Erste Group Bank's (EBKOF) CEO Andreas Treichl on Q4 2016 Results - Earnings Call Transcript

| About: Erste Group (EBKOF)

Erste Group Bank AG (OTCPK:EBKOF) Q4 2016 Earnings Conference Call February 28, 2017 5:00 AM ET

Executives

Andreas Treichl - CEO

Willi Cernko - Chief Risk Officer

Gernot Mittendorfer - CFO

Peter Bosek - Member of the Management Board for Retail

Jozef Síkela - Member of the Management Board for Corporate Banking and Markets

Petr Brávek – COO

Andreas Treichl

Ladies and gentleman, a warm welcome to our presentation of the annual results 2016. I think you know all the members of the Management Board. I’ve introduced most of them, if Willi Cernko is not known to you, Willi Cernko is with us today and I don't think we have to introduce any of the Executive Directors. I’m very happy that he has joined us and I admit that the gender composition is rather unfavorable, but apart from that everything's favorable. Let me present the results. We have the highest net profit ever. That as such is a very good thing and it's a sign for us that we’ve overcome the financial crisis finally. And that we have a very strong capital basis now and this helps us to look forward to the coming years. Of course the situation is not easy, there are problems, even if you look at our balance sheet and our profit and loss statement you will see that we've managed to get hold of the risk costs. And over the past years there were some rather unpleasant measures that we had to take but now we are in a good situation in a favorable situation and I do hope that in future, we'll be able to concentrate on what we are here for namely for our customers, let them be private customers or corporate customers or communities to help them to prosper. The situation is quite okay in our region. If you look at the forecasts for 2017, you see that all our countries with the exception of Austria which has improved slightly though, we are way above the average of the AU countries, so we will grow way above the EU countries and this of course will have a positive impact on our business. The labor markets are healthy and sound. The real way the situation has been improving for our customers, additional rates in most countries where the European Central Bank actually wants it to be. So in other words the business environment is okay, the political situation is insecure in all of Europe.

But the business data show into the right direction. If we look at the inflation rate, this is the development that you want to see also in Austria. As to the unemployment rate, I don't think that there is anyone in this room certainly not me who would have expected that the day would come where we could show a chart where the employment rate in Romania is lower than in Austria. And migration is not an excuse, take Hungary, Romania have improved and also in the countries where the unemployment rate was very high, it is dropping in Slovakia and is Croatia that is. Regionally there are quite a lot of problems but in all the development is looking up. As for the interest rates that’s very little. So say interest rates are very low everywhere like in most countries where the economy is looking up. In all countries we have historic results with the interest rates. And very little room for change here. Things will remain stable in our [indiscernible] hope that the interest rates will not go down and let's hope that the inflation rate development will somehow make up for the negative interest rates.

Well there is one thing that we have to add here. If you want to improve your capital and a equity situation you have to distinguish between the banks that improve their situation through income. And the others who do not provide any loans anymore. We have extended 5 billions of loans more and this is evenly distributed, over the countries, Austria, Slovakia, in Czech, yeah, things are turning as well. And as a result needless to say the loan to deposit ratio would have to go down, but it doesn't go down because our deposits grow more strongly than the loan volume. We have for new loans 5 billion new loans and 10 billion deposits which is quite fine on the one hand because it shows us that customers in all countries and although they practically get no interest at all, they still deposit their money with us. On the other hand this is rather dissatisfactory because we are a large bank that should be serving all our customers and we find it difficult to create no risk products for our customers and that offer a good income for our customers. So again this is something that we have to look in much more intensively not only in finance but also in politics.

What is very gratifying for us is that when it comes to digital George we have made great progress not only in Austria but also in Slovakia. So now we are the leading digital banks in Europe. George is simply a hit. We have more than 1 million users and we'll launch George in Czechoslovakia, Slovakia and Romania this year. So this is a very good situation, we don't have to participate in fintech we have an in-house [indiscernible] producers who would like to cooperate with us, so we can really take the raisins out of the cake here. As to the operating results, this is far from pleasant. And this is a major challenge for us in the years to come, but we are quite sure that we'll manage. I think we have always been good at cost management and we are still doing quite well, but at the same time we are investing in data quality, in our infrastructure. So basically it's a question of risk, how long can you allow old and new systems to co-exist, do you switch off old systems. I think we are doing quite well in this respect and we will be able to improve our cost income ratio in the coming years, but we don't expect this to happen in 2017. When you look at our operating income, you can see that both in terms of interest income, and fee and commission income we report a slight decline for various reasons. One reason being that on account of the liquidity ratios which we have to observe because of the regulatory requirements, we have a huge portfolio of government bonds, sovereign bonds and we invest in bonds worth good ratings in the region and we have practically no interest on our portfolio of government bonds. From the past, we still have securities on our portfolio that yield something like 2%. So every year we start, we earn a net interest income of 80 or 90 million and it takes a lot of skill to maintain or even increase that even if the loan volume is increasing.

As regards, fee and commission income there too we see a slight drop, which is easy to explain, we are one of the biggest asset managers in the region. But we're not UBS, we have an excellent private banking entity and we have millions and millions of customers who can't afford to deposit a lot of money with us. We nevertheless have to create products for them that generate a small yield slightly above the rate of inflation and if we are around 2% or 3% we can't ask for commissions that eat up the customer's earnings. So it's a delicate balance between serving our customers well and generating earnings and I think we have the situation well under control. When you look at net interest income, you also have to bear something in mind that is the cost of risk. Risk costs have reached the lowest level ever in our history. In 2016 less than 200 million risk costs was a credit volume way beyond EUR130 billion. So there again it's only logical that we will have a lower interest income and I'm sure Willi Cernko is going to tell you more about that about how we will try in the future to handle our risk costs.

As regards, our asset quality, I should say that we have more than 9 billion, we had more than 9 billion on performing loans, now we are down to 6.6 billion. Our NPL ratio is less than 5% and 70% of the non-performing loans are hedged [indiscernible] percentage is far higher than 70%. So we are in a very comfortable situation in this respect. This is something we can live with in the future. Now we’ll have to wait and see how things develop in the future, but the way it looks now we don't expect a negative development but rather a positive one. The one factor that accounts for our result in 2016 is the substantial decline in risk costs and the second factor is that in 2016 we've provisioned for a better other result. Now what is our other result? In the past it used to be everything that's non-banking business including the bank levy. In 2016, we not only paid a bank levy for 2016, but we also made a one-off payment which for all Austrian banks taken together was 1 billion. We paid that in advance, we paid more than 300 million in terms of bank levy as a one-off payment and the burden in 2017 and following years will be much lower unless anyone in our friendly neighboring countries comes up, both a post communist measure and increases the bank levy again. Pre-tax profit almost 2 billion, after tax 1.3 billion, we will therefore a payout dividend of EUR1 per share, in fact this is what we are going to propose to the AGM.

We think that this is almost an obligation which we have because we are among the very few banks that have a return on tangible equity of more than 12%. So we not only earn the costs of equity, but more than that. So we have a good capital position, sound capital position and that again means that we have to make sure that our shareholders can participate in that. When you look at the development of our capital ratio over the years of the crisis, you will notice that in a number of years 2010, 2011, 2012, we struggling with [indiscernible] and provisions. Our capital ratio was going - our equity ratio was going down - going up then as well and now it's going up much more and because we're doing good business which is much more important in terms of macroeconomic developments. As regards to our forecast for 2017, we are convinced that we will again have a double-digit return on equity, we think that costs may go up slightly in 2017 but not drastically and considering the economic environment we think that loan growth for the group as a whole will be above 5%. In a relatively positive situation we are not excessively happy or confident as far as 2017 is concerned, we still have to work on transformation measures within the group to be able to offer our customers the best possible service and the highest possible level of security, but all in all I think we are on the right track.

And well with this, we are open to take your questions. Please wait for a microphone so that colleagues who are listening via the Internet can hear your questions and the answers.

Question-and-Answer Session

Q - Unidentified Analyst

[indiscernible]. Mr. Treichl you said at very beginning that you have a very good results, but that it may be difficult in the years to come. What are the main difficulties, what do you expect in term of invest environment customers are losing on their savings deposit this year.

Andreas Treichl

I think one of the most important tasks for us will be to contribute towards creating investment options for the middle class that allows people to earn something extra in addition to their salaries. We have to expect that the interest rate environment will be more or less the same. Given the inflationary trend we are currently seeing there is not much of a risk of interest rates going down further but there is a clear intention on the part of the ECB to pay greater attention to the problems of the highly indebted states then to the issue of an increase in wealth for citizens in countries like Austria and Germany. Considering all that the options are rather limited, it's not going to be a fast process, it's not going to happen overnight. There are so many factors that come into play including the issue of financial literacy. If you live in a region when politicians tend to say that every shareholder is a speculator, it will be difficult to convince people that to buy products that allow them to earn a better yield in the long term if they also own a few shares not just fixed income instruments. So we have an enormous task but our interests coincide of our customers and we hope to get better and better.

Willi Cernko

I think the political and regulatory environment will continue to be characterized by uncertainty. I don't expect that the regulatory requirements will be relaxed. I don't think that equity requirements concerning equity will be easier in the future, it won't be easier in the future to finance SMEs in such a way that would be necessary to get the economy going again. Financial institutions like Erste have to get stronger that is essential. And this is what our claim is. A positive outlook for the future and we hope to be able to exercise a certain amount of influence on the mutual understanding between policymakers and decision makers in banks so that banks in the future can take - can do what they should be doing that is assume risks. I don't know if risk costs in the amount of 15 basis points are good for the economy in the long run.

Gernot Mittendorfer

I think Willi Cernko agrees. Well, one thing is absolutely clear. If we want the economy to grow, unfortunately in the markets, we operate in we do see growth. As Andrea's correctly said conditions on the labor market are improving. We have good growth prospects in all our markets, strong domestic demand and this is the main driver we want to support and make use of that and that is mainly due to private households and SMEs means. We cannot underline too much that two things need to be done, regulators should take a break, they should take a step back and try to understand what really serves the management of a healthy economy and what is it that causes collateral damage. That’s extremely important, we want to be a reliable partner, we want to be and we should be given a chance to be a reliable partner.

Unidentified Analyst

I have two questions. You said that you will think about possible investment options for the middle class. I would have expected you to recommend that people buy your shares, but politicians call shareholders speculators, so you're not thinking in terms of share buying. So what do you have in mind if it's not shares and if it should generate a yield nevertheless?

Unidentified Company Representative

Now, I hand over to Peter Bosek because he advices me when I have money to invest.

Peter Bosek

Now we take this issue very, very seriously and we are offering asset management for everyone. We know that we have a shareholding ratio of 2 - of between 2% and 5% and not much is moving in this respect, but we insist on this issue. Of course we will not be able to convince everyone to buy shares, but diversification is important with our diversified portfolios we have customers that were doing rather well even during the financial crisis. There will be - there will not be a new asset class that gives you 100% stability and no risk at all. This does not exist, so we can only offer diversified portfolios. So your recommendation would be getting sound advice and this is what our core product is, advisory services.

Unidentified Analyst

And my second question was, you were proud and rightly so of the fact that you've been originating far more loans. Now what is the geographical structure, where did you sell most of your loans and what's the customer structure, is it corporate loans, is it private consumption loans and do you also grant loans to persons above the age of 65 or 70, you know what I'm aiming at.

Unidentified Company Representative

You're asking about people older than 65 or 70 that is a huge problem. And I think we are doing quite well in this respect. Overall, however general speaking when we advise customers to take out loans on a fixed basis but the long maturity we are running into trouble with the regulator when it comes to people over 70. You are referring to an issue which concern discrimination, I'd like to have a word with you in private afterwards because it would take too long now. Development of loans [indiscernible] with an increase of 1 billion and in the savings bank sector 1.5 billion, in Czech, 1.7, in Slovakia, 1 million, also Slovakia had a good development of performing loans. NPLs of course have also been sold but the sound portfolio grew by 2 million, there was a slight growth in Hungary as well, the only country remain stable was Croatia on an area basis. We had solid growth in all other countries. So the credit growth was evenly distributed over the region and more than the half comes from Austria admittedly.

Unidentified Analyst

You said you expect no regulatory easing for the banks. Does that mean that Mr. Trump will fail with his attempt to take everything apart and take the EU apart and that the Central Bank and the EU will remain unaffected by this and not impressed?

Unidentified Company Representative

Yes and no. Well, I don't think that Mr. Trump will fail unless something unforeseen happens, but if he goes on the way he's doing now, he will put it through. And I think that the EU will remain unimpressed until the consequences become dramatic and then they will have to react, but the reaction speed of the EU is of course are very slow. In addition, what Mr. Trump has in mind facilitates things for 25% of the funding resources and the EU will certainly not do is 75% to 80% of the financing sources in the EU should be disadvantaged. Well until Brussels realizes that in the short term measures will have to be taken in order to boost the economy in Europe well this will take quite some time. No illusions in that respect.

Unidentified Analyst

Another question, you said that 12.75% will be your management target, CET1 will be the management target for you. And what about the rest, will that be dispersed or will you also save capital beyond that level?

Unidentified Company Representative

Well, we must take into account that there will be a regulatory activity. We have to remain very conservative here in our approach, but we have not planned to build equity that we do not need later on. In order to have enormous equity at our disposal we want to manage our capital in a way in the interest of our shareholders. And this is why we are paying out a dividend of EUR1 and if for what reasons ever we have this excess capital we want to share it with our shareholders.

Unidentified Analyst

[indiscernible] Hungarian Business Weekly, this was question, this is about Hungary. After long process, we could finish the integration of Citibank retail in Hungary. Can I ask what are you first experiences about this merger. And my other question that, in Hungary, we own the Erste Bank Hungary with EBRD and with the Hungarian state. Did they, so did this shareholder partners change anything in your business, I mean did they open any gates, I mean the Hungarian state or they had only financial shareholders?

Andreas Treichl

It depends on what you define as OpEx, but I think we've -- both things went extremely well. We concluded the integration with Citibank just a couple of days ago. We’re very happy with it. I think we're now the largest issuer of credit cards in Hungary and I think the business climate has improved in Hungary. So we feel more comfortable, whether it has improved due to the change in ownership of asset bank in Hungary, I don't know, because I think it has improved in general. I think it's to have government and the EBRD as a partner is not so bad unless they try to get involved in our business policy, which both of them don't do.

Unidentified Analyst

Hi. My name is [indiscernible]. Romanian, there are on the market for sale at least six banks, are they interesting? First question.

Andreas Treichl

No. You're talking about the Greek banks.

Unidentified Analyst

Yeah. Greek banks and other banks.

Andreas Treichl

In principle, I would say, no. Maybe if one of my colleagues has a interest -- strong interest, I mean Willi or Gernot or Peter or Jozef or Petr, I would say yes. Peter who runs our IT operation and actually I'd like to make one remark. I don't believe it will take many, many years where the CIO sits on the outside corner and the CEO sits here, because the shift in importance is dramatic. Actually, all those people here down to him, we all depend on him. If he doesn't perform, we are all gone. And he would tell me, if I tell him I want to buy a bank in Romania, he would tell me very nice, but I will not allow you to do it, because I want to make the bank less complex and not more complex. And 10 years ago, I would not have asked him and I don't know if I had asked him 10 years ago if he would have allowed me to buy it. But if you look at our result in 2016, thanks God, he wasn't here in 2016. So clear answer no. Assets, yes; banks, no.

Unidentified Analyst

What is your perception about Romanian banking system? I mean, in terms of business. If you look at assets, growth is 1% and the economy growth is 4.8%. Do you see any potential growth, except retail?

Andreas Treichl

Okay. Can I go up there? Oh, yeah. If you look at this number here together, and this number. Erste Bank Austria, including the savings banks, have a market share in Austria of about 20%, correct. And we have loans of 70 billion. Austria has 8 million people. In Romania, we have 20% market share and BCR [ph] has 7 billion in loans and the country has 20 million people. Where do you want to go as a bank? Look at the Czech Republic, in the Czech Republic, we have 30% market share. And Česká spořitelna which when we bought it in the year 2000 had 4 billion in loans. Now, it's 21 billion, but it's still smaller than the [indiscernible] and it's the largest bank in the Czech Republic. So where do you want to go? It's not a question of 2017 or 2018 or 2019, we're celebrating our 200th anniversary in two years and this is the reason, while we are sure that we will live to our 300th anniversary.

Unidentified Analyst

Did you receive the valuation made by Deloitte, the value of BCR Romania and regarding to one of your shareholders? You have a dispute with one of your shareholders, which has 6% of BCR Romania and the Deloitte was.

Unidentified Company Representative

It is about to be closed already. I think we have received it, but it’s a very small topic.

Unidentified Analyst

Small topic.

Unidentified Company Representative

Yeah, because it’s a small shareholder.

Unidentified Analyst

Yeah, but on the table, it’s around EUR200 million.

Unidentified Company Representative

I don’t know what you’re talking about now.

Unidentified Company Representative

He talks about the valuation which we just got from Deloitte. I’m just thinking because I don’t know whether we should tell you what the valuation was. I know it.

Unidentified Company Representative

We haven’t received it until now.

Unidentified Company Representative

I have. I have it. I'm not going to tell you.

Unidentified Analyst

So you said you're not interested in acquisitions, does this mean you don't need to buy any more banks to win new customers, you’re winning customers through digitization. Well, I couldn't have said it any better, does that mean you would be willing to sell entities in order to diminish the complexity of your group. And then you mentioned 4 billion costs per year and you want to tackle the cost issue in 2018 and 2019. You once said that you wanted to cut costs by 300 million. And then a last question unavoidable, do you exclude the possibility of charging fees for ATMs?

Andreas Treichl

Well, the last question goes to Peter Bosek, I don't even know what the fees are. Well, we certainly will not charge fees for drawing money from an ATM. We're not going to -- we have no intention to do that, certainly not. And I wouldn't categorically exclude any acquisition if something comes up that is a good fit and if we really wanted and if Petr Brávek says, okay, you can allow that because we can cope with it, we might do it. That was a very precise answer, wasn't it?

As regards to costs, I think it wouldn't be okay if we were to say now when exactly we can turn off systems and when exactly resources that have only brought in on a temporary basis can be -- will not be needed anymore. We have people working for us externally and they help us pick up speed. In 2017, our costs may increase by 1% to 2% and starting in 2018, the situation will turn around and costs will start going down, but we can't say any more than that because there are many decisions yet to be taken in the future.

Unidentified Analyst

Two of my questions refer exactly to the last point you just mentioned. You said several times that a lot of transformation is going on internally. So am I right in assuming that the objective is to have a completely different bank as of 2020. What will the world of banks be like from 2020 and can you quantify that how much has this transformation cost you over the past two to three years? And then an entirely different question, you said you would wish that portions show a greater risk appetite. Now what do you mean by that?

Andreas Treichl

Well, when I say more risk appetite, on the part of [indiscernible]. Well, when do you want to go to lunch? Your answer will take some time, but I think and I think Willi Cernko said it very well already. At some point in time, regular measures no longer serve their purpose, but become counterproductive and hurt the prosperity and the wellbeing of a state and its citizens and then the policy makers will have to turn around. I don't want to use the United States as an example. We have all read the letter sent out by Mr. Trump. It's unbelievable, but there is a grain of truth in that it would be -- it’s pointless to regulate and regulate and regulate and allow the economy to go down the drain. You need to turn around at some point. I don't know when it's going to happen. And what is our vision of the bank of the future, that's something I would like to ask Petr Brávek to outline in two minutes and in English.

Petr Brávek

It was already stated that we focus on advisory and I don't want to speak on behalf of Peter Bosek, he’s retail actually. But I think in the future, we will have less products because the products are in banking for 200 years, but the products will be offered in context and the context, it's related to the location where you are to your financial situation, to your needs. We have to focus that in order to provide you the good advisory. You have to understand the pressure of the situation you are and actually we have to understand it real time, because we do believe that you will not give up your phones and tablets and then you would like to get a new apartment, you will look at that in web portals, you would like to get an advisory for the price and for us it means that we would like to understand more the situation and provide you better advisory. Then the reason for the investments that we have understood the data better and we have to understand better how to provide you the advisory in context.

Unidentified Analyst

My question is on the Czech Republic. I'm from Prague. [indiscernible]. There is a discussion within the government parties about sector tax and I -- this would probably be the tax on banks and you already mentioned political risks, can you comment on these proposals from the Czech Republic. How -- what would be the impact for your bank and then I have one more question.

Unidentified Company Representative

Well, I think on the banks in the Czech Republic, I think it's not a surprise knowing the situation in the Czech political environment for the moment. I'm -- personally I am a bit surprised because we regarded the Czech Republic as the country that is the most matter of fact in our region. But given the present political environment, I think it's even understandable that a party that is in a difficult situation retreats to populist announcements in order to gain popularity. We had examples in other countries of our region, also in Austria, which was actually the first country that introduced a banking levy and I think that then chancellor used that for many, many years as his biggest success.

And it hurt the country very much. It was very bad for Australia because it really managed to create an environment where in addition to all the regulatory problems that the banks have, they did not finance a lot. And I don't want to relate banking levy to unemployment rates, but the economic performance of those countries that had a banking tax was not good and the economic performance of the Czech Republic was very good. So if you want to screw that up now, go ahead. Welcome. So -- not for us, we used to deal with banking levies in many countries. It would be [indiscernible] for the image of the Czech Republic because the image of the Czech Republic is to be a reliable partner of everybody and everybody also includes financial institutions.

Unidentified Analyst

One more question I have, the biggest economic thing in upcoming months or weeks in the Czech Republic is lifting the currency intervention regime by the Czech National Bank. We expect this to happen in probably in April. Will this have any effect on Česká spořitelna?

A - Unidentified Company Representative A

Maybe Jozef would like to answer that. He is a bit more Czech than I am.

Jozef Síkela

As the book of Česká spořitelna is in Czech korunas, the potential appreciation of Czech koruna will have of course appreciation impact on our balance sheet, on our incomes and also in our profits. So this is the question if the appreciation will come because usually, there are two for Tango. So there is a lot of speculatory operations currently and the question will be who will be the counter, so I cannot judge what will happen when the Czech National Bank will basically stop to intervene. The only thing and I can imagine is that it might be pretty shaky on the beginning. I can just hope that basically the koruna will appreciate, not in the [indiscernible] because usually the huge volatility is not always healthy for the economy and for the participants, but in steps.

Unidentified Analyst

[indiscernible]. Do you worry about the perspective of public financing Romania, because I’ve seen the forecast presented that you don’t really trust the forecast -- official governmental forecast for GDP growth, the one that the budget was founded on. You forecast a budget deficit of more than 3% percent and also the government

[Technical Difficulty]

Unidentified Company Representative

Romanian bank and has basically the task to finance the Romanian economy. 99% of the employees of BCR are Romanian. 99% of the clients of BCR are Romanian and BCR is the largest bank in the country and I don't think that the politicians in Romania are so irresponsible that they play around with the biggest source of financing in the country. So I'm not worried. I'm not worried. I'm actually very positive on Romania and its future.

Unidentified Analyst

One last question, how many customers do you expect to have this year with George?

Unidentified Company Representative

It will be a pilot. We have now 1 million customers in Austria. We will add up just about 1 million customers next year Czech Republic, Slovakia and partially Romania. It is a process. Firstly, we will bring it to the bank employees, then to the friends and families to stabilize it, fully localize and they just bring it up. We don't expect the massive rollout in Romania next year, only the year after, but we will technically bring it to work during this year.

The next colleague from Romania.

Unidentified Analyst

[indiscernible] from Romania News – Press Agency. I have a question related to the previous one. There is a more rhetoric in the region, especially in the Eastern side of the EU. Related to the, putting into question the role of the foreign banks or foreign enterprise into local economies, how do you respond how contributed to the economy of Romania, of the Czech Republic, of the Hungary in the last year's since you enter these new markets. Thank you.

Unidentified Company Representative

I think if you just take a matter of fact look and you take the Czech Republic as an example, you cannot say that the Czech Republic has done badly during the last 13 years, when the Czech Republic joined the EU. And the three largest banks in the Czech Republic are foreign owned and the Czech Republic had one of the best one, if not the best financial system in all of Europe. And then you have other countries where the banks are -- we’re being forced to stay under government or local control and the banking system got into huge trouble. I guess, most of the Greek banking system is Greek owned. Which banking system is better? The Greek or the Czech? So what has the banking system to do with the nationality of the shareholders? A bank is not run by shareholders. The shareholders are here to have a return on their investment. The bank is run by the management and by the people and it depends on how well they serve the clients. And our industry is not an industry where nationalism has any role and politicians who don't understand that, don't understand it.

Unidentified Analyst

What is your target for this year? Do you aim to recover the target?

Unidentified Company Representative

For 2017?

Unidentified Analyst

Yeah.

Unidentified Company Representative

You tend to be the journalist in the room who asked the question that I cannot answer. We have not given any target for 2017 but the fact that we will have a return on our tangible equity of 10% plus and then we announced that our overall costs will grow by a maximum of 2%. So we're looking relatively positively in to 2017, but we do not give specific targets.

Unidentified Analyst

Are you afraid also in Romania, the government will put a tax for the banks because of the need of finance to?

Unidentified Company Representative

Same answer as to the Czech Republic. If Romanians want to do that, they should try, but then they have to bear with the consequences. If you look at the financial situation of the country and you say on one hand, the economy is doing extremely well. On the other hand, the government has done a lot of things to reduce taxation. However, the deficit is increasing. So, the government will have to look out on getting the money from somewhere who is better equipped to do so and the bad banks. It is exactly the same story we had in Austria. If Romania wants to reduce its growth potential and everything else, they should do it. If they're reasonable and think about the future of the Romanian people, they will not do it.

Unidentified Analyst

I'd like more about the digitization George roll out, et cetera. On the other hand, you said you didn’t want to take over Romanian banks, but only assets. Do you think of taking over fintech next three years? Do you think of additional cost where you want to draw an external specialist or do you want to integrate things or have your own development, so developments apart from George in the future?

Unidentified Company Representative

Well, sharing fin-techs. We know that the market is overrated. Our strategy is to have a rollout of George in our country and in one to two years, we'll have enough users and today, we can actually pick and choose with whom we want to cooperate or not through our plug in store, which is an integrated part of George. We can say that this is where we want to introduce this or that into our George landscape. So we feel that our strategies are right one with our corporations that we have made.

Any further questions for.

Unidentified Company Representative

We will do this after the Q&A round finishes here. So we keep you posted and then go together down to the Financial Life Park.

Unidentified Company Representative

Well, thank you very much for calling.

Unidentified Company Representative

Thank you for having joined us. Thank you for having shown such interest. On the 7th of May, we publish our -- the results of the first quarter of 2017 and this will be an exciting thing. Thank you.

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