growth of 1.1%. So we get to the guidance a little later. So it's not bad, an okay loan growth, but a very significant deposit inflow which is dominating the picture and which is even more supporting our asset management strategy forward-looking.
Let me take you to Page #8 of the presentation with the key balance sheet data of this deposit inflow, which I have been elaborating upon leads us now to a record low deposit -- loan-to-deposit ratio of 81.7% which I think is hopefully the lowest point and something which, at that level, is still surprising. On the credit risk-weighted assets, they basically reflect the loan growth which we see.
So we have not seen yet massive down-gradings in the portfolio as such. So this is moving in parallel. If you look at the NPL coverage and the NPL ratio, again, very, very benign. NPL coverage ratio is now approaching 90% again, and the NPL ratio is still falling. I do not think that this will necessarily be true for the remainder of the year, the NPL ratio, because insolvencies will come in, in the second half of this year, will rise. But I don't see it. I don't see anything like a record inflow of our delinquencies forward-looking.
Capital ratios, we end this quarter, of course, without reflecting and taking into account the quarterly profit, a common equity Tier 1 ratio of 14.0%, which is way above, of course, our internal target of 13.5%. And it's also way above our legal requirements. And you do know that we will propose EUR 0.50 per share for the dividend distribution for the upcoming AGM in May.
And we also have reserved EUR 1 for an extraordinary dividend if and once we're allowed to do so. Liquidity coverage ratio, no need to sort of mention with this kind of deposit inflow, very, very high. And leverage ratio at 6.2%, still very, very robust.
So very quickly on Page #10. The CE economies and the overall developments. The recovery is taking place. All the figures are showing up. All the confidence indicators, which we measure are moving up. If you look at the industrial productions, all of the order books are full. All of the sort of stock figures are good. So on that, with the exception of the services industry, everything looks really well. And we can say that the tourism industry, which has been hit hard by a nonexisting winter season has been very strongly supported by fiscal stimulus packages.
So overall, I think economy is robust and recovering. We are now in a situation where all of the countries have handed in and filed their national recovery plans under the EU next-generation fund. And they will be a source of growth, and we are standing ready to co-finance any of the larger projects, which will come.
So always in the local markets, we see our tax cuts in the Czech Republic. We see investment intentions in Hungary. And we see a lot of efforts in terms of building, again, sustainable workforce. And on top of that, also, unemployment rates are still incredibly low. And we look at very robust labor markets throughout the region.
You see also a chart here on this page on the vaccination progress, and this will speed up now in the next couple of weeks significantly. So all of the countries are very firmly intended to be successful on that end because everybody has a strong desire to return back to what one could call normality.
I will jump over Page #11, just on the business side, retail, what is happening on the ground. We still see an incredibly -- Page # 12, we still see a very, very strong demand on the housing loans in all of the markets. We see quite a bit of a reluctance on the consumer loan side, which we believe will change as soon as the vaccination will be dealt with.
And deposits, as I said, dominate the balance sheet picture. On the securities products, demand for alternatives to cash deposits is high, both in the retail as well as in the corporate side and is driving our assets under management strategy. You see numbers on this page, when it comes to newly opened savings plans on the security side, you also see the development of the fee income, which shows a support of our strategy, which we have chosen.
On Page #13, we are also seeing that branch traffic, which was dropping significantly last year, has recovered very strongly. And this is not only because there is a certain desire to meet people again, but also in the context of a strong demand for mortgage loans, these are products which need to have physical interaction where customers insist on speaking to people in terms of advising them what they can afford and how the structure of the loan can be done.
Digital sales, of course, have increased significantly, cashless and mobile transactions are on the rise. So I think we still see a very strong support of our hybrid business model being physically present and accessible and digitally competent.
On Page #14, on the corporate side, I think the recovery is really already visible. Loan demand is driven predominantly by large corporates, not so much yet on the SME side. And if so, then on the working capital and bridge financing side, investment loans are still somewhat subdued in a context where visibility still needs to be improved, but large corporate credit is rising.
We also see a lot of deals in the pipeline on the commercial real estate side. And we see price levels robust and stable. And we do not see in our portfolio or on the market bubbles arising here. This is a market where loan structures are of a relatively robust shape.
Of course, in this context, margins are heavily under pressure. So it's not all rosy. The margins which can be charged are getting very meager at that stage. And this is a development which I expect to continue as there is an abundance of liquidity and also an abundance of capital available for banks who want to lend and everybody wants to lend.
On the capital market side, the capital markets side, there's a very strong deal pipeline. There's also a strong origination deal flow already, where we have been mandated. And this is something where in terms of fee income is incredibly important to our sales. Asset management, I've been mentioning, our corporate customers do want to switch from cash deposits to short-term money market products. Again, not something which is yielding them much but is avoiding that they are burning cash. It offers some fee income potential in our side.
Also more and more, what we see is that corporate customers request advice on sustainability matters and topics in terms of what they can do. It is something which we can offer and which we also can use in terms of showing competence to our corporate customers.
So with that, I will conclude my first presentation, and I would hand over to our CFO, Stefan Dörfler, to go into more details.
Thank you very much. Let me follow-up with operating trends and start on Page 16 with the volume developments. Customer loans developed basically just as expected and communicated earlier. That means the overall development points to a low to mid-single-digit annualized growth rate. Showing 1.1% year-to-date.
Bernhard has already been describing that in retail, with a steep increase in mortgage loans and ongoing drop on consumer loans, we kind of see a reflection of crisis patterns. We expect -- and I will get to that later on, we expect a certain reversal, especially on the consumer loan side, once consumption can really kick off when all the restrictions are lifted.
The situation on the nonretail and corporate development, it is a little bit more mixed. Which quite naturally is due to different industry and segment development and all the countries are performing differently, as you know.
On Page 17, we see a reflection of the customer deposit development. They -- the customer deposits have been sharply increasing, 13% year-on-year and 7.5% year-to-date, respectively. This is due to the ongoing deposit inflows on retail and corporate client side, typically parking their cash in overnight accounts as far as they are not, as Bernhard has been describing, already engaging into longer-term asset management investments.
What comes on top for the first quarter is growth in our foreign branches business, which we translates to some add-on on our profitability. So all in all, loan-to-deposit ratio is down to a really historic low of 81.7%. And it's also my personal expectation that once consumption picks up, that this number will somewhat stabilize at least and not drop dramatically further, remains to be seen in the upcoming quarters.
On Page 18, we show NII and NIM developments. NII is slightly down year-on-year, EUR 57 million lower than the first quarter of 2020. This is basically completely driven by euroland, so meaning Slovakia and Austria and, of course, the Czech Republic. Let me at that point, make a brief remark on TLTRO. We have added another EUR 4 billion in a March take-up, bringing the total to EUR 18.1 billion.
I think we have been talking and informing you about the way we account for the TLTRO position. And the second quarter will show whether we will develop sufficient confidence in the growth requirements of TLTRO. Should this be materializing positively, then we can have a catch-up booking of up to EUR 90 million, up to why because it's, of course, by legal entity to be measured whether the requirements are fulfilled.
With all of that and based on our expectations with regards to economic developments, volumes and interest rates, we confirm our indication of flattish year-on-year NII development 2021 over 2020.
On Page 19, we show the overall picture on operating income, and let me spend a few words on net fee and commission income as well as on net trading and fair value result. The trading and fair value result with EUR 66.4 million is, just as our CEO has been mentioning, well in range of our -- whatever you precisely want to say with run rate, but that's exactly what we typically communicate, EUR 60 million to EUR 75 million quarterly, leading to something like in the area EUR 200 million to EUR 300 million on an annual basis in a normalized environment.
The first quarter, as you know, there were -- was, on one hand, a little bit negatively impacted by upward sloping yields in some markets, at least temporarily. On the other hand, they were very constructive overall risk markets around. So I would say, a reasonably positive and neutral quarter.
What has been really a very good development and which makes us very confident that on those key strategic pillars we can deliver on the fee income is the EUR 540 million first quarter result on net fee and commission income. This has been structured in the way that on securities and asset management business, we showed very significant growth we're talking about 14% -- respectively, 18%.
And in the same moment, we had a very stable and, I think, for the very difficult macro environment with regards to shop openings and so on, a very solid income on the payment fees. So all in all, a very positive development, which allows us to communicate the mid-single digit growth with some upside potential if the markets remain constructive.
Very little to say this quarter about operating expenses. I just want to reconfirm our commitments, given informal reports, i.e., to apply well balanced discipline across our countries and businesses in order to allow for the necessary investments into our future. The one remark that I have to make when it comes to first quarter is the fact that we have been booking the, unfortunately, higher deposit insurance contribution, EUR 107.6 million, quite prominent amount. In the meanwhile, EUR 20 million or 22% higher than in the first quarter of 2020. This has been fully and even more than absorbed by other cost reductions.
All in all -- and this you will find on Page 21. That results in a quarter 1 operating result of EUR 725 million and a cost income ratio of just above 60%. I can say already at this point that our ambition remains to deliver positive operating jaws, which would require us to get below 59% cost income ratio for the full year. And we think that the first quarter has shown that we have developed some confidence to achieve it.
With that, I hand over to Alexandra for the risk part.
Thank you, Stefan, and good morning. As already outlined by Bernhard, in particular and very visible in the Q1 figures, so far, credit-risk related losses have not been a significant feature. The benign level of risk costs in Q1 are, on the one hand, not surprising, as we, as you all know, and for sure, remember, did perform an in-depth extraordinary UTP assessment exercise late in Q4, in line with our commitment of prudent front-loading.
Furthermore, and as you know as well, the various government support measures are still largely in place. So the NPL inflow is expected for later in the year, so Q3, Q4 of this year, maybe even in '22. At the same time, we see a continuous good development post moratoria, and we see stable strong recoveries also in Q1. Overall, this leads us to keeping our prudent guidance of 65 basis points max for the time being as there's still a lot of uncertainty out there regarding the economic recovery and the development of solvencies after the support measures are withdrawn. However, the current developments in Q1 opens up the way that we may beat consensus expectations.
Of course, a lot is depending on the vaccination progress, the size and the magnitude of the economic recovery. And the timing and the effectiveness of overall the government support measures. When we go to Slide 23, the effect of hardly any new defaults in Q1 and the already mentioned strong recoveries. Reducing the existing NPL stock led to a small improvement of the NPL ratio and of the coverage ratio as well.
The Stage 2 remains stable and as already outlined in the last call, we see this level as the peak. Now only very briefly on the post moratoria experiences and other portfolio developments. In a nutshell, we see a continuous trend in all the aspects that we have been presenting very detailed in -- especially in the call of the Q4, the full year results 2020. That means, in particular, the vast majority of ex moratoria clients resume or resumed payments without delay.
Payment ratio for retail is above 90% for corporates even higher and the overall default rate of ex -- even moratoria clients. So newly defaulted after entering into a COVID moratorium is still very low, around 1% to 1.5%.
Just to be clear, and as already mentioned in the last call, this excludes clients that have already been entering the moratorium in a defaulted stage. So taking this into account as well, these are 3.3%. This would total 4.6%. Currently, there's also no change in our industry view, most hit tourism restaurants, entertainment, everything connected to international travel.
On the other hand, production and construction doing very well in all our markets. And retail remains with a mixed picture. The winners, consumer electronics furniture on the one hand and clothing and footwear more hit on the other hand, and of course, highly depending on the further progress on openings.
So with this, I would hand back to Stefan.
Thank you very much. Page 24, just a few brief words on other results. Nothing too spectacular to report here year-on-year, quite stable. Important is only that, here, we have been digesting the pretty exactly EUR 100 million of recovery in resolution fund contribution.
So to sum it all up, let me refer you to Page 25 and add that after the higher tax rate in the year 2020 for known reasons, we calculate with a 22% average tax rate for the year 2021, which is completely in line with our long-term indicated range. All of that results in a net profit after minorities for the first quarter of 2021 of EUR 355 million.
Before I hand back to Bernhard, who will be talking about the key conclusions for our 2021 outlook, let me spend a couple of minutes on wholesale funding, MREL and capital. Page 27, in this respect, only shows the latest breakdown of our debt securities and the interbank deposit development, obviously driven, especially on a year-on-year comparison by the TLTRO program.
Therefore, let's look at the maturity profile, which is shown on Page 28, a very well-known slide to you. We are very happy with the overall funding structure. And also with the levels at which we could execute our transactions in recent quarters. Looking into the further 2021 program, it's fair to say that the funding volumes will mostly be comparable to 2020.
However, somewhat adjusted for, on the one hand, the active prefunding, which we executed in the last quarter or late in 2020 and, of course, taking into account, especially when it comes to covered bond lending, covered bond issuance, taking into account the big size of TLTRO funding.
So far this year, just to inform you, we have been executing 1 benchmark transaction, a EUR 500 million senior preferred note, mid swaps plus 55, 10-year tenor, this already took place in January. And we are planning for one or the other activity in the course of the second quarter.
On MREL, and this brings us to Page 29, where there is a general overview. I also may refer you for a more detailed description on -- in the appendix, Pages 42 and 43, for those who are very much into the MREL program, there, we show all the details on breakdown and when the timing of the respective regulatory guidelines happens.
I just want to let you know that besides the transaction I just mentioned on the holding level, we have already issued this year in Slovakia and in Croatia. And we are expecting transactions for all the 6 resolution groups further on in 2021, fully in line with our outlined overall 3-year MREL issuance plan.
For that purpose, the multi issuer program for all the entities have been set up and which I'm pretty proud of, to be honest, we have held a very well received MREL Roadshow Day, end of March, with all our local CFOs presenting and -- presenting their countries and explaining the plans for their local activity.
So all in all, what you should take away from the MREL update is that's all on track. We are executing the program and, frankly speaking, we believe that the cost for it will be quite significantly lower than it was expected, maybe 1, 2 years ago. Last but not at all least, on Page 30, we show the quarterly waterfall for CET1.
And frankly speaking, it's rather spectacular this time, which is in my eye is a positive. It brings us to 14.05% common equity Tier 1 fully loaded. And let me remind you, Bernhard already mentioned. It is in his first presentation part that this is not including the profits from the first quarter and also not the positive OCI developments.
So adjusted for those on a pro forma basis, we would be around about 24 basis points higher, so if you want flat for the year, which is very much reflecting our very stable and good capital development. And since there is on dividends, nothing else then to reiterate what we have already been saying by the end of February. I hand back to Bernhard for the outlook.
Thanks very much, Stefan. Let me take you to page number 32. Key takeaways and outlook, and I will focus on the right part of the presentation, of 2021 outlook, because I think Q1 '21 takeaways we have broadly elaborated upon. The outlook on the macro side, as I said, we expect a robust recovery, and that will also shape 2022 as much as we see.
Loan growth will, as again indicated in our last call, being the low to mid-single digits. On the cost income ratio side, we reiterate our ambition. And we stick to our ambition to have positive jaws forward-looking based on a flattish NII, a very strong fee and commission income. A normalized trading and fair value result should show on the basis also of cost discipline, further applied positive jaws throughout this year.
On credit risk, I don't want to sort of repeat what Alexandra has been saying, it will -- credit risk costs will certainly be below the 65 basis points. And with a certain hope that this can be -- we even can sort of beat the market consensus at that stage, depending, as we said, on the vaccination, depending on the overall economic rebound.
Capital position, nothing much to be added. We stick to our 13.5% common equity Tier 1 ratio. No reason to change that. We have a dividend now in front of us. We have the EUR 1 reserved for the later stage of this year depending on regulatory guidance. And we're also sort of looking to a market where possibly bolt-on acquisition opportunities will arise.
So we are not only very well protected against adverse economic developments, but we're also in a position to, A, pay dividends; and B, look at acquisitions as they come. On profitability, it's clear that the net profit line will look substantially better than in 2020 based on the risk development as we see.
And I think that pretty much concludes our presentation for today, and we're very much looking forward to taking your questions. Thank you.
[Operator Instructions] We will take our first question from Anna Marshall from Goldman Sachs.
Two questions, please. Firstly, on NII, could you please indicate what is your expectation on quarterly trajectory going forward? So you've already mentioned that TLTRO hook up, but is there anything else particular that you expect to play a role? For example, a mix effect, as you mentioned, the consumer picking up later in the year. So this was my first question.
And the second, could you please elaborate on the M&A front, if you have anything in the pipeline or this is at the moment kind of a theoretical perspective?
Thanks, Anna, for the question. And I try to keep it short, nothing really special, to be honest. What, of course, you're aware of first quarter -- quarterly comparison, especially year-on-year, a little bit less of a day count. Starting into the year with a difficult interest rate environment and, of course, also, which is affecting all areas still a quite dominant lockdown all around us. In the same moment, I explained the potential catch-up and increasingly likely a catch-up on TLTRO.
So I think it remains to be seen how volumes in the different segments will really develop. We are in constant talks with our business colleagues. It's really something which we are very keen to learn, week-by-week. So overall, I think it's fair to say that we simply stick to our assumption. So far, we've been pretty right in what we anticipated knowing the markets very well, but it's a little bit too early to say. And I hope that I can give a more concrete guidance in -- also with regards to sector NII developments, by summer. But for time being, a flattish NII overall is a fair assumption, of course, with very different developments country-by-country.
Anna, on the second question on M&A. No, this is not a theoretical exercise. It's a very practical exercise. And we are having very close looks at opportunities still inside what we guided over the last couple of quarters in terms of bolt-on acquisition opportunities in our markets which fit to our strategy.
Let me just cut 2 examples, and none of them sort of represent any kind of probability that they will materialize, but still there are sort of things which we look upon. One of them is Commerzbank, who is giving up their presence in our market, so it would be a very natural sort of fit. So we're looking into that. And the other thing is, which I want to quote is Sberbank Europe, which is also a potential opportunity, which we're analyzing whether or not this materializes, whether or not sort of in terms of earnings accretiveness and capital accretiveness, this works and can be a fit. It's sort of yet to be decided, and the jury is still out. But no, it's not a theoretical exercise. And we're looking almost every week at opportunities as they come.
We will now take our next question from Mehmet Sevim from JPMorgan.
I have 2 questions, please. And one is a follow-up to Anna's question on NII. You mentioned the potential TLTRO benefit of up to EUR 90 million. Could you please remind me to what extent your flat NII guidance reflect this potential of up to EUR 90 million?
And my second question would be on cost of risk. So you obviously gave us your views about normalized levels of cost of risk previously. But going into the crisis, it was obviously far from those normalized levels, given the strength of the economies across the region. And now it looks like we're back to those low levels. So once COVID-19 is behind us, and assuming it's a temporary hit to economies, what would you see cost of risk would rather settle? So would that be the normalized levels? You were saying 30, 50 basis points? Or is there a risk that it could be back to just pre-COVID levels of meaningfully lower levels?
Since the second question on risk is definitely the more tricky one at this point in time, we all are very keen on hearing Alexandra's answer on that. I keep it very short on NII. It's including the potential catch up. And that is what we have been always communicating. We, for a very good reason, have been cautious on the volume requirement fulfillment. We will know probably somewhere by the middle end of June, and we certainly report on that in July. So it's including all components, which play into the NII.
On cost of risk, I remember when we had our event in Vienna before the crisis, and it was also discussed the 30 to 50 basis points. And yes, you are right, what we have seen before the crisis over many, many, many quarters and years was much better. But we also have also seen years before with much higher costs. And I can repeat and now with a lot of confidence, seeing the resilience of our portfolio what I also said at this occasion. So the 30 to 50% is a reasonable assumption, but I'm not hiding that I consider the lower end of this range a realistic figure going forward after the crisis.
We will now take our next question from Máté Nemes from UBS.
Yes. I have 2 set of questions, please. Firstly, on risk costs. Can you confirm better you have released any general provisions in this first quarter? Looking at, specifically, Austria and Romania, where you had negative risk costs, were these workouts or specific situations? Or are these releases reflecting general provisions?
And secondly, on the expected NPL ratio between 3% to 4%, can you elaborate a little bit on what should be driving this? And are you expecting perhaps more credit events on the corporate side or the retail moratoria or loans kind of the moratorium could play a role in this as well? And then secondly, on fee income, clearly, a very good development on that front. Does the Q1 figure include any one-offs? And should we take that EUR 540 million a good basis for the next quarters as well. And related to that, and I promise last one, can you comment on the AUM development and inflows and asset management?
Okay, then I'll start with the question on risk costs. So the first quarter was characterized by a very low new NPL inflow, so roughly EUR 350 million, which was almost entirely compensated by recoveries and upgrades. So this is the reason why we had hardly any is bookings of EUR 54 million when you deduct also the recoveries on the written of stock, this leads us to this EUR 36 million.
So to your concrete question, no, there were no -- or de facto no releases of the FLI or the overlays that we had performed. So we did not release reserves and the reason, especially also for the negative or positive risk costs in the same releases in Austria and Romania, were really recoveries and upgrades. On the NPL ratio of 3% to 4%, is very similar for retail and corporate. So we do not consider one of them outperforming or underperforming the other one. So we expect this evenly for both sections or segments.
On fee income, let me answer first the very justified question on how sustainable do we regard this positive momentum. I would say, overall, quite sustainable. You remember that we have communicated at the Capital Markets Day in 2019 a 3.9%, so somewhat 4%, compounded average growth rate up until 2024, which would have been bringing us from the base back then to EUR 2.4 billion in 2024.
Now I wouldn't say that 2020, especially with regards to fee income, has been a lost year, by no means. As you know, we have been pretty much developing a flat fee income in the year 2020, adjusted for the changes in the regulation on payments. So I think it was only last year, but of course, it was a year which -- where we did not deliver the growth. So as of today, and given the overall mix of trends in the different components of fee income, I would say there's a good chance that we will make up for this year and basically reembark on the original trajectory.
So in other words, whether we will be able to deliver on every single quarter, the EUR 540 million. I mean here, I would be certainly a little bit cautious. But if you take the basis of the end of the year 2020, so 19 73, I guess, if I remember correctly, then you certainly can expect a significantly higher growth rate year-on-year than the original trajectory that we were indicating over time. The other question, and this is, of course, one important part of it, how had the assets under management develop. Here, I have the latest number from the end of -- for the end of Q1. And this is the first time north of EUR 70 billion, concretely EUR 71.1 billion under management.
Let's not forget that we had a harsh drop at the first quarter of -- in the first quarter 2020. So year-on-year, this is a dramatic increase, but I think it makes more sense to look at the end of year 2019 and end of year 2020 levels, which were EUR 64 billion and EUR 68 billion, respectively. So all in all, quite optimistic on fees. However, and for very good reason, my business colleagues also point to the fact that there could be shaky times both in markets and production. So I think that we should be able to get back to the trend originally outlined in the year 2019. I hope this answers the question.
We will now take our next question from Izabel Dobreva from Morgan Stanley.
I have a few questions too on NII and one on fees. So starting with the NII question. I suppose we have seen a quite meaningful deepening of the yield curve across your market since the start of the year, most notably in the Czech Republic. So I was hoping you could give us an update of how much of a replicating portfolio headwind we should expect now for this year. I suppose there should be an improvement since the last quarter?
And then my other question on NII was regarding the performance of the quarter. I think in one of the slides you flagged that the Austrian holding company business was affected by movements in derivatives this quarter. And we can see that the NII in that business dropped by about $11 million sequentially, whereas normally it's quite stable. So my question is, is this a one-off? Or should we consider it a step down in the run rate of that sub business?
And then finally, my question on fee. So on the liability side, we have seen a huge inflow of deposits this quarter. So how would you see that developing for the rest of the year? Would you expect it to reverse as the economy reopens? Or is it a longer-term fee opportunity from your perspective? I guess I'm just curious how your conversion rates look like when we think about deposits converting into AUM.
Okay. There was a couple of questions, Izabel. Let me try to answer those first, which were both acoustically and from content, easy-to-understand and we can answer very clearly. Absolutely correct. And I mentioned also in my presentation already that in some areas, we saw, of course, also increasing yields in the course of the first quarter, and that was mainly true for Czech Republic as well. So on a short-term perspective, this is always a certain burden. But I think longer term, obviously, this is also a positive.
What we did, by the way, we were executing a significant share, not to say, pretty much everything that we have in plan in terms of investment books on the back of higher yields on the long end as well as, of course, the liquidity inflow, and that should yield -- should give us significant positives on our investment books on the asset liability management side. So that's the first remark.
The other remark is that we expect, on a year-on-year basis, given the latest development in the higher yields, a drop of around about EUR 30 million in our investment book, which is a little bit less than we originally expected, which was right close to EUR 50 million, EUR 45 million to EUR 50 million. So that's the positive side. The negative side somewhat, and I mentioned it before when we were talking about trading and fair value income, which it still looked very okay in the first quarter, but of course, on the fair value positions, both in savings books and other entities, it is a little bit of a burden when rates go up.
Obviously, in general, we are not unhappy if the curve is overall steeping. So I see it as a medium-term positive. Unfortunately, to be honest, this has been very temporary. If you look at most of the curves, they have been coming back as expected, to be honest, very quickly. However, in some of the countries, especially Hungary, Czech Republic, so non-Euro counties. I'm a little bit optimistic that we will see a more constructive yield environment.
The last part of your question, I also understood it was about whether we can translate ongoingly incoming deposits into asset management. They're clear yes. Clear yes, our CEO has already described in his presentation that this is not something where we go for one-offs where we kind of shoot for the big tickets. We go for constant savings. We even have internally discussion around really asset management and long-term investment as kind of the new savings book, is something which I very much like as a thinking. Of course, a very well balanced and long-term oriented way of investing is what we recommend to our retail customers, of course, once they have available savings and that's a long-term trend.
And absolutely, I think you used the word convergence. We clearly believe that step-by-step, our markets will converge to somewhat Western European labels, which, as you know, would give us a tremendous upside there in terms of volumes and shares of invested money. And I have to admit, I did not really get this one question around derivatives and EUR 11 million or something. Can you maybe repeat that once more, so that we understand what you're referring to?
Yes, of course, sorry, I wasn't clear. If I look in the Austrian Other segment, the holding company segment, the NII there was EUR 98 million and normally, the run rate over the last kind of 5 quarters has been around EUR 110 million. And in one of your slides, I think you mentioned that it was affected by the market business. So my question was, is this a one-off? Or is the new NII a run rate?
Let me double check that. I don't want to shoot from the hips here. I have a certain view what that could/should be. It's nothing that you or anyone should be worried about by any means. I would assume that it could very well be due to the issued securities and the respective -- the way you need to book for that being issued. Since the hedging part goes through this. But again, I want to look at it. And Thomas or Peter will get back to you with a 2-liner explaining that. Definitely, it's not something which can be of any worry in terms of recurring or one-off effects, which are concerning by any means that I'm absolutely sure of.
We will now take our next question from Johannes Thormann from HSBC.
Three questions, please. First of all, looking at the risk costs. The still existing guidance of up to 65 bps. Just to understand what is needed to how -- just help me understand what would be needed to get to the level of 65 bps this year, like several larger corporate defaults, jobless rates rising to a certain level? Because you have already done some management overlays last year. Just to understand this.
And then secondly, coming back to the deposit wave, which you see flooding into your balance sheet. You not only feel this via the NII, but also via higher regulatory to us. And the conversion into fee income is nice, but do you need to take a stronger counter measures to limit this deposit inflows? And last but not least, if you talk about the long term do you think your old target of 10%-plus return on tangible equity is achievable post-crisis again? And then -- or is this now in a post-COVID environment less possible?
Johannes, let me take the second 2 questions. I'm sure Stefan will also home in last question. Our target level of return on tangible equity, double-digit after crisis, certainly maintained, absolutely. There's no reason why we shouldn't achieve that. On the last one question on the deposit inflow and do we need to take more countermeasures, yes, and we do. If you look on the corporate side, we're already charging negative interest rates for larger corporate deposits, and we will go further down the ladder how -- so -- and this is, again, then building a bridge towards corporate customers going for alternatives again switching to, as I said, money market funds and the likes, which is generating fee income and doesn't burn cash.
On the retail side, we find it presently very hard or impossible to pass on negative rates. And this is on the basis of a little bit stated high core judgment on the question are we allowed to pass on negative interest rates for savings accounts, which is negative in Austria. So this is something where we presently are constrained by the regulatory environment. So where we can pass it on, we do. And sort of where we cannot pass it on, it's depending on our success to convert the inflow to other products. And let me also say this, I do think that if you take a more forward-looking view in terms of when does this wave stop or when does this wave sort of come down? I do think that's a sort of -- there's a very strong correlation to the recovery.
Once the economy opens up once people can spend again, once people can go on holiday again, can travel and can invest they will use their savings. So I think that will be a very natural also mitigation against this deposit inflow.
Absolutely nothing to add from my side. I can 100% confirm what Bernhard say.
Then I come to your question what needs to happen to come to the 65 basis points. Johannes, you already -- you yourself, you mentioned a lot and I will repeat it. One is, of course, larger corporate defaults. Second is the development of shop rates. When you look at Austria and Austria alone, there is still also on a decreasing trend, still almost 0.5 million people in the so-called Kurzarbeit, and it will be decisive. So a lot of them, of course, coming from tourism and entertainment industry. And we will see very soon how this will either increase the unemployment rate or really will be taken up again from the opening economy.
The second is how consumption will pick up and consumer confidence will develop. Let's take tourism as an example. For the time being, yes, it's tough because the hotels need to be closed. On the other hand, there is a strong support from the government. When the openings will be allowed and this government support will fade out, it will be decisive how many clients and people come back and how consumption will pick up. So these are the biggest question marks. And in case these things do not develop all positive, this would then rather indicate towards the 65.
We will now take our next question from Benjamin Goy from Deutsche Bank.
Two questions, please. First on loan mix. And then secondly, on risk migration. To your loan mix, I think, very positive comments on the consumer loans you mentioned. I'm just wondering about your -- the confidence you have given you see all these deposits that any, so to say, lifting of lockdowns directly leads into consumer loan growth. Any expectations you have there?
And then you're positive on large corporate loan demand. Just wondering whether you expected trickling down and all the SMEs in the second half of the year, or is that more uncertain?
And then the second question, you had a modest impact on your RWAs from risk migration in Q1. I was just wondering whether there could be more to come in your base case or anything material in the remainder of the year?
Let me take the first 1.5 question. The loan mix on A consumer loans and B, large versus SME customers. I think this can be answered in one. There will be a certain time lag between the opening of the economy and the sort of return to normal and a picking up of consumer loans and also SME investment loans. As per both, the prerequisite is an increased certainty that stabilities can be expected both when it comes to our order book, both when it comes to business development as well as when it comes to job security.
So I would say, for both, we are based on our outlook for the vaccination success. Very confident that consumer loan demand will pick up in the second half of this year and that SME investment loans will also normalize and will pick up again by the sort of second half of this year.
Now on the development of credit risk, RWA. So in the first quarter, as Bernhard was already outlining, the major impact was business, business growth and not rating migrations. However, we had some impact from rating migrations and also uplifts, but those were overcompensated by increasing collateral value. So some risk transfers and real estate, some residential real estate collateral. So overall, it was not so visible.
For the year, for this year, we still, and unchanged, expect a mid- low to mid single-digit increase in credit risk RWA, where still some effects from rating migrations are factored in, and also compensated by the NPLs -- into NPL.
We will now take our next question from Riccardo Rovere from Mediobanca.
Two or 3, if I may. The first one is for Bernhard. I just wanted to have a better feeling, a better understanding on capital return. If M&A in your mind comes before shareholders' remuneration or before organic growth, just to shed a little bit of light on that. Second question I have is I'm not sure I understood it correctly, one of the previous comments from Stefan. On -- maybe on rates, possibly moving higher in other countries, which are clearly not Euro area. I'm not sure I got it, I understood it correctly aside from Czech Republic, of course. And the third question I have is on risk cost.
I sense that in the message you are giving today is a kind of orderly retreat from your guidance of a 65 basis points without holding positions that cannot be kept. But in this context that when I look at NPL's coverage ratio at 90% and probably this is even higher because if you are experiencing recoveries in written off positions, which are, by definition, covered 100%, technically, the NPL coverage ratio, even now you have 90%, now can you shed a little bit of light of why the LGD should be so high on these positions?
Are those positions all unsecured? Or are they secured by something that is worth technically nothing? And when -- can you also shed a little bit of light on the functioning of courts. Have they been working regularly, normally when it comes to workout NPLS? Or have they been slowed down by the COVID-19 situations, working from remote or something like that. Have they been working normally over the past few months?
Riccardo, thanks for the questions. Let me take the one with the capital returns versus M&A. Philosophically, I don't think that this is an either/or. I think they go both hand-in-hand. We're looking at acquisition opportunities under the context that they would be capital accretive and earnings accretive. So this is a use of capital, which, again, will be sort of for the benefit of the shareholder. It's not sort of something where I would say, let's keep an acquisition opportunity because we want to pay an extra dividend. So I think this is not the way how we look at it.
So I think what you can count upon is that we want to expand our core business in a way, which supports our capital position, which supports our P&L. And therefore, supports our dividend distribution capacity.
Yes. Riccardo, on rates higher, I think we are all following on if not weekly then at least monthly basis, comments from the different representatives of the local central banks. I guess Czech Republic, you mentioned yourself, there is a lot of talk about when the Czech National Bank will consider rate hikes. I think the question whether or not is relatively clearly answered by their overall commitment. A recent indication what we always said for 2021, we do not expect too much of a positive contribution for us. Even if they should act in the third or fourth quarter, that will not turn a needle for our NII in a relevant dimension.
Certainly, for 2022, this is a very important factor if and how much the Czech National Bank will raise rates. We believe that there is a good chance in some other countries. In particular, when you look at the Romanian situation, and against all odds, if you want, we have seen an upgrade in the rating of the country recently other than a downgrade, which, frankly speaking, was not to be expected. So the overall environment, while always a little bit shaky from a political front, I don't want to comment on that too much, but that's, of course, always a question mark. But overall, the situation is robust. And I think that's also represented in our operating trends in Romania.
So I think if the environment in Romania on the inflationary front and on the public household allows, I think that we could very well see a turnaround or at least a stabilization that's very likely, but maybe a slight turnaround in that. It's also a question behind Hungary. I think these 3 countries, with regards to their overall macro situation, offer a certain opportunity. We are not counting on that in our forecast in detail with the exception of Czech Republic, and I'm sure we will talk about 2022, the latest in summer. But that's the picture I would draw here. Of course, and you mentioned it yourself, just to repeat that. No whatsoever expectation of higher euro rates or even a reduction of CUI in Europe is built into any of our assumptions.
Now to your question on risk costs. Let me guide you back to Page 23 of our presentations to the table on the right-hand side, where you see the risk provision by stages. And let me start with one basic comment. So we do not assume that LTVs because we have less valuable collateral on the new loans is prone to become worse compared to the past. But what you need to take into account when you look at the current coverage ratio is the provisions on the stage 2 loans. So it's only under brackets. It's single-digit from demand, but it's EUR 1.2 billion.
So this also flows in the high coverage. And when these loans, what we assume after the expiry of the various support measures, at least partially flowing into stage 3, this will then increase the losses and create the risk provisions. So this is on the first question.
Okay. Alexandra. But on the -- yes. But on the NPL on the -- on something that is already defaulted, is going -- is in court and all these things, what is the collateral? It's completely unsecured? Probably not.
No, no.
The amount -- the NPLs are probably not 100% unsecured. It's not just consumer finance to buy a TV, probably not. It's not. So there is a part of that is -- yes, a part of that, it must be secured. It is secured. And secured by what? Because we -- because with 90% coverage ratio, with recoveries of written off positions, as you have stated today, probably this is not secured by -- sorry, for the French potato land. Because otherwise, you would have no recoveries. You could have a pop up. You would have an increase of the coverage ratio to 200%. It's not the case.
No, it's not. When you look at the table, and this fully reflects what you say, of course, this is not uncollateralized. This is a mix of unsecured consumer loans of secured mortgages very, very low level and of corporate loans with a normal mix of collateral. When you look at the table stage 3, so this is why the coverage of stage 3, with which we still feel very comfortable, is 54% only, yes. So this is due to the collateral that we have.
And also the new loans that we were giving and granting and bridge loans and the new NPL that we are expecting, they will not be different from the stock that we know. So a very good mix of collateral, so not only unsecured consumer loans, for example, for sure not.
Right. Right. And in the court, are they working kind of normally? Or they've been slowed down normally?
This was the factors indicated, a very positive surprise that the recoveries not only on the written off, they are the smaller part, but the recoveries on our own books NPLs are really, really strong, as strong as compared with 2019, for example. And this is also due to that there are no restrictions apart from, of course, as long as there's a statutory moratorium place. We had different restrictions in the different regions, but they are fading out. And basically, courts work normally and workout recoveries and workout activities are also performed normally. Of course, within the boundaries of local legal restrictions. So you cannot see a client who is still...
OK. Very clear.
We will now take our next question from Alan Webborn from Société Generale.
Just a couple more from me. What were the nature of the written-off loan recoveries? Are they specific? Is it Hungarian real estate? Or just -- was there a specific issue? And wasn't it there a specific timing? And would you see any more of that as we go through the rest of the year? That was the first question.
You mentioned insurance brokerage is one of the areas that you see driving fee income growth. You've shown us what the -- I think the investment, the brokerage amounts could be. How material do you think the insurance brokerage business could be going forward? And is that linked particularly to mortgage demand? Or is it more general? That was the second question.
The third question was are you using already pricing differentials in your ESG business? And is that attracting more customers? And is that becoming -- you clearly sense that's becoming more important, but I just wondered whether it was about was something that you were doing.
And then so finally, I mean, you talked about branch attendance recovering strongly. And I appreciate fully your hybrid model. But at the same time, you say customers are increasingly using digital and remote channels for investment advice. So other than mortgages and to have a chat, what are they coming to the branches for? And have you seen now you've experienced 12 months of increased digital usage and so on? Does it make you feel about shifting further along that hybrid model to perhaps reinforcing more of your indirect channels and reshaping, readjusting at all the way the branches work?
So let me start with the famous written-off portfolio. So we have been seeing recoveries on the written-off portfolio over the last few years. And the written-off portfolio overall is now down at roughly EUR 1 billion. The recoveries that we have seen also over the last years and which continues so far also this year is roughly 8% to 10%, yes. So this would equal roughly EUR 100 million per year.
In the first quarter, we have seen EUR 22 million. So it's very much in line and also well distributed throughout the countries. So a little bit more than half in CEE and a little bit less than half in Austria. But no country now significantly standing out from the regular developments.
Alan, on the insurance brokerage, let me just share with you facts, and then I leave it to your interpretation of how material regard that. Around about 10% of our overall fee income is related to insurance products. And we had a year-on-year growth in the area of 7%. So I think it's on the right track. It's not, of course, comparable to asset management or payment fees. But I think it's the right way. We move together with our partner, we are across many jurisdiction, many countries. And we see that we can connect it more and more to our core products.
And not to forget, and this brings you over then to Bernhard will answer your question also around digital and branches and so on. We are working very much with our insurance partner also on digital solutions to be offered to our clients. So that's the situation. There we are. We're working on it constantly. It's a very important part of our offering, but it's, of course, not the biggest block in the fee income.
And by the way, I missed to answer before. I think it was Izabel's question about whether there were any significant one-offs in the first quarter, which we should point to. The answer is simply no. Nothing significant. It's something that you could take as very strong, however, hopefully, quite probably a recurring level that we can deliver.
Alan, let me start with ESG and the relevance on the customer side. I think that the relevance presently is twofold. One, of course, the demand for green bonds and the demand for sustainable investment products is very much on the rise. So our asset management company has been, for a very long time, been already in this market and has been very successfully with placing these products. I wish I had participated some 10 years ago when they came up with their first green bond, our green fund product.
So I think we're very active on the asset management side on that. And this is going to be a continuous demand overhang. Which -- the second thing, which I tried to mention was on the advisory side on the corporate business. More and more corporate customers require advice when it comes to respecting sustainability targets when it comes to sort of reaching carbon neutrality. So this is something which, in terms of offering competence in the client coverage, is something which is picking up and which we quite significantly put attention to. So I think these are the 2 elements, which I've seen, which will grow over time.
On the hybrid business model and the branch versus digital and the behavior of the customers, all what you say is true. And what we're trying to do is, on the one hand, reflect our customers' behaviors and desires. It's not only mortgage business, which drives branch visits, it's also investment advice when it comes to larger investments on the retail side, which requires face-to-face interaction. But of course, also customers are wandering through the branches and picking up the cash and doing self-service transactions, which we more and more offer. And we're also starting in Austria quite significantly piloting remote advisory services.
So more and more, I would guess, and it looks to be quite successful, customers will also accept that kind of service. So I don't think that we will see a very drastic reduction in branches very soon. But we will see a reduction, as we have done so for the last couple of years as we go along, reflecting customers' behaviors and moving them towards more or towards cheaper channels. But as I said, I still think there is significant value in being also physically accessible.
We will now take our next question from Olga Veselova from Bank of America.
Several questions. First of all, which regulatory changes do you anticipate once the COVID is over? Do you think that the Czech Republic will bring back its capital buffers? Maybe anything else similar?
My second question is how does the fiscal stimulus year-to-date go versus your expectations? And this question I asked because of the strong deposit inflows, which continue. Is this stronger than you expected? In which regions, and maybe in which forms? And my third question is about the normalized cost of risk. Thank you for updating us on that. How long do you think it will take for asset to return to the normalized levels? Could it happen reasonably quickly, let's say, next year? Or will you talk about much longer period, 3, 4, 5 years?
Let me start with your second question on cost of risk, how long will it take. So of course, the idea of prudent front-loading was to return as quickly as possible to a normalized risk cost level and this -- that's the reason why I can answer you, yes, this should be on a reasonable time frame. So not over more years rather earlier than later.
The second one on regulatory changes. This is -- if I knew, I -- yes, so -- but of course, the one that you indicated with the countercyclical buffers, of course, these buffers, they had been reduced. And there's a lot has been done from the regulators also to support the banking industry. And to what extent this will bounce back remains a question mark. On the other hand, regulators, I think, can see that the banks also proved to be very resilient, that the capital ratios have been held up. So overall, I would be confident that banking industry and regulators would proceed on a constructive and economy-supporting paths that they are currently walking.
Maybe I can take up sort of this remark and reaffirm it. A couple of elements here. The regulators have understood that they should not act procyclically in this crisis and have allowed banks to use their buffers. Actually, we didn't use the buffers. So we have made no use of that. And I do think that forward looking, I think somewhat there is more clarity when it comes to how will capital requirements develop over time. Because since the global financial crisis, capital requirements have gone up and up and up in an absence of knowing sort of would the banks survive the next crisis.
Now a century crisis have come, all the banks managed the crisis really well. Capital levels were more than robust enough, to respond to a very deep economic collapse. So I think there is some certainty now for the regulators for the first time after 10 years, what an adequate level of capitalization can be. So I'm reasonably confident that we have got now a calibration point, which was missing for the last 10 years. So this makes us confident that yes, we will see possibly the one or other buffer coming up when credit demand is moving up much more sharply than economic development, but this will not change the picture overall.
So we're reasonably confident on that. Secondly, on the fiscal stimulus packages and their development and their impact and our expectation forward-looking, I think it's very important to still memorize that. With the exception of Austria, all of the other countries, mainly, sort of relied on moratorium programs. Austria was the one country which had a very, very massive sort of package with direct contributions, with grants, with guarantees, with short-term work, which were all employed time, while most of the other countries, mostly relied on moratoria, which were put in place and a couple of -- and short-term sort of work schemes.
So I think forward-looking, yes, these support programs will phase out. But I don't see the any kind of cliff effect because of them fading out. So I expect 2021 will be a year where most of these packages will just phase out.
We will now take our next question from Gabor Kemeny from Autonomous.
A few quick follow-ups. One is can I just confirm that the EUR 90 million TLTRO catch up is included in the guidance of a flat NII this year? And then secondly, can you give us an update on your Czech NII sensitivity to interest rate, given that your balance sheet has grown quite a bit in the last few quarters.
And then finally, what's going on with the securities accounts? Because you showed there is a strong momentum in the accounts opening, opened almost half of 2010 full year accounts just in the first quarter. What is happening now, which did not, in the last few years. And to what extent do you see the new clients being traders? And to what extent do you see them being longer-term investors? I guess this would imply the volatility of your fee income going forward. This would have an implication for your volatility of your fee income.
So since we are pretty advanced already in the hour, I have -- take the privilege to be very straightforward in answering your 3 questions. TLTRO, yes. So that's the short answer. So it is included and fully reflected. And up to EUR 90 million, as I said, I just repeated, because, of course, it needs to be evaluated by respective legal entity. And since it was not only holding or Slovensko or savings banks taking up Tier 2, likely, it's a measure to be looked at by legal entity.
Czech Relations and run rate exactly as always, yes. So no changes there. You don't need to factor in any changes there. Only if the shape of the curve should really substantially and sustainably change, we would need to have a look at where the run rates and changes on -- and sensitivities on key rates might change. Fundamentally, but so far, you can work on the same assumptions as always.
And the third one was on securities. This is a very simple question. No. The answer with regards to whether those are traders or even short-term traders is a clear no. I would say it's fair to assume that probably 90 -- rather 99% than 97% of the customers who are opening securities accounts with us are long-term savers. And if you look at the -- and this was in a question before, we had that already. If you look at the average share of our clients, especially in CE, which have already executed the accounts and compare those to Western European levels, there is a huge gap still to be closed. So it's people who simply want to save for long-term retirement preparation, building up a certain amount of wealth. Really, this is the goal, and this is also what we are managing for those clients, and that remains our key function there.
We will now take our next question from Riccardo Rovere from Mediobanca.
Yes. A very quick follow-up. I just wanted to be sure, on TLTRO, the EUR 90 million is an addition to the NII, is not the total contribution of TLTRO, that would be on top of what you already account for?
Yes.
Understand it correctly, just to be sure on that.
Yes, Riccardo, that's correct. The run rate that we have been accounting for is relatively small in '20. It's, of course, always we discussed that in earlier calls, it's always a little bit difficult there against what do you calculate. So the numbers I gave you is always against the minus 50 ECB rate and -- minus 50 basis point ECB rate, and what we have been accounting for in 2020, if you remember, we talked about it was like EUR 15 million to EUR 20 million in total.
So it's -- the big chunk would come with a catch-up, yes. So that's basically representing most of what we connect to the TLTRO. But it's not including the relatively small run rate. Yes. I hope this helps.
Okay, okay. Yes, yes, this helps. And then again, a number, I think I missed in one of the previous answer from Alexandra. When you were asked about possible normalized risk cost after COVID-19, disappears, I'm not sure I got the number. But could you be so kind to repeat that, if possible?
The number?
In terms of basis points.
So it's still the range 30 to 50, but I'm confident that we can be very close to the lower end of the range. And not only in the few years to come, but rather sooner than later.
We will now take our next question from Simon Nellis from Citibank.
Just 2 quick questions left for me. On Croatia, I see that the management attention exposure went up quite significantly over the quarter, I think, over EUR 1 billion. But you haven't changed your reserving there. If you could just elaborate on that. And then my second question, maybe it's a bit too early, but just on dividend policy this year. I guess you'll start accruing some kind of dividend in the second quarter. Can you give us any outlook there?
Yes, Bernhard, is nodding. So very clearly, we will comment on that in July. And we'll then also comment on further outlook on whether there is any kind of adjustments required with regards to our payout guidance and so on. So July is the time to comment on that. And of course, also, we will then inform you about the level of dividend that we will accrue for the year 2021. We have not yet taken this decision, and we'll discuss it until the July analyst call. I think the other question was to you, Alexandra, right?
Yes. This is on Croatia. I hope I got the question correctly. So overall, yes, of course, strongly dependent on tourism. Summer was fairly okay. Not as good as expected, and the moratorium still is in place until end of June for the tourism industry. And also quite a significant -- also part of the clients take this opportunity.
So this is also the reason why when we compare the countries, the cost of risk in Croatia is comparatively -- is planned to be comparatively higher and when it comes to the amount -- so being in the tourism industry, and second, that we also tried to have quite a harmonized approach also when it comes to the overlays depending on PD. This is also a reason why Croatia may look higher. But this has a fundamental reasoning, and I think it is a very appropriate provisioning planning.
We will now take our next question from Robert Brzoza from PKO BP Securities.
A quick question from me. On the other business, other Austria business unit, I see that the assets of this unit went up by EUR 16 billion or about 30%, and mostly driven by a huge uptake in deposit base. So my question is what was the actually the business rationale for this movement, and whether this was the main reason why the NII of the other Austria declined 10% over the quarter and whether that's sustainable, this new run rate, whether that's the new run rate going forward.
Yes. So the first answer is no, for your second part of the question because that was not related. I think it was the same question that Izabel was asking earlier on. We looked it up in the meanwhile, by the way, it's really -- what I said before, I can confirm, it's nothing that is recurring in any form.
The other question with regard to volume, is an expected one, Robert. This is where we simply took -- where we took advantage of taking up volumes, especially in our New York branch. And there, we could convert. Of course, it's a basis point business, as you can imagine. We could convert the liquidity that we take up there throughout our operations into some profitability-adding features. And so that is something which we performed throughout the year, very low margin, but also very low-risk business, which simply adds to our profitability.
Our money market people are very successful in that field. And that's something which can go up and down depending on market environment as you can imagine. I hope this answers the point.
Okay. I think with this, I would hand over to Bernhard Spalt to close the call.
Yes. Thank you very much, ladies and gentlemen, for your interest in our earnings call. Let me announce that our Q2 earnings call will take place at the 30th of July 2021 for the half yearly financial report, and we're very much looking forward to meet you then. Thank you very much, and stay safe and healthy.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.