Raiffeisen Bank International AG

VSE:RBI

Earnings Call Transcript 2022-Q2

[Operator]

[abrupt start]

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead, sir.

[Johann Strobl, CEO]

Thank you very much. Ladies and gentlemen, welcome to our Second Quarter Results Presentation. Thank you for taking the time to join us today.

While we are, of course, pleased to report record results, I appreciate that there is a lot to digest in our numbers. In the most recent quarter we have seen an unusual high contribution of the pressure and then unprecedented appreciation of the ruble against the euro, but I will do my best to walk you through the moving parts.

Nevertheless, there are some positive underlying developments in the quarter which are worth highlighting. Core revenues continue to improve and I'm satisfied that this is not solely driven by Russia. Excluding Russia and Belarus, NII in NFCI have grown nicely in the past 12 months.

Loans to customers are of course distorted by Russia with on the one hand a 22% reduction in local currency of the loan book, but significantly stronger ruble rate, which then we will digest later on in details.

We have got -- we have again seen good loan growth in many of our core C markets including Romania, Slovakia, the Czech Republic, Serbia, even before accounting for the recent acquisition. And most importantly, our CET1 ratio is now at 13.4% after deducting 30 basis points for dividend accruals.

If we now move to the next slide, you will know that we have been focusing on growing in Central Europe for some time now. And despite all that is going on in our Eastern Europe segment, I'm very pleased to report that our core C markets have continued to grow nicely.

In Q2, Slovakia loans to customers grew by 3.5%, in Romania by 9%, in Serbia by around 5%, and we added another 1 billion loan through the acquisition of Crédit Agricole Srbija. Czech Republic grew by around 1.5%, also this is closer to 3% in local currency terms. We have executed our M&A plans with the successful closing of Crédit Agricole Srbija acquisition and disposal for our Bulgarian business.

We have made good progress on capital this quarter. The disposal of Bulgaria helps as to the strong retained earnings. We have also accrued 30 basis points for dividends as required by the regulator. It should be clear however, that we will only decide at the end of the year on any dividends and that our dividend policy and guidance remain suspended.

Our CET1 ratio remains strong under all scenarios in Russia. Even if we are forced to deconsolidate with no consideration for our equity, the impact on the CET1 ratio is very limited.

As we derisk the business in Russia, while also generating substantial retained earnings there, we are careful not to relocate the higher Russian CET1 into RWA growth elsewhere in the group.

In effect this means that we ringfence the Russia capital for our planning purposes. This also means that the CET1 of the group excluding Russia will not be materially impacted by whatever happens in Russia.

As I just mentioned, we are derisking in Russia and can report loans to customers in local currencies down 22% in the quarter. At the same time, we're seeing large inflows of deposits, which means that the balance sheet is not shrinking.

Moving to the next slide, I think here are a couple of points which I could highlight and this is one of the many moments where I have to stress the strong ruble, which for example, in the second quarter in NII had the positive impact on €82 million only by these FX impact.

We have seen higher liability margins in the Austrian business, in Hungary and Romania, and also in the Ukraine. We have seen higher liability volumes as I mentioned before in Russia. Asset margin we have seen some improvements with -- compared to the other numbers relatively small amount of €9 million Russia, Slovakia, partly compensated in Czech and in Austria.

The asset volume effect in Czech, Romania, and Slovakia accounts for €7 million and in the treasury activities, we have a €21 million net, here comes the bigger part of the Russian business.

And when we look at the NFCI, here again of course, the Russian business with FX in Russia, this environment there this was of course, a strong contributor and also the mandatory conversion obligation, so this was somehow loosened in the course of the second quarter still is part of this strong contribution.

Moving to the next slide, and I have touched already the overall development in the NII and the NFCI. Some of you might be interested, what is the result, the impact outside of the Eastern part of Europe. So, here we can report the continued loan growth, I have mentioned that Czechia, Slovakia, Hungary, Romania, 5% to 7%.

And this all leads to also, I think, impressive improvement in the year-on-year comparison, if you look at the business without Russia with 30% increase in the net interest income or the 12% increase in the NFCI.

I think I have mentioned many other topics already. And you can read it what I probably want to address already here is that the recent ECP hike will contribute also to our NII mainly in Slovakia, whereas in Australia it's probably rather neutral. So, that’s the impact from this last take is about €20 million per annum.

Moving to the next slide, the assets and loan growth development. Once again we have to stress here that in ruble terms, we have reduced the loan book by 22%, but in euro terms, it's an increase of €3 billion. We have seen loan growth in the Southeast region. And here you would also then at the organic consolidation of the Crédit Agricole Srbija. And of course, there have been some positive impacts as I mentioned before in Czechia, Slovakia, and Hungary.

If we move to the next slides, here, it's important again to mention two things, mainly Russia-driven, one is that of course, the strong ruble overall leads to a group-wide perspective denominated in euros to a huge increase in deposits from customers, but also in Russia per se, we have seen a strong inflow.

We had seen some outflows at the beginning of the war. These are to a large extent already compensated. So, the deposits are back and therefore, also the liquidity ratios improved substantially all over the countries.

Moving to the next slide, which is CET1 ratio development. Here, this needs a couple of maybe additional information to the many points, which are mentioned here. What my colleagues in preparing this slide for you tried to achieve is to separate the various impacts. So, the FX impact, the M&A impact, and the net loan growth impact, and then also some other factors.

Important to mention here is that one strong contribution came from Russia with the buildup of equity in euro terms refund amount of almost €1.5 billion and a reduction in RWAs. So, this was overall very positive.

What's also important here to mention is that if we're heading or looking at the further regulatory developments, we see some discussions in markets that countercyclical buffer might be increased. So, we expect that this would lead to a CET1 requirement which is now already at 10.50% to further increase to 10.60% in the course of this year.

Uncertain what in Austria we should expect, but if the countercyclical buffer would be increased here, this could add another seven to 15 basis points in the capital requirement if the countercyclical buffer would be at 50 basis points or 100 basis points respectively.

And as I mentioned, the 30 basis points in the CET1, as I said before, this is a regulatory requirement. The base for that is that is no policy than the average of the last three years as the payout ratio has to be assumed which in our case is 17 basis points -- 17% of the consolidated profit which is €285 million.

And if we now move to the next slide, which is an answer to the potential question, what could be the CET1 ratio by the end of the year? Here, of course, there are couple of drivers like -- when you look then at our outlook and ROA of 15%, this could add another 30 basis points CET1 equivalent till year end loan growth we will explain could be overall group rather flattish, and then the question is what would be the ruble rate and what can be achieved by using different ways of liquidity management in Russia, which simply means, can we reallocate some of the liquidity which is now with the Russian Central Bank, which has under IFRS requirements 170% risk weights, if we can manage this more capital efficient.

We also are regularly approached by one question, what would it mean, so the worst case scenario if we would have to deconsolidate duration [ph] activity without any contribution? You are aware that we overall currently have -- and when I say all together then I mean the IFRS equity which is around €3.9 billion plus and subordinated instruments, which, if I round it up is about €4.3 billion, which might be lost in the worst case.

On the other hand then, of course, with such a big loss, we won't pay the group dividend. So, this €0.3 billion and we then will have some further corrections like reduction of the IRP shortfall and an increased effectiveness in the IRP transactional arrangement. So, if we net this all we would end up at €3.6 billion capital impact and if we then look at the €27 billion of RWAs, this would have slightly minus five basis points impact on the CET1 ratio. So, in essence, we are -- Russian activities are to a large extent ringfenced.

I think the next slide, the regulatory requirements, I touched already with also the countercyclical buffer developments. So, I would like to move then to the next page which is the MREL and our issuance plans.

What you can easily see from this page number 13 is that the current bottleneck is the MREL and here, of course, issuances in the second half of this year would help to create a little bit bigger buffer than what we have now and what we would like to achieve.

So, we could be up to two issues in the course of this year, and then of course, there will be some activities that we have this multi-point of entry concept, which then also requires MREL issuance in the Czech Republic, Slovakia, Hungary, Croatia, and Romania. And these requirements are split between 2022 and 2023. In this table, you'll see the requirements what we have and the split over the time.

Moving to the next slide, some information on the Russia. I shared with you last time we're focused building up the capital and liquidity buffers and selectively reducing the lending portfolio. And on all the three levels, the bank has performed very well in the quarter.

We have seen large and persistent inflows of deposits in ruble and in foreign currency from corporate and retail accounts, which has further improved our liquidity ratios. I mentioned it already the loans to customers in local currency terms are down 22%. With a smaller loan book, a very good bottom-line, the CET1 ratio on the local standards has improved significantly.

We are derisking the bank and ensuring that it is as resilient as it can be. But of course, under IFRS terms and in euro terms, it looks slightly different. So, the strong ruble development in the quarter from RUB93 to RUB56 per euro means that our equity now is almost at €4 billion.

The FX impact is also visible in the RWAs, so the -- only the FX development increased in euro terms the RWAs by €7 billion and the mentioned the high volume deposit inflow required another almost €4 billion of RWAs in the second quarter. This is -- in this chart the yellow part. So, more so we have this substantial reduction in the loan book. Overall, the RWAs increased from €20 billion to €27 billion.

An update also on the net cross-border exposure, which is €330 million, down from €600 million what we reported in March, and our trade finance guarantees derive as in bank Russia are around €140 million.

It has to be mentioned as well that we had been very successful with the capital hatching, but now this market is very dry. And there's a significant runoff in our hedge position which is currently at the level of €300 million.

As we announced in March and discussed on our Q1 results call, we are looking at a range of different strategic options for our Russia subsidiary. This may include the sale as well as other possibilities such as for example giving up control and deconsolidating Russia from the group, while still retaining a financial interest. In the meantime, we continue to focus on derisking the business.

There is no change since my last communication, no news I can give you today, and no decision has been made -- yet made. Please understand that I will not go into each option and possibility and that I cannot make any statements today on the timeline.

I want to reiterate that there is a lot of internal effort on this project. We are working hard on it. We are committed to finding a timely solution, but at the same time, we need to be extremely diligent. I will not make any statement today on the timelines, but as soon as we have clarity, we will share this information with you.

Coming to the outlook on page 15, you have seen a strong first growth in GDP developments before the war started. I think this is beneficial till year end in the overall numbers. Of course, the GDP forecasts come compared to end of last year had been adjusted downwards, maybe what we see and read from the various indicators.

Probably there is some risk to the downside, but still we don't see recession as of today, in Central Europe, in Southeastern Europe, in Austria, or in the euro area in 2022 and also reduced numbers also in 2023. It's different in Eastern Europe, war and sanctions have a big impact on the countries with Ukraine down one-third, Russia 8%, Belarus 4%. Of course, with have such a big drop this year, we expect that Ukraine somehow will recover next year, whereas in Russia, there's a high probability that there will be also a recession in 2023.

Moving to the next slide, we have -- give you our view on five core markets for us. All of them you can see it in the verbal explanation have slight differences industry structure depending on energy, FX reserves, structure of the economy imbalances like fiscal deficits, current account deficits. These all leads to loan growth potential in the markets in corporate and retail, as is outlined in the box below.

And with this, I come to my last page before I hand over to Hannes. And this is the guidance. So, we don't have an updated outlook for 2023 for obvious reasons, given the big uncertainties what we face in our footprint and the guidance for 2022 is based on the assumption that the footprint is not changed, which means Russia and Belarus are included in these numbers as long as there is no change visible.

We expect a net interest income in the range of €4.3 billion to €4.7 billion and net fee and commission income of at least €2.7 billion. We expect an improvement year-on-year in NII and NFCI if we exclude Russia and Belarus by around 20% for NII and 10% for NFCI in 2022. We expect the stable loan volume in the second half of the year, we selected growth in some of the CEE and SEE markets.

We expect an OpEx in the range of €3.3 billion to €3.5 billion. In these numbers, the M&A integration costs are included and this will lead to an cost income ratio of around 45%

Hannes will talk about the risk development, let me here just mentioned that we assume a reasoning ratio of around 100 basis points. If we take all these numbers together, the consolidated return on equity is expected to be at least 15% in 2022. And the CET1 ratio should remain at plus 13%.

Hannes please.

[Hannes Mosenbacher, CFO]

Thank you, Johann. Good afternoon ladies and gentlemen. Thank you for your interest today. And I do hope following this call and reporting cycling that you managed to take some time off enjoy the summer.

The second quarter has been marked by the forward [ph] amortization militarization of some of the flecked wildcards, which we have previously discussed here, namely, inflation, concerns around energy supply and supply chains and, of course, ongoing geopolitical tensions. First and foremost, the war in Ukraine. Together, this will continue to weight on the outlook and we cannot exclude a weakening of the credit cycle in the quarters to come.

Let me briefly summarize for you the second quarter. We have taken €242 million of risk costs leading to a total risk cost of €561 million year-to-date. This includes €204 million of overlays and €127 million of Stage 3 provisions. This now brings our stock of overlays ,you can see this in the middle of the page to €665 million.

To put this into perspective, this is more than a one year through the cycle risk costs, which have gone through P&L and capital ratios. Half of these overlays are booked outside of Eastern Europe and are available to us under all scenarios.

As we discussed last quarter, we have largely digested the RWA increase related to these wildcards. In the second quarter, we have reviewed over 13,000 customer ratings.

The heavy inflow of deposits in Russia has added another €4.4 billion of risk-weighted assets. From a risk perspective, we're of course happy to take ruble liquidity in place it with the central bank on a reverse repo. At the same time, this is affecting our FS reserve ratios and we are managing this closely.

At the end of the second quarter, we also have around €900 million of Stage 1 and Stage 2 impairments available in addition to the overlays that I have just mentioned. In Eastern Europe as well, we have been actively building up our provisions.

Let's start with Ukraine, we have now taken around €200 million of risk costs for 2022 and for obvious reasons I cannot tell you today that we are done for the year. But I'm confident however, that this represents the biggest part in the coming quarters we can adjust as required.

In our last call, I mentioned that our exposure to dispute occupied regions around €300 million and this has not increased in the second quarter. In the [indiscernible] specifically, we had already reduced our exposure down to near zero since 2014.

Let me also talk about Russia. We have taken €266 million of risk provision so far this year. In March, we guided for risks of up to €450 million, which I would claim today seems to be rather unlikely. High commodity prices have probably pushed up some of the expected costs into the next year.

And also worth reiterating that our Russian business is ringfenced and an earning capacity of the bank is more than sufficient to cover the risk cut in to absorb the RWA increases.

As Johann mentioned, our Russian subsidiary has further increased its capital buffers with very good earnings and by reducing its lending activities. Away from Eastern Europe and despite all that is happening there, we have seen good loan demand and very low risk costs, which they will from a very strong 2021 still noticeable in the first half of the year.

We are a bit more cautious about the second half, but we expect growth to slow and at the same time inflation may affect disposable income and put pressure on some of the corporate margins.

High interest rates are also waiting on our customers. But I'm not yet particular concerned at this moment that this will have a significant impact on the asset quality. In persistent wage inflation, savings from the pandemic are helping to soften the blow and we have been offering fixed rate terms to our customer for several years now.

On the corporate side, many of the customers have locked in fixed rates and in many cases they have locked in for longer tenures than usual. Furthermore, the increase in interest expenses manageable convert to EBITDA matching progression we have seen in the past quarters. Many of our customers have taking advantage of the strength of the pandemic recovery to shore up their balance sheets. Later on, I will also talk about some thoughts when it comes to the gas supply from Russia and it's increasingly a concern.

And I will share with you our scenario analysis on the following slides. We have started building specific provisions for this as well as the RWA impact is manageable. Despite the more cautious outlook, I believe that RBI is in a very good shape and the same goes for our customers.

Despite significant RAW inflation and higher risk costs, our CET1 ratio is back around 13.3%. Our rating has been affirmed by both rating agencies. We have built up substantial risk cost provisions for future defaults. And on the existing MB portfolio, we are as always one of the best covered banks in Europe.

Furthermore, we have securitized around €10 billion of exposure, which also provide some buffers and cushion when it comes to further RWA inflation and risk costs. Therefore, looking ahead, I can confirm our risk as guidance for 2022 of up to 100 basis points. In all likelihood, we will see a bit less in Eastern Europe, offset by a little bit more of risk customer need in the rest of the group.

Let me move on to the next page. Here I'm happy to share with you our thoughts and how we tried to approach the entire topic of gas supply shock. You will realize that the approach we have chosen is very much comparable to what we have done in the due course of [indiscernible].

So, what are the major assumptions? We do assume a full and EPRA gas top. And of course, then we were looking at the industries which are being most affected by an immediate stop of gas.

At the same time, we also assumed this was the best which was available to us that the gas available will still be equally distributed. We all know by now, which are the countries who are most exposed to the Russian gas import. And therefore, we will also concluding which are the industries most impacted by this current energy intensive sectors.

So, you can see on the left side, the countries and their gas dependencies from Russia, then going with the in energy-intensive industries, how much this would mean and then we tried also to simulate the effective ratings.

We have done so and on the underlying portfolio of €16.1 billion of RWA in this very, very, very extreme scenario, this could mean an RWA uplift of up to €2.7 billion.

Let me move on to the next page please. And here you can see how we have worked on our exposure list when it comes to asset freeze. What is important for you to know is that the team is always using the actual sanction regime now being in the seven sanction package and calculating back what this would have meant at the inception and the beginning of the war. So, you can see that we have continuously worked on reducing this exposure, now also being capable to run it down by 15%.

Let me move on to the next page. And many things have been said by Johann when it comes to RWA development. The part which is yellow flagged is very much about the credit risk. So, we have reduced our exposure on fixed effects rates.

We were talking about the uplift and inflation of our RWA when it comes to liquidity placement because of the high risk weights and we were also talking about securitizations. Please bear in mind that a big part of the impact in the second quarter must be attributed to the cross rates.

I'm coming to my last two pages, IFRS 9 provisioning in the second quarter I shared at least from my point of view, the most important things already, let me just reiterate that -- or the spillover of energy inflation risk, we have also increased the overlays but what €96 million which is quite a pronounced coverage already for this topic.

Last page from my side when talking about NPE ratio and NPE coverage ratio, 1.6% NPE ratio 60.7% coverage ratio. And what you also can see is that, of course, NPEs are going up on the rising trend in Eastern Europe.

All these were a couple of slides from a risk management point of view. Thanks for listening and we are now eager to listen to your question.

[Operator]

Thank you, gentlemen. Ladies and gentlemen, we will now start the Q&A session. [Operator Instructions]

Our first question comes from Izabel Dobreva of Morgan Stanley. Please go ahead.

[Izabel Dobreva, Morgan Stanley]

Hello, thank you very much for taking my questions. I have three. My first question is on your guidance with the group NII up 30% to 40%, but also, even excluding Russia guided to be up 20%. And this is a very high level, both in absolute, but also relative to the prior guidance. So, I was hoping you could comment on the developments which have surprised you and essentially unfolded better than your expectations at the start of the year, leading you to this big guidance upgrade? But also equally do you think this level of NII is sustainable into next year?

Then my second question is on the potential exit from Russia and I fully appreciate that you cannot give us a lot of specifics at this stage. There have been some local news reports that the government may be looking to block the sale of foreign banks assets. So, I was wondering whether you have any comment on this? Is a sales still possibility in your mind? Or does this mean that you're leaning more towards a deconsolidation now?

And then finally, I wanted to ask you about your geographical footprint? And are you considering an exit for many additional countries in order to streamline the geographical presence? And how are you going about assessing these candidates? Because for example, Albania, Bosnia, Kosovo, these are smaller countries, but you're number one or number two. Whereas on the other hand in Czech and Hungary which are the bigger markets, the ranking is lower. So, what is more important in your mind? Is it the size of the addressable market or is it the competitive position? Thank you.

[Hannes Mosenbacher, CFO]

Well, if I may start with the first part of your question regarding the NII guidance and NII dynamic. I think we have seen Central Banks acting extremely pronounced when you think about the Czech National Bank, the Hungarian Czech National Bank. And we have seen interest rate increases, at least, within my career I have never experienced before.

So, we have seen Central Banks acting pronounced, delivering interest rate increases of over 100 or sometimes even one of 185 basis points when talking about the Hungarian Central Bank, for instance.

And if you recall, we're coming out of a long lasting period of very super low interest rates, where we of course, very classic here. Not surprising, but we may have forgotten it, usually a bank is earning also quite some money on the liability side, also out of the payment. Payments, they're conducting asset side, which was very much in the focus in the last couple of years and hopefully, it was a little bit out of term structure.

So, therefore, these two or three countries -- also Poland is not so important anymore for us, but also the way how the Polish Central Bank was acting was quite pronounced.

Do I believe that still something could be seen? Well, maybe finally, also, ECBs is delivering even a little bit more than what we have seen as of today. And I would not be surprised if also in Romania, we could see still the increase when it comes to the interest rate moves. So, I think this would be what is my current thinking when it comes to the NII and why we are guiding so strong on NII.

[Johann Strobl, CEO]

Thank you, Hannes. Moving to the next question, which is about our strategic options in Russia. And let me assure you that I completely understand why you ask. I understand how important the strategic options for Russian subsidiaries are for our investors and for our investment case.

And let me be clear, we are committed to finding a solution, we are working hard on the project, no decision has yet been made. And we will brief the market as soon as we are able, and in a position to do so.

The choices that we are working on our toes that we set out at Q1 results and this includes the sale of the business, but also other possibilities as giving up control and deconsolidating Russia from the group, while retaining an interest. It's not straightforward environment. Yes, I agree with you and there are constraints that are most important the regulatory authorities in Russia, regulatory authorities elsewhere, the sanction framework of the EU, and of course, the government position of Russia.

And -- so, it takes time to elaborate and as soon as we are there, we will let you know. I mean, at this point in time, I cannot comment further. And the nature with timing is one which I cannot comment on at this point in time. And I can only what I can commit is and reiterate is our commitment to reaching a solution.

And once again, to brief the market as soon as we get there. And for me personally it would be important that you do not interpret anything from my inability to comment. This is a life dynamic situation and there's little I can say though. So, please do not draw any conclusions from my lack of comment. Thank you.

You had a third question, which is the geographic footprint and I mean, from what we say I think one can feel also it's not the cast in stone principle. But yes, what you see is the market size and the situation in the market probably is slightly more important as you see. Also the potential which offers such a larger market than to the smaller countries. But at this point in time, I would not like to comment on any potential transactions on the on the Western Balkans. Thank you.

[Izabel Dobreva, Morgan Stanley]

Thank you very much.

[Operator]

We can now take our next question from Mate Nemes of UBS. Please go ahead.

[Mate Nemes, UBS]

Yes, good afternoon and thank you for taking my questions. I have three of them. Firstly, on loan growth and loan volumes, I think you mentioned that you would expect a stable level of volumes in the second half of the year, and still some selected forthcoming from Central Europe and in Southeastern Europe.

I was wondering if you could perhaps clarify better this statement explicitly includes developments in Russia, i.e., further decline there. And whether this could be offset by continued good momentum in some of the countries? As I think it has been quite clear, you saw very good development in a number of countries in the first half.

Second question is on provisioning. The up to 100 basis point cost of risk for this year, could you help us understand what extent that's been driven or that will be driven by continued provisioning in Ukraine and Eastern Europe generally, versus the rest of the group? i.e. what would be the cost of risk rates in the group ex-Eastern Europe?

And the third question is perhaps a technical one. I noticed that in the Czech Republic, you saw NII declining in the second quarter on a sequential basis, could you perhaps give us some color what drove that? That’s it. Thank you.

[Johann Strobl, CEO]

Thank you for your questions. If I may start with your first question the loan volumes, we have -- when talking about derisking, we have achieved quite a lot already in Russia. I mean, it I still can't confirm that at this point in time, we're not given the circumstances, we are not seeking for new business in Russia. So, with the runoff -- or so the short-term runoff to a large extent has happened but there will be further runoff as well. So, yes, there will be weaker loan books, lower loan books in Eastern Europe. And of course, everything is then also depending on the -- and we are talking nine local currencies, of course, and effects development makes it more difficult.

But in the other markets, we would be ready to look at it too. Elements one has to consider, of course, the rate hikes which have happened has brought the interest now at really a level where people are thinking twice. So, to what extent they take additional loans. I think it's fair to say that many customers have front loaded their loan demands with the expectation of higher rates.

This we saw in the housing, this we saw also with corporates, I think working capital, of course, customers built up to be less dependent on the supply chain weaknesses. So, overall, I think the high inflation and the rate hikes, yes, well, they somehow take off the heat and the speed of loan growth. But right as you indicated, it's in the Eastern Europe where we expect further drops in the loan portfolio.

I can also take your third question, the Q2 €7 million, this is an accounting thing. This is rather executing to last year, and the first quarter so the €7 million rather, would better fit to the Q4. It was booked in Q1 and therefore, if you compare Q1 with Q2, so it's a drop of €7 million, but if you take out, then it's exactly a stable number of what you had to check in Q1 and Q2, and I hand over the Hannes.

[Hannes Mosenbacher, CFO]

Talking about the risk costs of up to 100 basis points or -- and if we would exclude entirely Eastern Europe, we -- I would still confirm the 30, 40 basis points was to one overlay.

What is maybe important and I tried to cover this in my introductory words is that we may not need necessarily the flecked €450 million, 480 million when it comes to Russia. But please have in mind that also in Russia, we have already allocated over €200 million of Stage 2 bookings. Thanks for the question.

[Mate Nemes, UBS]

Thank you very much.

[Operator]

And our next question now comes from Gabor Kemeny of Autonomous Research. please go ahead.

[Gabor Kemeny, Autonomous Research]

Hi, few questions for me. First one, can you comment on the ROE outlook for the business excluding Russia and Belarus? These two are a significant part of your profit.

You earlier had a I think an 11% ROE target for the group, but on the other hand, we now have higher interest rates, while Russia and Ukraine is under strategic review. Any comments on that would be useful.

And a more specific question on the business excluding again Russia and Belarus actually the 20% NII growth guidance here, I think assume flattish or perhaps slightly declining NII dynamics in the second half of the year. Could you comment on what you -- what trends you see there?

And my final question is on the gas shock scenario, thank you for these detailed disclosures on the exposure. Would you be able to comment on the provisioning impact of a potential gas cut off scenario please? Thank you.

[Johann Strobl, CEO]

Thank you, Gabor, for your questions. Let me start with the first one. I mean, you have seen throughout our reporting that separating the Russia and Belarus business on single information -- single reporting lines is complex enough on assuming what is the impact of a deconsolidation and then running it without even more so.

So, please, except that this point in time, we will not go deeper into and potential ROE analysis, but yes, if we have a change in the geographic footprint, we of course will update you.

Your assumption to the NII growth is correct. So, here we assumed that in the second half, probably, it will be slightly lower than in the first half. So, I don't know 3%, 4% less than what we had in the first half. I somehow have as in a former -- in earlier answer already addressed this -- I think at least I did with maybe some -- what we see is in some business areas the pressure on the margin on the assets, reduce demand in some areas may be a shift in the deposit structure.

Central banks now are taking out some liquidity of some of the markets, which I would also expect leads to more competition on the liability side with increasing pricing and lower margins. So, this is in a nutshell the reasons why we slightly lower in our forecast in the second half. Hannes please

[Hannes Mosenbacher, CFO]

Gabor, the way I understood this that you would be curious about the risk of the impact when it comes to this gas scenario. No, from this starting point, what we must not forget is that we have very strong corporate balance sheets from 2021, but also Q1 and Q2 in 2022 have been really -- if you listen to the corporate announcement for this energy-intensive industry has been very strong.

So, what we have done in just to reiterate this one is that this is a pure desktop approach at the inception. So, mean your simulate, what would happen if you see these gas drop. And still they get some gas allocated with within the available stock. This would lead for some of the companies to an EBITDA impact of some 22% up to 40%. And, of course, this is causing a multiple of downgrades. This was the desktop part.

And we assume that the missing turnover would be compensated and would be financed. And then we were talking to the clients on a bottom up level within those industries, and asking what are their mitigation plans what they could do, and we must not forget that some of these clients are either producing in regions which are not so dependent of the gas delivered from Russia, or even delivering or producing five Canada or with U.S. This helped us also to better understand, and to get the feeling on the total impact.

What is also important before then, finally, in increasing the tension and excitement, what is also important, the number I mentioned to you is that it does not include any certain defaults, because this is difficult to digest. So, pure desktop simulation of ratings, this would be some €50 million to €70 million. And then you can make your choice, you could add another €50 million. If you say well, but the model was not complete, and therefore there was a sudden default or surprise candidate, this would be the best what we can do at this moment. But as I said, this means that still certain stock can capacity is in being made available also for the industry. Hope this helps.

[Gabor Kemeny, Autonomous Research]

That's very comprehensive Thank you. So, you're saying €100 million to €120 million, potentially?

[Hannes Mosenbacher, CFO]

No, €50 million pure desktop and if you had another €50 million for a sudden default, which we were not capable to catch with the desktop protesting this would be as of today a fair assumption.

[Gabor Kemeny, Autonomous Research]

Okay. Understood. Thank you.

[Johann Strobl, CEO]

Welcome.

[Operator]

And our next question now comes from Mehmet Sevim of JPMorgan. Please go ahead.

Our next question comes from Mehmet Sevim with JPMorgan. Sir, your line may be muted, we're unable to hear you.

[Mehmet Sevim, JPMorgan]

Good afternoon. Sorry about that. Just two questions from the remaining please. So, first of all, on the NII in Hungary, it seems that it's evolving a bit faster on the back of the rate increases so far than the original guidance you provided in the third quarter of last year. Is that a correct assumption? And if so, have there been any structural changes in the balance sheet? And can you provide an update on your current sensitivity, please?

And secondly, there have been quite a lot of talk about a potential introduction of Czech Bank Tax. So, do you have any views on that? Has there been any communication to you? And what do you see the probability of that being introduced?

And lastly, on the 85 basis points of negative impact -- potential negative impact on CET1 by the year end which you say is inorganic and other impact? Can you please provide any color on what that is? And also can I confirm that all the numbers assume a stable global from here onwards? Thanks very much.

[Hannes Mosenbacher, CFO]

Well, if I may start with the first part on the NII improving faster than previously Q3 guidance, we must not forget -- and I'm now looking at the interest rates we have seen in 2022 -- 2021 when talking about Hungary, this is 2.4%. And we must not forget when we talk about guidance and sensitivity, this is for small changes.

But now we are talking an interest rate environment where the key rate is are on 10.75. So therefore, we could have seen a dynamic which is a little bit which is a little bit more pronounced because as I said, what we usually share with you is some 50, maybe 100 basis point changes, but of course if you see changes of 8% plus, this is extremely pronounced. So, the balance sheet structure by itself did not yet change. But this is the main reason why Q3 guidance could have been a little bit more cautious than what we can see and experience now.

[Johann Strobl, CEO]

When talking about rumors on Bank Tax, I think in Czechia, I do not want to add additional rumors. So, we hope that the that the constructive environment, what we have seen in the in the Czech Republic over the many years will continue. And I think there is some chance that the government is focusing on the on the strength of the historic developments in the markets and this -- if they would look at this, I hope that then they avoid Bank Tax. But in these days, if you ask me, can you exclude it 100%? Probably not. But I still hope that it will not come at all.

When talking about the 85--

[Hannes Mosenbacher, CFO]

when you're talking about the 85 basis points on the others, since many parts are coming from my area of responsibility. Let me start with this one. So, we have still certain dynamics assumed on the on the average care development, which must be considered out of the Polish zloty litigations, the first one, then we have for still some methodological left overs when it comes to the IRB repair, which would sum up to €1.4 billion and the one audit rating spillover, we're also introducing an updating a five rating model, which would be not at all €0.6 billion of RWAs.

And finally, not to forget, since current derivative markets would not give us the capacity to establish the over hedging this would also contribute to the to the eating up of the of the CET1 capacity. Thanks for the question.

[Mehmet Sevim, JPMorgan]

Okay, thanks very much.

[Operator]

And we can now take our next question from Riccardo Rovere of Mediobanca. Please go ahead.

[Riccardo Rovere, Mediobanca]

Good afternoon to everybody. Three -- four questions if I may. The first one is I think for Hannes. Hannes, when you give us objectively reiterate the guidance of roughly 100 basis points with cost with Russia or 30 to 40 basis points without Russia, that -- those are the same numbers that you provided gave us immediately at the time of Q1. When the gas shortage was not topic as hot as it is today. So, I was wondering whether those two numbers do include the somehow at least in a scenario and probability weighted whatever, the possibility of gas being halted -- the flow of gas being halted from Russia.

The second question I have is for -- again, I think it's for Hannes again. NII in Czech Republic is down a bit, few millions of euros, but it's down. I was wondering, what is driving that?

And if the run rate that we see today is -- can be considered the one that we're going to see over the next few quarters or maybe we're going to see more pressure on deposits and so maybe NII will continue going down in Czech Republic rather than up?

And then I have a couple of questions for Johann. Your capital has gone to roughly 13.2% -- 13.3% fully loaded. Before previously you mentioned that you're accruing a dividend, but the final decisions will be taken only a year and so on. What can level of capital given the risk gain -- the certainty -- we were leaving at what level of capital would you be confident to say that the dividend should be something for granted?

And then I have another question, which is on Russia again. In the previous call, you mentioned at the moment, the only possible option you have is to progressively wind down the operations over there. If I understand it correctly, the book in ruble, in local currency is down kind of 20% quarterly basis, and this is the one rate that you mentioned at some point whether we think and that was on an annual basis. So, can you really reduce the book by roughly 20% in a quarter or in six months, mean that the operations over there could be zero into three years, if you are not provided you're not able to sell it? Thanks.

[Hannes Mosenbacher, CFO]

Riccardo, thanks for participating, and thanks for your detailed questions giving me the opportunity to go a little bit deeper and share our way of thinking. And, of course given the situation we all know that it was -- I would claim a very educated guess, but not -- of course, you have to adjust. And this is what I tried to share with you at the beginning.

So, if we, again, start with the different contributors to the different risk provisions. So, the first guidance on Russia was based on this expected loss of €120 million, I was saying, well, times four is €480 million. And some of you picked it up, which I appreciate it very much, but I always had in mind that this €480 million would come over a two year's period, sanctions do need a certain period of time that they really completely materialize and unfolding their intended -- things what they should deliver.

So, the €480 million, now, we already have booked in the first half year €266 million years. And I rather would say, given the high commodity prices, that the €480 million will not be seen, by all what we know as of today, for the full year and I rather would believe that we could finish year end for Russia with some €350 million firs thing.

Second thing I was talking about Ukraine where we had are an expected loss of some €25 million to €30 million. This is even more difficult, we were assuming a multiple between eight times maybe even more, but this is the best what we are capable to do assume at this period of time and in cash equivalent, we were talking about €200 million.

This €200 million, you can already see that we have tested this in our financial in the first half year. And usually if we have so difficult topics, I always try it from different angles to approach those topics. And I was also sharing with you that local colleagues have used this sort of a drastic light approach with Red and Green and Amber approach. And in total, we have some €350 million, €400 million within the Red zone. So, we believe that the €300 million, €350 million within this Red zone would also say yes, this €200 million makes a lot of sense.

And please bear in mind that in the lately most effected region on the very Eastern part of Ukraine [indiscernible], our credit exposure was already more or less at zero before the heavy war was -- what -- this region was exposed to this heavy attacks from Russia.

So, this is what we claimed at this time for cleaner and this is what is already been suggested in our books and of course, with sufficient high uncertainty to be still taking into consideration.

I was talking when we last time had the opportunity exchange our views, I was talking for another -- about €200 million for the remaining part of portfolio. And this would give us, I would claim more than sufficient space to also be well prepared within the given guidance of the 100 basis points to cover the one or other more euro more needed when it comes to the gas supply shock. I was sharing with you this pure stylist approach when it comes to the gas shock. But of course, we did not, because if you would go with this €50 million of the impact to customers, you would at the same time believe that macroeconomic assumption must be adjusted end and end.

So, but my current thinking is that the remaining cash amounts to the 100 basis points could cover quite a strong inflow also out of this gas supply shock. So, this is the thinking and hopefully it helps too for making up your own mind. Riccardo, thank you.

[Johann Strobl, CEO]

Thank you, Riccardo. I will take over your other questions, which are easier, I guess, Czech Republic NII, I have mentioned already that we had this one-off in Q1, which was something which was left over positively, if I may say so, from last year. So this is a flat development. When looking at the further development, my way of thinking in the Czech Republic is that, we might expect an increased competition on liabilities. And I would assume this comes in a segmented approach, meaning that some of the deposits might be the target of competition and others less so.

And -- I mean, we can only watch the competition, what's going on here, probably -- that means probably. We are not the leader in this development. But of course, like in any other market, if it would happen, we might need to react. And then the margin pressure would come from deposits, and I would expect less so from the current account.

Of course, there are some business models with banks, which are built on accounts and deposits. And for them, of course probably this is the first period in their life to really make money and we will see how they try to capture these opportunities. So this is our thinking on the NII in the Czech Republic.

To your third question, CET1, here, I would confirm the 13% as a midterm target. I tried to mention that in these days we want to structure the group in a way that even if the deconsolidation of Russia would happen, then this should go without any significant harm on the CET1 ratio. So if you look at the overall ratio, you have to consider that as well, but 13% is the target where we consider dividend.

To be very clear, if we would build up CET1 in Russia, this would then not be used as part of the dividend potential as anyhow there is a dividend ban in Russia. When talking about de-risking, I think the 22% quarter-on-quarter was a tremendous positive result. All the other -- I can say, or I did say that maybe some -- to a smaller extent, some additional de-risking might go on till the end of the year. But I -- as I said, we will explore all the options what we have, and I do not want to pick up one of the potential options and be more explicit at this point in time. Thank you for your understanding.

[Riccardo Rovere, Mediobanca]

Thank you.

[Operator]

Our next question comes from Alan Webborn of Societe Generale. Please go ahead.

[Alan Webborn, Societe Generale]

Hi. Thanks for your time today. Just a quick question on the dynamics in the Group Corporates & Markets division in the second quarter, could you talk a little bit about the drivers there in terms of activity and in the context of, I think what you're suggesting is that the activity in the second half of the year in some areas is going to be -- in some ways is going to be weaker. And how do you see that business progressing as we go through the second half.

So what have the drivers been? And how do you think they will change as we go through the remainder of the year? I also note that, there was a I think a 30 bps provision charge in the second quarter, whereas you had write backs in the first quarter. Could you just tell me a little bit about that? I think you also suggested that in terms of the ECB rate rise, you wouldn't see any impact in the Group Corporates & Markets area. Was that correct? And would that change, if we actually start to see higher and more positive rates further underlying from the ECB? Thank you.

[Hannes Mosenbacher, CFO]

Well, I would start the answer. So what we do see in the Group Corporate & Markets is that, there is still a good flow of credit demand when it comes to working capital financing. And I think this is for obvious reasons, because of course on the one hand side all the input materials have increased in pricing, and this was also one of the reasons why we have seen more demand when it comes to working capital financing.

The second one is and I'm sure Alan you're closely following, is that also some of the corporates rather now turn again back to bank financing than for looking whether or not they can adapt the capital markets. So this is what we have seen on the Group Corporates & Markets activities. And of course, we made also still use of the higher credit spreads in deploying our repo portfolio.

When thinking about H2, of course, I think this is very much dependent on the current dynamics. But still -- and if you also look to the different surveys, what you can see, credit standards might be a little bit more strict. But if the transaction is well structured and we leave the period of covenant or no covenant structures, we still are more than eager to look at it.

So this is the thing what I would see. The other thing is what we also -- and you have it implicitly anyway included in your question that some of the corporates, of course, the ECB hike was more than reflect. You could even say it was preannounced.

But of course, it was just reflect and not preannounced. So therefore, some of the corporates still we are making use of a little bit longer-term financing and refinancing their current loans outstanding. Well, Johann will maybe talk about the second point in addition. But on the third one, group corporate market, 30 basis points of risk cost versus release in Q1. Well, here you have seen two things. The one is that, we made use of our overlays -- and secondly, we had in the second quarter one default, and we were adding a little bit of additional overlays in the group corporate markets, but it was mainly was one bigger counterpart where we have seen a default and we allocated individual loan loss provisions. Johann?

[Johann Strobl, CEO]

Thank you, Hannes. So, on your other question, ECB rate hikes, what would be the impact, I think we shared with you that in the past, when we had negative rates, we charged fees on larger deposits. So okay, now this period of charging fees is gone. So this is the reason also why one would not see a positive impact or a substantial positive impact one the Corporates & Markets area on the deposits. Yes, in the short term, I wouldn't see any significant improvement here because of the sensitivity of the deposits, what you have there since -- rate sensitivity of the deposits. Maybe if we are at the peak than or when we are closer to the peak. It could come, but this is for sure not this year.

[Alan Webborn, Societe Generale]

That's very kind. Thank you.

[Operator]

We can take our next question from Hugo Cruz of KBW. Please go ahead.

[Hugo Cruz, KBW]

Hi. Thank you for the time. I have just a clarification on your comments around the impact of the guests stress scenario on the cost of risk. And then a few questions on an NII. But so your comments on the guest's scenario, I understood, and please correct me, if I'm wrong, that it could simply by 50 million, of course, the risk based on the desktop analysis, and another 50 million for any southern defaults. If I understood correctly, that strikes me as quite a low number, especially when compared to the numbers given by your Arista yesterday, where they talked about a cost of risk of 90 basis points. I understand the footprint is quite different. But yes, if you could comment on that we'll be interesting.

And then on the NII, can you just -- you used to give sensitivity for -- to rate changes? So if we have further ECB rate hikes, what could be the impact, another 50 basis points what will be the impact on NII, but also for some of the CE countries, if we have rate rates going down in Czech, Slovakia, Hungary, Romania, what could be the impact on NII for the group? That's it. Thank you.

[Johann Strobl, CEO]

If I may start, yes, Hugo you understood right, the €50 million from the desktop analyzes in €15 million for another unforeseen default. But please bear in mind that, this is a set a desktop analysis based on very strong assumption and the strong assumption is that these energy intensive industries would still at least productor being served with guests. Secondly, this 50 plus 50 does not incorporate any second and third round effect, because most likely, you would see it was a very strong deterioration on the macroeconomic side and you would then of course, increase your macro provisions in the case of need.

So the 50 per 50, what I was sharing with you is or -- is isolated on this desk of analyzes, but please bear in mind, while others are still forecasting and thinking we already have booked €243 million when it comes to inflation in energy. So the 50 plus 50 in my statement, I would claim that they already nicely, or at least partly covered on this €243 million.

But you understood right but these are just again to share with you or basic care in very vital and important assumption on which you base your desktop analyzers. At the same time €243 million of overlays already have been booked in the second quarter. Thanks for the question.

[Hannes Mosenbacher, CFO]

And talking about the NII sensitivity from ECB rate tax hike, we have shared with you that I would say in the presentation that that mainly in Slovakia, this is a 20 million and the next rate tag maybe it's a little bit more as we are moving away from the from the negative rates and customers might share with us something with CSA outlined before what the competition would react, I think when talking -- when talking about the other direction now that obviously you think that not only that the Czech National Bank is done, but would soon start in a decreasing cyclic so hear a 50 basis points terms of sensitivity depending also on re-pricing to what extent could mean minus 10, maybe a little bit more.

And of course that, the reason why this is relatively difficult question is that, you are aware that we have model books for the deposits. And in current accounts, and of course, this is the time where receiver positions might be build up and maturity is might be a little bit longer. So I think here, we might need to update you called by cohort, so that you kept a good insight in that development. Thank you.

[Hugo Cruz, KBW]

Thank you.

[Operator]

And our next question comes from Alexei Lougovtsov of Bank of America. Please go ahead.

[Alexei Lougovtsov, Bank of America]

Thank you very much for the call. And therefore, very candid disclosure. I wanted to ask about your Ukrainian subsidiary. Do you see a risk that maybe you will need to recapitalize it out of the headquarters? Presently, you have 2 billion of loans and you already created €200 million have provisioned since the first half. And given the capital is in the region of €400 million. Then loan book can deteriorate further, possibly creating a capital need and also outside of the loan book. Do you see risk for the assets?

For example, government bonds of Ukraine presently trade at €0.20 in the Euro, do own government bonds? Is there -- and also is a risk of some government encouraged or mandated to loan moratoria in Ukraine, we're going to see already that on territories controlled by Russia, the local new administration's announced the debt forgiveness. So do you see a reason the government control territory of Ukraine will do something symmetrical to help businesses to get through the tough times? And as a result, maybe your loan book deteriorates further and create capital needs?

[Johann Strobl, CEO]

Well, Alexei, you've raised so many questions, so I tried to cover the part when it comes to the -- to the government bond or inter on risks on assets. What we see is that, unfortunately, many of the schemes which you would need in such a situation already have been tested in 2014, but also in 2020. So the moratoria was also one of the thing on abroad of KT, which we tried to offer, but you of course are talking about a full governmental -- full monitorial on government debt.

And I think here, we have to be very careful, if we're talking about debt being issued abroad and local currency. So, so far, we have -- we have seen that, the local bonds are being honored without any, any big thing. And if we see a restructuring and an adjustment of terms, this word radical was before a foreign currency bonds.

The other one is on the other risks on the loan book. Maybe give me also the opportunity to share with you that I think we are very proud and also pleased that we were capable also to provide some agri financing and we were also financing the planting season, which now can be harvested Is it the different kinds of weeds, second point.

Third point is on re-capitalization, please bear in mind, what you can see is the dividend from last year, we were not allowed that this is being distributed to the head office. The second one is, the credit quality given the country rating, anyway had a very, very low credit rating, meaning it is a very high risk weight and a capital consumption and earning capacity is still a variable to, but I'm not pretending that in this environment to perform banking services is by all means the easy job in these days.

We provide agri financing, we provide daily liquidity management to our corporate into retail customers. And at the same time we see a very high ambition of the retail science, but also have the corporate lines to honor their obligation.

Thank you. Hannes. So go ahead, Alexei. Go ahead.

[Alexei Lougovtsov, Bank of America]

No. Go ahead, sir, go ahead. Yes, please go ahead.

[Johann Strobl, CEO]

I just wanted to reiterate. So I think Hannes confirmed that under the circumstances so far, I think, first, the bank is well capitalized. Having in mind what risk cost already has been booked.

Second, I can only reiterate, I think, a moratoria on government bonds would be a real issue on the local ones, on the domestic ones for all banks. So here, your dentists will totally change the picture. But I'm really confident that the responsible ones in the National Bank, they have a very deep understanding as Hannes said, how their local banking market works and what banks can afford and what should not to be put on their shoulders.

And so I think they would -- and that's Hannes said, they have an understanding that the banks are needed, as we were participating in the agri finance. So, I think all the employees of banks are doing a fantastic job in difficult times. And so, I would not expect that additional problems are imposed to them. So, there is probably a balanced way to how to deal with the situation.

I think, for many the discussion of foreign bonds did not come as a surprise as at least people tell me when should not expect that from outside the country, money is flowing in from some institution and then just to be used to repay other debts. So this is probably that the situation if you like it or not, but I assume they want to keep their local banking system running as it does quite well now in these days.

[Alexei Lougovtsov, Bank of America]

I see. And just a quick follow-up, €201 million equivalent of provisions were taken just for the loan book, also for some other assets where you saw deterioration?

[Hannes Mosenbacher, CFO]

For the loan books only, Alexei.

[Alexei Lougovtsov, Bank of America]

For loan books -- book only. Okay, thank you very much, and good luck.

[Hannes Mosenbacher, CFO]

Very much.

[Operator]

Our next question -- now comes

[Johann Strobl, CEO]

My colleagues told me -- sorry, to continue that there is -- there might be also questions in the chat. And one is thoughts about buybacks, that we have the authorization by the shareholders to potentially buy back up to 10%. We have not started the process, which would one need for such an activity.

Sorry, moderator that I interrupted. You please continue with the moderation. Thank you.

[Operator]

Thank you. We’ll take our next question now from Luis Garrido of Bank of America. Please go ahead.

[Luis Garrido, Bank of America]

Yes. Thank you very much for taking my questions. I have three please. Number one, you stated on Page 94 of the report, there was a temporary shortfall of the combined capital buffer requirement at consolidated level as of the end of May. Can you tell us what the capital ratio was at that point? And what drove that breach?

And secondly, can you give us an update on the gross exposure cross border to each of Russia, Belarus and Ukraine, and apologies for I've missed it.

And the final question, can you give us a bit of detail or reassurance on how the dividend upstreaming from Russia might work? Do you assume the profits generated by the Russian business can be up streamed to the Austrian parent? And what are the consequences if this is not possible? Thank you.

[Johann Strobl, CEO]

Yes. So, it was a very temporary issue, because the requirements of the regular are rather strict. So, you have to consider all the negative developments. So, if you book loan provisions whatsoever, but you cannot use the profit. And this was the reason why there was -- on this -- in this one month a shortfall, of course, with the many activities what you have seen, this is now something of historical evidence.

When talking about the cross border exposure to Russia, I think, we have in this slide deck for Russia we have it. So, this is down to 300 something, let me look it up 330. And in addition to that we have 140 or so counter guarantee for our subsidiary. And I would say, the other Ukraine -- maybe Hannes would go for that. He has it already in his…

[Hannes Mosenbacher, CFO]

I have it already in my jet colleagues are working heavily. So on the other one is, the Belarus the net exposure is €30 million. And when talking about Ukraine, the net exposure is some €70 million.

[Johann Strobl, CEO]

And to your question of the potential upstreaming of dividends from Russia, it's in these days not possible. And yes, the consequences of this is that the capital position, the capital ratio of Russia is improving potentially every day. So, very resilient bank. The good thing is that this increase as we shown on consolidated level also supports our WA growth, which came from Russia, so now they are contributing positively again.

So it's -- one can stay very good, resilient bank on a standalone and not the burden at all to the parent. Currently, we have no indication that the dividend ban is lifted at all, and then probably one has to consider that we as an owner are located in an unfriendly country. So it's unclear even if the dividend ban would be lifted, if then the amount would be packed on an asset account or if it really could be delivered to us. We do not plan with the dividend in the near future.

[Luis Garrido, Bank of America]

Sorry, can I just follow-up on to these points? And maybe sorry, it's a very innocent question. Are the profits then in Russia available to service your debt holders at the consolidated group at all as a result of this ban or not? And then just on the cross border exposures, you give the net numbers, can you give us an indication of the gross figures as well? Thank you

[Johann Strobl, CEO]

Yes. I don't know if I fully understood your question, but maybe I try a potential complex question, a simple answer. So the Russians, so the Raiffeisen Russia as till now approvals to honor all their liability requirements with RBI and these so far included also the 81 entity to what we have. So the coupon so far has been serviced.

I hope this was the right understanding of your question and the answer. And Hannes is looking up the gross amount as well.

[indiscernible] would follow up with you.

[Luis Garrido, Bank of America]

Okay, thank you.

[Operator]

Thank you all for your questions. [Operator Instructions]

As there are no further questions at this time, we will now conclude today's conference calls. Thank you for your participation.

[Johann Strobl, CEO]

Yes, thank you very much moderator. It was a pleasure to work with you. Thank you to all participants. As Hannes said at the beginning of his speech, we hope that after the -- we are relatively at the end of this earning season so that you now can start your holidays. I hope you can enjoy it. But thank you that you spent the afternoon with us. We wish you all the best. Thank you and good bye

[Operator]

You may now disconnect.