Erste Group Bank AG (EBKOF) CEO Bernd Spalt on Q4 2019 Results - Earnings Call Transcript

Erste Group Bank AG (OTCPK:EBKOF) Q4 2019 Earnings Conference Call February 28, 2020 4:00 AM ET

Company Participants

Bernd Spalt - CEO, Erste Group

Alexandra Habeler-Drabek - CRO, Erste Group

Stefan Dörfler - CFO, Erste Group

Conference Call Participants

Gabor Kemeny - Autonomous

Andrea Vercellone - Exane

Anna Marshall - Goldman Sachs

Johannes Thormann - HSBC

Tobias Lukesch - Kepler Cheuvreux

Alan Webborn - Societe Generale

Stefan Maxian - RCB

Hadrien De Belle - KBW

Bernd Spalt

Thank you very much. Good morning ladies and gentlemen. Let me start on Page number 4, the group income state performance and let me drive to the chart on the right-hand side on the year-on-year development. The year-on-year development shows a very good business model and very robust CEE economies. So what you see is an 8.7% in operating result performance. So, very good revenues, good cost management in this year, a very group strong negative result on the other operating results land, which then translates into a net profit of 1.47 at the end of the year.

If we go the Q-on-Q chart on the left hand side, we see the individual developments upon Q4. Expense side have a usual shown some seasonal up drift on the back of IT exchanges and marketing, and PEREX going up slightly. We have booked 17 basis points of risk costs in the fourth quarter, which on an annual basis translate into 7 base points risk costs.

So, we're still seeing a very benign risk environment, and we see the other reside, very much interested by the increase or the doubling of the slow back banking tax. We've been announcing that on the Capital Markets Day, last year, when we set that probability that in the context of the increase of the banking tax, an impairment of goodwill will be necessarily what you see. So on the doubling of the banking tax, we have built an impairment of 165 million on the slow back goodwill and taking it out completely.

If we go on the Slide number 5, key income data, you see that net interest income has developed strongly over this year. Margins on a year-over-year basis are still under pressure as expected, quarter-on-quarter to show a stabilization. Operating result, as I've said, 8.7% up and cost income ratio is now down to 59% on a year-on-year basis. Cost of risks as I said still very benign on a yearly basis of 7 basis points and the return on tangible equity will be 13.7% on a year-over-year basis.

Very quickly on the balance sheet, we have a 3.8% increase of our balance sheet, very much driven by customer business, both on the asset as well as on the liability side. Loans have increased by 7.1%, deposits have been increased 6.9%. So, this is reflecting a very strong domestic demand situation on the back of very strong local economies, which we will talk about a little later.

Key balance sheet data on Page number 7, loan to deposit ratio at a very, very solid and stable 92%. The NPL coverage ratio is now up to 77% and NPL ratio at a record low level of 2.5%, and we don't see any kind of trend reversal when it comes to balance sheet composition in terms of risk features. On the liquidity side, you also see a robust and very solid situation on liquidity coverage ratio and the leverage ratio is now at 6.8%.

Let me turn to Page number 9, starting with discussing the macro situation in our countries. We've been covering that on our capital markets day very deeply. And the picture is of course unchanged to what you see is that our region is the most dynamic growing region in the European context, twice as much growth as Eurozone average. Record, sort of growth clearly here is Hungary with 4.9% in the last year, but also the other currency is stable that's really well on the back of domestic demand.

We see also a record low unemployment rate level, which is also then translated in some to somewhat pressure on the PEREX side, and we see also that this growth is supported by very resilient household figures of the state. So, when it comes to budget deficit numbers and indebtedness numbers, we see still a very robust and positive picture with an orthodox exception of Romania.

Now, let me go to Page number 10, interest rates. Most notably in, I mean, of course in the Eurozone, the interest rate levels are not getting any different and we don't expect any kind of trend reversal either, which I think is broadly in line with consensus. However, in the other economies, we see a much better picture of course. And I think it was particularly noteworthy that the Czech National Bank has now increased the rates to 2.25% for the ninth step in a row, which of course in terms of supporting our core business is very, very positive.

Currencies on Page 11 reflect very strong local economies been stable over time. This has been true for the last years. Hungarian for in slightly weaken but nothing sort of with too worried about. If we go to Page number 12 and look at the market shares across the region, very stable, very robust. It's very worthwhile mentioning that on the corporate loan side, we are across markets gaining market share, which I think is something which we also mentioned on the capital markets today, and we expect that to continue, other than that stability all over the places.

Let me turn to Page number 14, on the business performance on the performing loan stock and growth. Here, you see sort of the reflection of what I said in the beginning, 7.1% loan growth, very much supported by domestic demand. All over the region, we see a very positive picture, which we do not expect to a short-term change. So, we see across all the segments favorable economic fundamental support of this loan growth going forward.

Same on the deposit side on Page number 15. Deposit built up cleaned continues, also over most of the markets in segments, you see a slight reduction on the check side, which is not something which is sort of a trend reversal, but rather a momentary reflection of what a type development on the public sector when it comes to deposits. Other than that, very stable and the public inflow continues even on the low interest rate level.

Page number 16, net interest income and net interest margin; NII has been increased year-on-year and also in strong quarter-on-quarter which was usually the case in the fourth quarter. We see a stronger increase in NII, which then translated into also a little bit of a better net interest margin. It does not mean that overall you don't really see much pressure from customers business going away.

So, the interest rate hikes in the Czech Republic, certainly in this context, is a positive even though at that moment it doesn't produce any sort of remarkably positive aspects because we have decided to pass on some of these to the customers deposit side. But overall, what you see loan growth translating into NII growth, as we have indicated when we talked last.

If you go to Page number 17, NII and fee sort of growing up; we have indicated that we want to target 2 billion of fee income for the full year 2019. This is where we sort of -- what we've achieved. The fee income growth in line with our strategy and strategic pillars, deliver resides and this will continue over the next quarter for something. In terms of revenue stream, you see all revenue streams delivering into an operating income growth.

As we go to Page number 18, costs as I said will be higher in Q4, but year-over-year I think we have shown good cost containment. So in a context overall probably, 5% wage growth coming in with the 2.4% cost growth is showing that we are really taking that momentum. So cost seasonally higher in Q4, but coming up with a 59% cost income ratio which is also shown on Page number 19.

With that, I would like to hand over to Alexandra to cover the risk factor.

Alexandra Habeler-Drabek

Thank you, Bernd, good morning everyone. Risk situation on Page 20, risk situation remained positive, so with high asset quality still benign. Risk cost is already mentioned by Bernd Spalt, decreasing NPL and increasing coverage. The Q4 risk costs amount to roughly €80 million, which were mainly driven by parameter updates in the area of the forward looking indicators. It's a minor impact from the definition and some coverage increase of existing NPL.

The risk costs for the full year 2019 amounted to 39 million. This is composed for roughly 100 million allocations for the on balance path, which translates into the already mentioned 7 basis points of relative risk costs and minus to 70 million net releases in the off balance path will come to the 39 million overall in full year.

The NPL ratio down to 2.5%, which is not only a record low, as already mentioned, but also considerable improvement from the 2.2 new comparison and from 2.7 million even quarter-on-quarter. NPL ratio is at 1.6, which compared to year end 2018 of 2.2 is also considerable improvement.

Also the NPL volume in excellent terms decreased further to roughly 4.1 billion, which is a 50% decrease compared to 2018 and still 3.3% decrease compared to the third quarter. The main drivers of the NPL volume decrease are still net recoveries and upgrades. NPL sales do not play any role. It was roughly 200 million for the full year. The NPL coverage already mentioned amounts to more than 77%. It is an extremely comfortable level.

With this, I hand over to Stefan Dorfler -- back to Bernd

Bernd Spalt

Thanks, Alexandra. Let me quickly cover the other results on Page number 23, as I said, dominated by the goodwill write down in Slovakia Republic. As we have anticipated the banking sector, which has been introduced, which was not limited in time, so, we recalculated the expected cash flows and accordingly wrote down full good will of our Slovakia participation, which embedded into €160 million impairment.

We had on the other side a €20 million bad will realization on the acquisition of a small Macedonian bank by one of our savings banks. And we have booked 11 million in Romania on the banking tax. So I think other result line has been this year heavily impacted by one-off effect as we see it.

Now concluding the business performance on Page number 24, but before I hand over to the Stefan. If you look at the net profit line, these have been impacted by positive operating results and negative one-offs. So, on a group level, we enter here total at 1.47 million net profit after tax.

With that, I would like to hand to Stefan, our CFO to cover the financial statements.

Stefan Dörfler

Thank you very much, Bernd. Making reference to the Pages 26 and 27, those two slides represent very well the healthy business -- business growth that we could achieve throughout the 2019, healthy as we respect, first -- firstly, on the basis of how this growth has been funded. You see that the net loan and the customer deposits, both have been growing round about €11 billion year-on-year, and this has been the major part of the balance sheet growth.

As already has been mentioned by Alexandra all that came along with a very healthy risk profile, and equally importantly, we have been able to grow, across all the countries and across all the core segments, this growth led particularly by strong growth in Hungary, Slovakia but also in the savings banks in Austria. As has been mentioned already, our liquidity situation is a very sound and there has been a huge development on LCR side.

On Page 28, you find some details with regards to the liquidity. So, no big changes there, if any of than to the better we made use in the year 2019, and here I am already on the Page 30 of the very favorable environment for all the funding side, and we have been executing both several benchmark transactions they come in a second and also quite a lot of very successful private placements for our clients and our business throughout the region.

On Page 31, you find the representation of our maturity profile, two remarks to our activities in the year 19 and '20 so far. In the year 2019, we could execute benchmark transactions in all key asset classes in all the asset classes with the exception of the cupboard bone area where we executed two transactions, we have execute this one transaction 500 million each, which was exactly according to our funding plan.

In all cases, we could execute at never before seen low and tight spread levels. This has been further prolonged in the year 2020. In January, we were executing 750 million cover positions and as for sure you have been following. We executed our 81 transactions in earlier this year, on a 338% and coupon is the second lowest coupon ever executed on, in this asset class in Europe and found a very good response in the market both in terms of quantity and quality of the book.

As promised we give you the updates regarding our MPE resolution strategy. As you know we have started presence in 7 geographically connected countries and Erste Group setup suggests a multiple point of entry resolution strategy, the binding MREL targets. For Austrian resolution group, I expected in the first half of the year.

In the meanwhile and with that I'm on Page 33; in the meanwhile, we have already been starting to execute our MREL funding plan. We have done so within for the differentiation section in Romania and in the meanwhile have also executed a small section in Slovakia and both of those came in even better levels than we already had been expecting.

The final page I want to talk about and very importantly, of course, is page 34 where you see all the details with regards to our common equity Tier 1 position. On a fully loaded, basically fully loaded level we are 13.7 to 13.8 at the end of the year 2019. For the year 2020 as a group does not expect any changes with regards to expected minimum requirements.

The current minimum requirements have been confirmed already by the regulator based on extra decision and the only small change refers to 5 basis points lower than expected compensated a buffer starting from July 2020. This result in the clear decision of the management in our common equity Tier 1 ratio target remains unchanged at the level of 13.5%.

And with that, I hand back to Bernd Spalt for the outlook.

Bernd Spalt

Thank you very much. Let me start Page 36 on the key takeaways and then I get to the outlook. Key takeaways as already summarize upon very, very strong local economies with ensuring a strong operating results and as promised positive strong for last year. We have improved our cause information to 69% balance sheet similar is wrong as quality is very, very robust capital positioning stations 13.7 and we have been delivering a return tangible equity of 11%. So, for the fifth consecutive this year was been showing double digit return on tangible equity and profitability are generally is very robust.

On the back of that we have proposed general assembly next year, a dividend per share of €1.5. Outlook for 2020, yes, we expect to slight economics deceleration, but still economies will be growing about European average. Domestic demand will drive that. We still have the ambition as indicated on our capital market space to show positive jaws with -- which is hard, but still our target for DCM.

Net loan growth will be mid-single digit. As we see it, in all of our economies and we will continue to accumulate capital for our business, be capital accretive, which will support our CET1 ratio going forward. We still target of course a return on tangible equity of double digit going forward.

And with that, I would like to conclude the presentation and hand back for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We will now take our first question from Gabor Kemeny from Autonomous. Please go ahead.

Gabor Kemeny

Thank you for the presentation. I have a couple of questions, firstly on jaws. You mentioned as you aspire to positive jaws in 2020. Since you've outlined this guidance, we had short-term interest rate hikes in Czechia and in Hungary. So what further development would make you more confident that you can deliver positive jaws? And what has prevented you from making this an explicit guidance so far? And then secondly on the recent macro development, early days probably, but can you give us a sense of how you think about the potential impact from the coronavirus at this stage? I think at the CMD, you gave us your exposures to manufacturing and trade. Are these the segments which you would be most focused on? And perhaps you could give us an idea about your exposure to the Chinese supply chain? And just finally, what do you think is the likelihood that in -- even in the absence of ultra corporate defaults we could get an uptick in your provisioning in the first quarter or the coming quarter because of more negative macro parameters ceding through to your forward looking provision model?

Stefan Dörfler

Thanks for the question. So, I take the first one with regard to the full control and as you rightly put it ambition. There are three very simple reasons and I exclude the corona discussion from that, why we are hesitance to name the positive jaws targets. Number one, the very, very good results in 2019, which simply, on operating level basis it sets a very high level. Secondly, of course interest rate environment, which is a steel and in particularly in the new area, a significant challenge to banks operating in this Eurozone. And thirdly, while it was mentioned in our presentation already, we are very successful in containing the upward drift on wage inflation. We have to monitor, and I'm sure you saw it, the inflationary tendencies in some of our core C countries, which of course limit our ability there to cut down costs or reduce. That's on the one hand.

On the other hand, it makes us very optimistic is that we see a very good and very well developing fee business. We've been starting off very well in January and we are very optimistic that we can grow the business based on our strategic goals as envisaged in -- on NII. We clearly expect growth based again on volume roles and of course, the interest rate environment at least so far in the sea countries has been support. So overall, we exactly stick to what we have been communicating at the capital markets day. We said that all sales the target to grow the operating result and we have the ambition to deliver positive jaws. That's where we stand and with that for the corona question, I turn to Bernd.

Bernd Spalt

Thank you very much. On the coronavirus, I think it's very early days in the end, there is no degree of certainty where we can predict them which kind of industry would be affected. However, clearly there will be companies which have supply chain logics, which will be impacted in which will then also have a negative impact on a EBITDAs and cash flows.

We're talking individually to the large corporate customers. We're where we understand exposure of infectious or effective regions. So there is no sector specific thing to produce is rather a sort of business logic approach, which has a potentially affection. Overall, we think our economists themselves are very resilient and sort of very robust. And of course, it's very early days to give an overall interpretation on a macroeconomic level.

Alexandra Habeler-Drabek

There was one last question cover. Yes, let's finish this one. Adding on this what Bernd Spalt just said. We stick to the risk-cost guidance for 2020 of maximum 20 basis points and we currently do not expect a noticeable uptick in provisioning. I already mentioned that before that already in Q4, of course we have implemented the new parameters in the SLIs. So, we see the implicit of SLIs. What makes me confident that the hike will not be strong is that we still see very sound recoveries on our NPL portfolio and on the return of stock, which is offsetting these impacts on the portfolio loan loss provisions.

Operator

We will now take our next question from Andrea Vercellone from Exane. Please go ahead.

Andrea Vercellone

And just a question or a series of questions on capital, you grow several model change approved in Q4, which led to lower RWAs as you have been guided for. Is there any more model changes in the pipeline for 2020 that still needs validation or you're done? And do you still expect the benefits from that when they come through, if there is any? And see related to RWAs, you've been adding quite good positive tailwinds due to positive rating migrations over the past one or two years. You just mentioned that you see no problems with asset equality at least in the immediate future. So shall we expect tailwinds on that front as well in 2020? And finally, vis-à-vis your capitals targets, are you already in a position to add a view as to whether you will fund part of the pillars to requirements without the capital or you remain or the view that you continue to funded it with common equity Tier 1?

Alexandra Habeler-Drabek

So, I would start with the model changes. Currently, we have already out two models for approval. The one is the SL model that we expect to go in the short-term and where we expect some relief on the capital aid. The second one which is out stage model where expect final approval for 2020 and there is no impact. And also on the PCR, IRB, we would not impact this year, so we will file end of March and then on side to the process which takes longer.

Second question on the rating migrations, also in the last quarter, despite of the not overall all sorts of things but the economic environment, we had not seen a downward shift of facing migrations, to be very realistic to expect payment also going to short, but also normally trade headwinds. So, we are expected our solid asset quality will remain at least what we said today.

Stefan Dörfler

Andre, I will take the question regarding capital impacts and -- of the Pillar 2 requirements. So, I reiterate what I said already in the presentation. For 2020, there is totally no change from the regulatory front, not only to be expected, but it is a firmly communicated and based on asset addition. However, as for 2021 and given the communication by the ECB or the new Article 104a of the CRD V, concerning the split of Pillar 2 requirements, we would expect, a certain corresponding reduction of Erste Group's common equity Tier 1 minimum requirements.

However and I'm sure you remember the discussions that we had in Q4, around this particular point. The overall CET1 minimum requirements, reduction is also subject to the Austrian implementation of the CRD V with regard to additive treatment of OCII and systemic risk buffer. So, we currently are slightly optimistic. There could be a certain reduction in the requirements on the Pillar 2 label for 2021, but it's definitely too early to say, what's the concrete impact will be. We hope that we can get more clarity on the buffer regime until the middle of this year, so middle of 2020. This is currently the timeline that we expect, and we of course keep you updated on developments on the regulatory front.

Operator

We will now take our next question from Anna Marshall from Goldman Sachs. Please go ahead.

Anna Marshall

Thank you for the presentation. To follow up on the capital topic of regarding CRD V. What are your expectations regarding the treatment of intangible deduction related to software whether you expect any positive impact from that? And my second question is on tax, could you please provide more color behind the quite low effective tax rate in Q4?

Stefan Dörfler

So, I can reply immediately to the tax question. So, this is typically Q4 effect and based on the planning of '20, for the full year 2020. With this -- as I regard relatively limited effect, other than that no changes on the principal levels of the tax rate.

With regard to intangibles, it's almost 85 to be very honest. This is rather and minor topic in the context of the overall CRD V discussion. We do not have any estimates in that respect. And we believe that compared to the potential stood effect out of the street or that I've been referring to before, it should be rather minor.

Operator

Question from Johannes Thormann from HSBC. Please go ahead.

Johannes Thormann

This is just one question concerning your risk situation. As you confirmed the cost of risk guidance for 2020, what is needed and what is needed to happen to bring your cost of risk back say 30 or 50 bps? What deterioration do you need to see in your models and of course in the real economy?

Alexandra Habeler-Drabek

I mean this is coming back to the coronavirus topic. Honestly, no one came conservative this for the time being, we're getting also answer for this discussions on propensity to wrap something up. This is so much about deterioration. And in fact, I cannot comment from this more. And from a clear calculation perspective, you need to repeat this whole slide, but why should this happen. So this is -- we stick to the 20 basis points guidance for 2020.

Operator

We will now take our next question from Tobias Lukesch from Kepler Cheuvreux. Please go ahead.

Tobias Lukesch

Three questions from my side as well. Firstly, you've mentioned the market share gains in the corporate loan space. Could try a bit please shed a bit more light on the reason for this? Is it on pricing? Is it on taking higher risk? And secondly, on the risk costs, I mean, you've mentioned the higher NPL coverage ratio, which is up nicely now to 77%, up from 73%. And it's still kind of feeling what you see with regards to collateral, which is also -- has to be taken into account when creating the cash buffer. Is there any feeling 80%, 90% something like that? And lastly, again, on core Tier 1 quality one ratio development, you had some model effects that you mentioned 3.2 billion, if I'm not mistaken in RWA around 30 bps. If we met this with a goodwill impact maybe on the capital, you could argue for a 50-bp effect here. With regards to the standalone growth, you have close to 8%. Now you're guiding again, for mid single digit right it for '19. Can we expect that you grow capital towards to 14% and you have a clear target here with regards to 2020?

Stefan Dörfler

Okay, let me start with corporate loan market share growth whether it comes from medium and large corporate business. The one thing which I can't tell you is not because we saw some underwriting standards relative to concrete because as some sort of discussed last time. We do not think that at a relatively late stage of economic cycle will be the time to build in weaker structure, so hold up on our underwriting standards and we gained market shares still on SME on the corporate side. We're not sort of intending to get any market share on the commercial real estate side.

Alexandra Habeler-Drabek

To the question of the coverage ratio, so first, the NPL coverage is net of collateral and so this is purely provisions. When it comes to collateral, this would come on top. So adding collateral, we would have the coverage of about 100%. And of course, we two big haircuts on collateral, but when it comes to where do we stop the calculating the ceiling, so this is not in place, but of course we're planning what haircuts to the different types of collateral that we have.

Tobias Lukesch

How much leeway -- maybe how leeway would you have in let say bringing collateral values down in order to increase the cash collateral?

Stefan Dörfler

Can you ask again? We didn’t' hear this?

Tobias Lukesch

Okay, thank you. Alright

Stefan Dörfler

Okay, we will move to the next question.

Operator

We will now take our next question from Alan Webborn from Societe Generale. Please go ahead.

Alan Webborn

I think in your November presentation on the CMD, you've talked about capping single costs so low digit level in 2020 and then you didn't repeat that specifically in the outlook, but could you just confirm that is your aspirations are? And or is there any sort of nuance of change in terms of the cost outlook between then and now that was the first question? Second question, should we be expecting sort of after full year a very good margin performance at group level in Q4 that seasonally you will see slightly weaker in Q1, just give us an idea of how you think that going. Thirdly, was there anything unusual, at all in the combination of the trading and have value results in Q4? I get what you're saying and you repeat it that what you said about that, that result being lower in 2020, but just if there was anything good to hear? And then just a couple of points of detail that seemed to be quite a big other operating income results in the savings banks in Q4, could you tell me what that is? Was there anything specific in the other Austria impairments or the Romania impairments in Q4? And there also seemed to be a bit of a negative in Croatia in the other operating result and could you tell me what that is?

Stefan Dörfler

All right. Okay, Alan, I'll rather try to answer your question. Course first, no change whatsoever to what it's been communicating, and implicitly, it has been mentioned with our -- of course with our target ongoing the operating result and the ambition to achieve positive jaws. This will not be possible unless we are also successful in delivering what we have been indicating on the cost growth side.

So to repeat it in real numbers, we definitely want to land below $4.4 maybe on a million overall operating expenses or even better. So, we're below a gross of $100 million in operating expenses year in year '19 to '20. Regards to the margin we just caught on, yes, Q1 is to be expected I think lower there that's exactly correctly observed. Regarding the fair value, fair value expectations in trading results always looking at those two lines together. It's a sector 2019 has been showing a very good result and therefore we are a little bit cautious.

The outlook of course, if interest rates develop like the last few days, for well known reasons that could also repeat on the particular $12 billion fair value bond portfolio. However is of course at this time much early to say how this will develop in the course of 2020. Therefore, we took a rather cautious approach here. We don't expect this to be much better than in 2019. I think that it's fair to say last, but not least regarding the savings banks area in 2019 Q4. I think it was mentioned, but it was not explicitly stated in relation to the operating income.

Ohridska Banka was acquired by Steiermaarkische Sparkasse in there. I use this term here a bit, we also to say in the sense of a positive impact on our income could be books, due to the level at which this bank has been acquired by Steiermarkische Sparkasse and consolidated in the group. I hope you found these points.

Alan Webborn

And the Croatian and there is a Croatian other operating results negative in Q4.

Stefan Dörfler

€10 million based on provisioning for the Swiss franc issues in the Croatian market in our portfolio.

Operator

We will now take our next question from Stefan Maxian from RCB. Please go ahead.

Stefan Maxian

Just two or three questions remaining; one, referring to the corporate center and to the other results in the corporate center. It's actually like around €240 million I understand that 165% that is the goodwill impairment, but is there anything special in this remaining €75 million negative in there? Second just on your NIM development, you just say that in the first quarter, you expect the NIM again to peak down slightly, but like going forward with your assume the name to be roughly stable or will you expect better pressure there? And finally, just a clarification, you have the wording in the presentation of dividends to share up to €1.5. Is there any reason why you'd say, up to or is the proposal clearly 1.5?

Stefan Dörfler

Okay. Stefan, I take right away the dividend question because that's simply word -- as I say, a semantic issue. It goes up to, not up to a percent of -- at maximum. But it is nearly up from last year, so thanks for that. So, 1.5 is the proposal of the board, so the Supervisory Board, respectively, then further on to the general assembly. So no changes there at all.

Stefan Maxian

Okay.

Stefan Dörfler

And regarding the participation, I think the change in operating income beyond the goodwill write-down of full interest retainer. That was an overall €45 million participation valuation that is every year. As you know, we need evaluate all the participations and the effect in Q4 was a total of 45, which then add up with a goodwill to the 200 roundabout effect.

Bernd Spalt

Yes, on the net interest margin, we expect, if this interest rate levels do not change, which we think is the based case. We still expect pressure on the net interest margin side of Slide 1, so this will sort of quickly continue next couple of quarters.

Operator

[Operator Instructions] We will now take our next question from Hadrien De Belle from KBW. Please go ahead.

Hadrien De Belle

Just two quick questions on my side. I saw you already spoke about of it. But any update on AML in Romania and what could happen there? And second question is, can you talk a little bit about this competitive environment in the Czech market now? Your NII was very strong, and particularly on with the rate hikes, do you see more migration to turn deposits or pressure to pay more for the deposits? And how is reflective on the asset side? And that should be it, thank you.

Alexandra Habeler-Drabek

So, I take the AML topic. So as of today and as of now, according to the available information, the National Bank of Romania did not initiate a formal investigation against the bank in relation to possible money laundering. We are expecting request, but like any request that we receive from the authorities in relationship with money laundering, we will treat with at most care and we will of course provide our entire support to the authority.

Bernd Spalt

On the Czech market and the competitive situation there, Czech Republic continues to be very busy in competitive market, apart from the large players almost all of the new banks and alternative providers are there. So, yes, we see high quantities. On the deposit side, we you have for the first time after many, many interest rate hikes, has decided to pass on some of the last hike to a part of our deposit -- retailer retail depositor. Overall, I would say that, this competitive situation will not ease. Still, if we look at the market share side, we're able to hold up and defend our market shares on all of the segments.

Operator

As there are no further questions at this time, I'd like to turn the call back for any additional or closing remarks.

Bernd Spalt

If there's no more questions, then thank you very much for taking the time to participate in the call. We have our Q1 results announcement on the 30th of April.

Thank you very much and talk to you then. Bye, bye.

Operator

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.