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NLB Group reported strong financial performance in its Q3 2025 earnings call, driven by robust loan growth and digital transformation initiatives. The bank's net interest income and fee income showed healthy increases, and it maintained a solid capital position. The stock rose 2.56%, reflecting positive investor sentiment.
Key Takeaways
- Loan growth reached 16% year-on-year, bolstering financial results.
- Digital initiatives included new mobile apps and Apple Pay launch.
- NLB Group's stock increased by 2.56% following the earnings announcement.
Company Performance
NLB Group demonstrated a strong performance in Q3 2025, with significant loan and deposit growth. The company's strategic focus on digital transformation and cost efficiency is evident in its operational updates, including headcount reductions and a shift towards digital infrastructure. The bank's competitive advantage in digital banking and asset management continues to strengthen its market position.
Financial Highlights
- Revenue: Not specified in the call
- Net Interest Income: Increased by 2% quarter-on-quarter
- Fee and Commission Income: Up 8% year-on-year
- Normalized Return on Equity (ROE): 23%
- Loan-to-Deposit Ratio: 77%
- Capital Tier 1 Ratio: 15%
Outlook & Guidance
NLB Group maintains a positive outlook, with expectations of high single-digit revenue growth and continued low double-digit loan growth. The company is exploring potential M&A opportunities in the region and remains focused on digital transformation. It also plans to expand into insurance, fleet management, and leasing.
Executive Commentary
"We are delivering what we promise," said CEO Blaž Brodnjak, emphasizing the bank's commitment to its strategic goals. He expressed confidence in the region's growth potential and the bank's digital transformation efforts, stating, "Our goal is to be perceived as a digital bank with a strong asset management arm."
Risks and Challenges
- Slower growth in Slovenia due to industrial challenges.
- Regulatory actions in Serbia could impact operations.
- Macroeconomic pressures in Central and Western Europe may affect regional growth.
Q&A
Analysts inquired about potential market entry into Croatia and M&A opportunities in Albania and Bosnia. The management addressed regulatory concerns in Serbia and discussed capital allocation and dividend potential, providing clarity on cost of risk expectations.
Full transcript - Nova Ljubljanska Banka dd Ljubljana (NLBR) Q3 2025:
Lily, Webcast Operator, NLB Group: Ladies and gentlemen, good afternoon and welcome. I'm Lily, your webcast operator, and I would like to thank you for joining NLB Group's live webcast, where we would like to present and discuss with you our performance in the third quarter 2025. Before we start, I would like to draw your attention to the fact that our system for voice questions is slightly different this time. Instead of calling us, you can ask your question in person directly in Zoom. We will not be able to see you; we will just hear your voice. If you would like to ask your question in person, please type the word "call" in the chat, and we will make sure that your call is placed. When it's your turn to speak, I will say your name, and you will get a notification on your screen asking you to unmute your mic.
If you prefer to ask your question in writing, just type it in the same chat. This means that you can write in the chat either "call" or the question you would like to ask. Please have a look at the disclaimer on the screen. At this point, I would like to turn this conference over to Mr. Blaž Brodnjak, CEO; Mr. Archibald Kremser, CFO; and Mr. Andreas Burkhardt, CRO. Mr. Brodnjak, the floor is yours.
Blaž Brodnjak, CEO, NLB Group: Thank you, Lily, very much. Warm welcome, everyone, to our traditional regular periodical performance call. This time around, we celebrate quite some successes. It's been first a very robust quarter, obviously, but we have been successful at accelerating our digitization agenda. I'm happy to report that the operational merger and legal merger of two leasing entities has successfully completed at the beginning of July, so in Q3, and that we have been really continuously gaining, you know, some benefits in form of perception of how we actually develop the digitization agenda in the whole region by actually bringing a couple of services as complete novelty to some of the markets.
Apple Pay has been around in various countries for quite some time, but it was actually the NLB's effort that brought Apple Pay to three countries and four banks at the same time in the beginning of July, which was an important reflection of how seriously and genuinely we actually believe that, you know, this region should prosper. At the same time, we launched quite some further attributes that actually are helping our clients at access to their information or, of course, transactions with us. So we launched a couple of other apps for private banking clients, but also trading apps.
And we have been successful at really pushing forward the digital penetration so that really now more than 60% of our clients in Group White actually are already our mobile clients in a sense that we are able to access their hearts by mobile-first, 24/7, easy but relevant and safe solutions. At the same time, we were also accoladed and awarded, you know, for some couple of our improvements in terms of user experience, be it web portals, be it mobile apps, perceived as actually the best in specific markets. In terms of the business results, Archibald is going to talk about details, maybe just a couple of focus areas. We are evidencing a strong growth, and that's, of course, different to what you would see in the Western European banking universe.
We are looking at 12% growth, more or less, and, you know, it's even more if you analyze it. In terms of loan assets, and it goes across the business segment, so it's retail, corporate, and state, and it goes across geographies. We are gaining market shares; we have been gaining market shares in more or less all of the geographies for the strengthening of our market position. This has been more or less, you know, a key driver besides repositioning partly a balance sheet, introducing some other measures already last year like hedging and so on, liquidity reserve deployments, to actually more or less fully offsetting the loss of rates in the magnitude of 200 basis points, right? We have basically almost completely or entirely offset this loss. Our revenue base is growing, so we are now looking at stabilization of rates.
They have not yet been fully necessarily, you know, filtered through the look-through elements of our balance sheet and P&L, but nevertheless, we show growth of revenue, and that's a very important feature in the declining rate environment. And we have been keeping until Q3 at least very solid also efficiency ratios still at 46%. Leading to what is indeed, of course, a bit lower net bottom line result as last year, but given the rate environment changes, this is still a very robust output, and we believe slightly ahead of expectations for the Q3. What we have been evidencing is stabilization of margins, so net interest margin has been more or less flattening, right? The cumulative loss is manageable given the fact that we actually are looking at looking back to 200 basis points reduction.
We are talking about, you know, just about 36 basis points when it comes to the actual impact on the net interest margin. On the other hand, the cost of risk was still relatively benign in Q3, whereby Andreas will report on, of course, some challenges coming predominantly from the industrial part of our economy, automotive and steel processing, clearly following the situation in Central Europe, predominantly Germany, Northern Italy, Austrian industrial basin. Slovenia has been one of the most open economies in the world, right? In this respect, clearly not immune to these challenges. There is some pickup in cost of risk. I will be talking about this later on at the outlook as well. But the returns are still very, very solid. So I'm talking about 16% ROE and in normalized terms exceeding 20% still. This is a very robust output.
In terms of macros, we see a bit. Impaired growth in Slovenia, predominantly due to its high level of industrialization, i.e., of course, certain industries that are affected the most by these. Current challenges. On the other hand, Slovenia has been a very diversified economy as well, so we believe there is going to be a bounce back in the upcoming period, whereby in other countries in the region, we still are looking at 2 to 3% growth, which is, of course, significantly north of the Central European levels and Western European levels. And it's catering for significant growth of demand still for loans, which is both true for retail and SME business especially.
There is a bit less in a bigger corporate investment, but that's something that is somehow attached also to the infrastructural investments that have been missing a bit in order to facilitate again for the renewable production. So now it's about grids, now it's about batteries, and this has some lead time, which we simply have to take into consideration before we can then, of course, again see a stronger pipeline in terms of this energy build-up and infrastructure build-up, clearly investments. So we've been looking at, of course, various challenges in specific countries such as Serbia, Republika Srpska, Bosnia and Herzegovina collectively, and so on. We don't believe that the situation is beyond control. We believe that this is going to, of course, somehow phase through this challenge, and we will see a transition into something that is again a more predictable environment.
But generally, this is still an environment of solid growth and especially growth of banking business. We like the situation as it is in the sense that it's not significantly impairing our business. You see some pockets predominantly in terms of cost of risk uptake, especially in Slovenia due to this higher industrialization level. This is what I was mentioning. So healthy growth rates still, and forecasts for the upcoming year and a half too are still very solid, and we are simply banking on that, keeping then the growth rates. And I'll be talking about the outlooks later on. So we are currently delivering growth that is ahead of our midterm guidance, and other attributes are more or less in line with that or still slightly below towards the year-end and the upcoming years. There will be potentially some uptick in cost of risk, but not a tremendous one.
I would not further comment necessarily specific details on the country level, but as I was mentioning, there is still a lot of room for growth. And if you look at the depth of the market. In Slovenia predominantly, which is the largest market, obviously, but also Serbia specifically, so our two largest markets, and North Macedonia and Bosnia and Herzegovina as well, this level is still pretty low and in this respect or very low. And this is catering definitely for convergence. And as long as we can see nominal growth rates of the GDPs, you know, in high single-digit numbers, we could reasonably expect also from these countries at least double-digit growth of loans, low double-digit growth of loans. And this is something that, you know, even on aggregate level. Delivering these high single-digit expectations for the midterm periods.
It's coming a set across the board from retail and corporates, and that's a very solid basis for the upcoming periods. By that, I would pass the word to Archibald to guide you through the details, and then Andreas is going to talk about the asset quality a bit.
Archibald Kremser, CFO, NLB Group: Thank you, Blaž. Welcome also from my side. Drilling down a bit on what has been mentioned, broadly speaking, you all have seen that loan growth is exceptional. We are really happy to see 11% year to date. 16% year on year, and 4% Q on Q. So these are very, very robust numbers. And let's not forget this is in a somewhat mute macro context. So I think that speaks. A lot about. The inherent potential that we see in our region. And also happy to report pretty solid deposit growth, year to date 6%. Year on year, 11%. For us, of course, very, very important to fund the growth with. Our most precious resource, the trust of our customers, and then placing their money in our bank accounts. LTD, the balance sheet is still very, very robust, 77%. Capital ratios. Tier 1, 15%. CT1, similar levels.
So that's still a very, very. Robust basis for future growth. Balance sheet itself. Plain vanilla, as we tend to say. Mostly deposit funded, most of the deposit funding from retail sources. And still a very solidly liquid and strongly capitalized balance sheet. We'll talk about. Details later. Also the composition of the balance sheet, Andreas will talk about. Region and sector splits. But that's a textbook bank balance sheet of robust health and lots of potential for the future. We've seen the loan growth really across the region and broad based. Higher, of course, still in our subsidiary markets than in Slovenia, but still very respectable growth in Slovenia itself. And. That, of course, is the foundation for our revenue basis. And you'll see later on the income statement that also on a Q on Q basis, we actually see pretty solid pickup now on NII.
And that is, of course, a very good foundation going into next year when we, in essence, expect the rate environment to remain broadly stable. Talking about rates, here you see the asset yields across our geographies. And of course. That's on one side a function of the rate environment. We basically match it here against the base rate of ECB. You see that the drop is much less sensitive than maybe is somewhat imagined. You see that. Year on year, base rate dropped by 150 pips, and. The NLB Group asset yield by. Somewhat 80. So that's half of this amount. And so that's, of course, a lot of. Also smart steering of the business and balance sheet composition. As we have been talking a lot in the past. We have been deliberately putting higher durations in the balance sheet in the loan world.
That simply means more fixed loan production. And you see the composition is now. In retail firmly on the fixed and in corporate increasingly on fixed rate. On the deposit side, as I said, that's our lifeblood, and we are very happy to see robust growth also here. That's the foundation for future growth on the asset side. And of course. We see a little bit of. Two stories for the time being. One is in Slovenia, we are still running a heavily over-liquid balance sheet. And of course, are. Still. Able to somewhat follow with term deposit pricing, the ECB rates and the swap levels. On the banks in our subsidiary markets, you see that the extraordinary loan growth translates into a somewhat higher pricing, very moderate though in deposits, simply by also adding terms temporarily to the balance sheet.
On the group level, you see a perfectly flat curve of deposit pricing. So I'd say on group level, we operate really in sweet spot territory. So this translates into really. Quite remarkable resilience on the revenue side given the very dynamically changing rate environment. And especially. NII now already showing quite visible pickup, Q on Q 2%. You've seen the Q on Q loan dynamic, something like 4%. So that's, I think, very encouraging also going into next year. Also very solid growth on the fee and commission. You see 8% year on year. That's still very much driven by. Exceptional performance also in our. Non-bank distribution business in Slovenia, which again is a very encouraging sign as we start to platformize these businesses into our. Most promising next geographies, i.e., Serbia and Northern Macedonia. Where, of course, distribution of asset management is still in infancy.
But that speaks for the potential, of course, going forward. Costs, we'll talk a little bit. Later in more detail, but basically the like-for-like cost dynamic is quite manageable these days, just shy of 5%. That's still very much driven by our continued drive to invest in digitization. So that's a given, and we want to continue on that basis. You see headcount numbers are coming down. And that's to some extent the leveling off of, as we keep saying. A little bit reduced physical footprint in exchange for a more digital footprint. Otherwise, the quarter itself, robust financial performance. You see a little bit of an uptick already in cost of risk, and we'll speak about. Guidance later. Overall, very, very solid performance and normalized ROE 23%, I think, is still very exceptional. And as I said, most promising with.
The positive dynamic on NII now combined with very strong loan growth, I think, is. Providing very promising signs going forward. Not to reiterate too much on the. NII, as I said, 2% quarter on quarter, respectable 1% year on year, and a quite resilient margin environment. If you see year on year, we lost 150 pips on base rate in ECB. The margin basically just moving by some 30 pips plus. I think that. The NII here was mostly commented. Again, the lower chart for me is a bit more interesting as it indicates the potential for future revenue growth. And that is, of course. Our ability to continue to attract and to work with the trust of our customers, putting their money. Into our bank, both on transactional and non-transactional accounts. That's our ability to provide excellent service levels. And of course. Our, I think.
Excellent franchise in placing money with both corporate and retail customers. I spoke a lot about the fee income dynamic, and I guess the bright spot really is the excellent abilities of our. Non-bank services to be increasingly. Well, visibly adding to the. Revenue. And again, that's basically just the beginning in regards of our region. On the cost side. We have basically this quarter was fairly normal, I would say, not too much. Non-recurring elements, 5.5% like-for-like if you normalize for non-recurring elements around mergers and some of the. HR items. A couple of. Which are related to revaluing actually the. Stock-linked instruments as part of management comp. And you see on the employee number, headcounts are coming down. And that's for sure a trend that we will continue to observe. So the investments in people and technology somewhat mitigated by.
Basically deliberate reduction of some of the physical and transactional footprint. Capital, continued story of strengths. We run robust buffers to. Statutory requirement, CT1, 350 pips over P2G. So excellent capitalization levels. And. Also very healthy. MDA buffers. If you see MDA buffer on CT1, 433. So that, of course. Speaks for. Our ability to continue funding the growth. Both organic and non-organic. Of course, the organic growth requires. A little bit more capital, but there is plenty of buffers to draw from. And on top, there is ability to actually raise incremental funding, especially these days we are very much focused on exploring opportunities on the 81 space. As you see on this slide, we are still. Somewhat underrepresented. In this bucket with. A fairly small instrument outstanding. That's also coming due in two years. So here we are. Proactively looking for opportunities to.
Stack up here with a possibly benchmark-sized listed instrument, i.e., some 300 million is something we could easily absorb and accommodate and actually have very good use for deployment. By that, I pass on to Andreas. On asset quality. Archibald, thank you. On the distribution geographically and also between corporate and retail. Well, actually not many surprises, not many news. You see the very strong growth both colleagues were talking already about is well distributed. So basically all segments, SME, corporate, and in retail, both housing and consumer. Double-digit growth. And on the geographical distribution, also no surprises. You saw already before that the group is still growing a little bit faster than us. And of course, that's why you see percentages here slowly, slowly going up and relatively, of course, in Slovenia then going down. Asset quality. Well, you saw now in Q3 already a little bit of provisioning.
What you also see is. Both in stage two and stage three, some increases in corporate. That's. To a good extent driven by. Slovenian cases, actually. And if you take the stage three increase, that's actually one bigger corporate to the biggest extent. So it's very contained, but you see it a little bit. Whereas. In retail, I mean, you saw in June the jump, which is also due to methodological reasons. We discussed that already. In the previous webcast. And now actually very stable. Distribution between the industries very well diversified. And that's. Yeah. Also. Continuing. So no big surprises here. I mean, what you can see in manufacturing. Is actually the biggest. Jump is in food production. That's from the second table, the first. Subline. That's actually one bigger acquisition of a client which we supported. That was also. In the media.
So I guess you can guess it. But overall, very stable and very well diversified picture. What we were breaking out here is a little bit automotive. Blash mentioned already before where we see at the moment. Well, a little bit less happy situation is automotive and steel. I have to say automotive, it's very, very. Selective. So it's not automotive, but it's more clients with some weaknesses. And you basically see them more or less exclusively here on the right side. So manufacturing of car components. So here we see. Some increase in stage two and some increase in stage three. That's actually the one bigger client I mentioned before primarily. Whereas in the other two areas. So. Car sales and maintenance, both in the banks and in leasing. Very. Stable situation. And as you can see in all. Three categories, majority is in.
Big part is actually in Slovenia. And the overall volume, if you count all of these three together, is still very, very moderate. And again, only on this right pie chart, we see now some less favorable developments. Of course, these developments you see also a little bit in the. Total volume of non-performing loans. So since a long while, actually we are now increasing a little bit. Last year, remember that was primarily driven by the acquisition of Summit Leasing. This year, this is. Well, really coming from. Inside business. And here. Predominantly Slovenia. But if you see that in percentages, it's still very, very small. So coming from December last year, 1.6% now to 1.7%. Coverage ratios. Since the new clients are a little bit less heavy provisioned, simply also because they are. Usually well collateralized. You see here a little bit of a reduction. Geographical.
Distribution still, well, pretty logical, actually. Slovenia now, of course, given what I said before, increasing a little bit in the percentage. Yeah. And here you see the cost of risk in. Numbers, both Q and Q and for the year so far. That reflects at the moment 9 bps cost of risk annualized. And what I have to say is we will see some provisioning in the last quarter. Primarily corporate Slovenia. We will stay well within the guidance. Remember, we. Were guiding for 30 to 50 bps cost of risk. I'm definitely expecting on the lower end, maybe if you're lucky, a little bit below that. But of course, if you see that we are currently at 9 bps, that means still some provisioning. To come in the last quarter. For next year, and you will hear a little bit more than later on also from Blasch, but.
We will stay. In the same range, so 30 to 50 bps. But honestly speaking, for next year, I would not. Necessarily see it on the lower end of that range anymore. So we see at the moment. Some developments which. Honestly speaking, are still very, very controlled and. Very reasonable. But it's, of course, a little bit a change to what we were used to in the last years where we had often either zero cost of risk or releases. And what you see if you go here in the details is, and that's sometimes indeed a little bit surprising, that we still have quite some repayments from written-off receivables. This tendency will simply just go year by year a little bit back. Because simply the stock of these cases is getting smaller. And that also, of course, will then contribute to an extent to the developments I just.
Mentioned. With this, I'm handing back over to Blasch. Thanks. So talking about the guidance, implicitly, we somehow were saying already that this year is within the expectations and that there should not be major surprises towards the year-end. We are slightly revising relative profitability numbers and cost-to-income ratio numbers given the fact that there is some seasonality Archibald was talking about in terms of, of course, acceleration of the investment in the digitization and some effects that are actually good news for shareholders that are coming actually from revaluation of financial instruments that are meant for the compensation of the broader pool of talents and managers actually in the group. Which means that in this respect, this is, of course, combined effect, right? Benefiting shareholders but benefiting also people. And it's figured out, of course, within the cost metrics of the business.
The growth is ahead of what we have been guiding for. So you saw this year-to-date growth rate. So now talking about high single digit would be, of course, unrealistic. It is low double digit. It is even closer to mid-double digit from today's perspective. And that's a very solid basis for the upcoming periods because, of course, as much as volume as we can front-load as given risk appetite within perimetry of our underwriting criteria is the desired business. This is solid growth. This is healthy growth. And this is something we are really, really proud of. And if we are able to combine this with a bit of M&A, we would be solidly and confidently delivering the strategy, right? So 2030 ambition is to come to the 50 billion asset pool, which seems from today's perspective absolutely doable.
And we still keep certain capacity, obviously, given our capital buffers for transactions in form of an M&A. So we have continuously been saying we have been closely monitoring and observing any. Eventual opportunities within more or less our home region. And if there were any becoming actionable, we would, of course, immediately be able to act upon that. And in this respect, that's why we have been consciously keeping these buffers still. For the upcoming year, it is, given the volatility of the whole environment, right? Especially beyond January this year, really an unpleasant job actually to guide confidently. So we are somehow sticking to what was communicated so far in sense of the midterm transition. What is a solid fact is that we have seen the rebound of revenue.
So the rate reduction has more or less, to the predominant extent, found its way through our balance sheet and P&L. And now this growth should start really delivering growth of revenue as well. So this bouncing revenue is obvious. Of course, on the other hand, this will be accompanied by certain still continuous investment. And talent-relevant positions. On the other hand, we should really now with real acceleration of platformization of especially client-level UX-based interactions with our clients' platforms, right? Start seeing really benefits in form of reduction of number of employees group-wide. And by that, of course, also address the cost evolution midterm, 20 CS7 and beyond that would be rather in the mid-single-digit growth territory combined with high single-digit growth, hopefully then delivering high single-digit growth of revenue as well, right?
And in this respect, then opening up the scissors of increasing absolute profitability that would then be finding its way towards a billion, which we have been aspiring to achieve in 2030. So overall, the message is Q3 was very strong. We feel very confident. There are some pockets of challenges predominantly coming obviously from the industrial part of our economy, predominantly Slovenia because it is by far the most industrialized in relative terms compared to other economies. We are. Alert when it comes to, of course, other opportunities. So besides this very strong organic output, we are definitely looking and exploring eventually opportunities also through the acquisition space. And it's not only banking. It might be captive insurance. It might be some fleet management-related stuff. It might be some leasing and so on. So we are really using more or less wide open eyes and ears.
And we would definitely address such opportunities if they were to become actionable. I would wrap up here. Open for questions. Not to forget, please twice a year test your blood for the PSA. Thank you. Thank you, Blasch. Thank you, gentlemen. We'll now take questions. I would like to repeat the instructions for today because, as I said, we have slightly changed our system for questions you can ask in person. So if you would like to ask a question in person, type the word CALL in the chat, and we will make sure that your call is placed. When it's your turn to speak, I will say your name, and you will get a notification on your screen asking you to unmute your mic. If you prefer to ask your question in writing, just type it in the chat. Our first question today is from Mr.
Miguel Diaz from Wood & Company. Now I will read it for you. Congratulations on the results, and thanks for taking my question. Regarding the guidance on higher costs in 2025, can you please provide some more color on what are the main drivers that lead to an increase of the guidance? So we have traditional a bit of seasonality in Q4, and. That comes typically from. A somewhat traditional time lag in G&A recognition and a bit of seasonality in IT contracting, stuff like that. So that's one typically effect. Also on HR, we see year-end accrual of. Expected variable payments. So that is expected seasonality. This year, we have been indicating that we are. Firmly supportive of an accelerated digitization agenda, which, as we have heard in the beginning, starts to deliver visible results. So we are committed to continuing on that.
We are not managing quarterly cost-income ratios. We want to accelerate this transition to the largest extent possible. And so in that sense. We rather change a bit the guidance than compromising on this digitization agenda. And the other aspect was also mentioned as share price is evolving very positively. There is a bit of revaluation dynamic in management compensation instruments as they are allocated throughout the group. So in essence, we share, let's say, half of a percentage point in market cap increase towards management comp. Just to give you a sense. And so all this amounts to this somewhat marginal change in cost-income. On the other side, I would highlight we have also revised upwards income guidance on the back of this really exceptional loan growth. So in that sense, I think it's. On bottom line, you still see us. Basically well performing. Thank you.
Our next question from Žan Zadravec, Quantel Capital. Congratulations on very solid results. Most of your loan book remains fixed rate, and group deposits costs are still low, flat at around 0.5%. However, as you said, we're seeing gradual upward repricing in some Southern. Eastern European markets. How sustainable is this funding cost advantage? And as the regional rate environment evolves, how should we think about the impact on net interest margin, particularly regarding deposit mix, competitive dynamics, and pricing discipline across subsidiaries? Pretty complex question. Thank you, Žan. I hope you're doing well. In principle, what we are now really focusing on fully with also this platformization and solutions that are more or less client-facing is new client acquisition and side deposits acquired through this new client acquisition, which is then simply affecting the funding mix as well. In Slovenia, you saw that actually the development is favorable.
So we're actually reducing average cost of funding. However, in some other countries, obviously, the fight for deposits is a bit more exaggerated. So we are actually trying to. Develop stuff in an accelerated way, be it mobile apps, be it onboarding processes, and be it other. Relatively attractive features that will simply attract more new clients and buy that more new side deposits and buy that manage average at the total equation. So it is not an easy fix. It's not, of course, doable overnight, but it is really focusing on actually client experience, onboarding, and ease of use of our banking services in daily banking terms, and by that attracting more side deposits actually in the total mix. Because in subsidiaries, we have almost half of the term deposits. I mean, whereby in Slovenia, we are at more or less 90% sites.
So it's really encouraging the banks in the subsidiary network to really focus on the mix. Whereby in Slovenia, the trend is still very, very solid. And we are having actually reduced pressure even temporarily at least. Archie would for sure add something. Just to emphasize this, I mean, it looks a bit dramatic on the chart, but in absolute amounts, it's a fairly manageable increase in the deposit. Pricing. And. It's really funding an enormous loan growth. We have seen robust double-digit loan growth at a fairly manageable uptick in. Deposit pricing. So our margin is. Relatively firm. And going forward, I expect margin to remain kind of stable. If anything, maybe even. Slightly widening to the positive given that. We manage to keep loan deposit ratios around this 75%, maybe going towards 80% on group level. So we are in a very, very good position, solid position.
But in banking, as in any other business, there's no. Time resting. So we have to do all the things mentioned and get even better in that, but very, very robust position and good outlook. And focus on fee income, obviously, is, of course, also gradually reducing the dependency on solely net interest income, right? If you look at the progress we've done in asset management and in bank assurance business, and we have, as Archie said before, been only at the beginning of the journey in subsidiaries landscape, there is enormous room for growth there. Thank you. So now we will hear from. Mladen Dodik from Erste. He's on the line now, I hope. So Mr. Dodik, go ahead. Can you hear me? Yes. This looks very great. So I had to try this voice. Although my IT doesn't like this accent, but anyway.
Do you have any updates on Croatia? What might be next there? Yeah, not really. I mean, the only possibility for us in Croatia in terms of banking operations would be what we tried to do and we were not successful at. So if this was to become actual at a certain point in any way, of course, we would be interested. But. For every willing buyer, there has to be a willing seller. So far, I cannot comment on any progress in this respect. We are looking for other opportunities potentially. I was mentioning before some other areas like fleet management will simply be something that is complementary to our listing business and so on. We could think of some insurance, but nothing directly because direct investment and direct asset buildup is prohibited to us. So we can't actually do that.
I mean, you don't expect that that will change anytime soon, right? This would require political agreement between both countries. And since Slovenia is in pre-election period, we will have elections, it seems, now in the second half of March, which is four and a half months away or something. I wouldn't have high hopes that this will be possible because it would be linked to other big unresolved issues such as the second reactor of the nuclear power plant, the border issues, and so on. So there is a bit higher complexity in this respect. So us getting the hurdle of direct entry removed would require a big interstate deal, which would require two statesmen basically agreeing on it. And I haven't been. Aware of any such process actually pending. Understood. Thank you very much. And talking about the M&A is some geography.
Particularly standing up right now in your eyes. You were mentioning Albania many times. I don't know. Bosnia, other countries. Well, I mean, we, of course, are heavily interested. And we mentioned any in-market consolidation within our markets of existing operations and presence is welcome. What is at sale is a different story. So we haven't been aware of any actionable. Material bank sale eventually happening in Albania. It seems that existing investors in the Albanian banking market are now more or less betting on Albania entering the European Union within the upcoming midterm and are not willing to consider exits, it seems. So we are not considering any greenfield actually entries into the market. This would be an uphill struggle for decades. So we would simply be on the watch if there was any opportunity that's material enough with significant market shares surfacing. We would look into it.
So Albania is, for us, a highly attractive eventual prospect market, but there is nothing that we have come across that we have come across lately that would be actually actionable. Federation of Boston-Hertzegovina, we always mentioned, is something that we would definitely desire to strengthen our position since we had 6.1, 6.2% market share in terms of total assets. We are progressing well in housing lending. We are already north of 10%. But we need size. So if there was anything available in Federation of Boston-Hertzegovina, we would definitely be interested in other markets as well. But as I said, there's nothing immediately that would be on the table that we could be discussing with anyone. If there were any opportunities, we would immediately could immediately engage. This is what I can say.
And Croatia is, for us, only accessible in indirect structures, and there was only one such opportunity by now. Unfortunately, we were not successful. Thank you. And finally, from my side, I guess you already answered to the upgrade in revenue guidance for 25. But we have seen recently many regulatory actions across the region, Serbia with. Limitation on interest rates. There are some. Fees. Curbs in Bosnia, Montenegro, DTIs. I mean, is there any. Material. Effects coming from this side, maybe in Serbia? Do you have any figures that might affect the. Interest? Yeah. I can't be precise, but it's below what used to be the housing loan limitation cap, for example, introduction, right? So it is below really the materiality threshold. So the solid growth level. The solid loan growth actually is offsetting this and more.
So we expect actually growth of revenues, right, in next year, quite a visible one. We are still guiding for more than 1.3 billion still. I mean, as I mentioned, we will come up with the refreshed guidance for the 26th with publication of the annual report because in these three months, many things can happen. But there is an obvious solid growth of revenue envisaged also from today's perspective. Sorry, one, one extra regarding Serbia. So we will see enormous growth of loans this year. Do you think. Any similar thing could repeat in 26? Look, retail, we would hope. Corporate, it is a bit of a function of what would be the infrastructure buildup still in the country and what would be sovereign-sponsored investments.
So I would not count that much on big corporate tickets because we see stagnation now actually in new projects coming in from the energy space. We've been financing a couple of wind parks across the region, but now we see that there is a bottleneck of grid preparation, right? So the grids are no longer sufficient for embracing higher or larger devices. So now we are really focusing more on grid upgrades, on battery parks, and so on. And this requires some time to actually learn how to do it in a predictable and reasonable way, structured way. So there's going to be, I guess, some hesitation for a year or two when it comes to bigger corporate, bigger infrastructural tickets. So we would be more focusing on SMEs and retail. So that's why we are keeping high single-digit growth guidance and not like this year, right?
We are talking about almost 14% or 14% or even 16% year on year. So in this respect, it would be moderated a bit. And it would predominantly be coming, if you ask me, from this corner. Got it. Thank you very much. Thank you. Congratulations. Thank you, Mladen. Thank you. Thank you, Mr. Dodik. And thank you for trying out our new feature. And now we have with us Mr. Simon Neles with Citi. Mr. Neles, can you hear us? Go ahead. I can hear you. Yeah. Thank you for the opportunity. Yeah. My question would be first on. Seasonality of costs. I think historically, costs have gone up quite a bit in the fourth quarter. If you could give us some feeling for. If this is going to be the same this coming quarter, that'd be my first question.
And my second question would be, I see that your capital requirements are coming down a bit. Do you think that that. Progress can continue? And does that. Give rise to some potential upside risk to your dividends longer term? I think you've guided for. 50% to 60% payout next year. But. Given the strong result, which I congratulate you on, and yeah, lower capital requirements, can we potentially see some upside to that capital return story? The second part, I'll try to answer. And of course, I trust Archie will do better. So it's really the dividend potential payout potential is really a function of if there were any opportunities coming from the M&A space, right? So we would be discussing the dividend payout, let's say, in spring.
And if we didn't have any visibility for the upcoming months, we would then, of course, potentially reconsider what would be the dividend payout. If there were some material opportunities somehow on the radar, it would be rational to pay out this capital. We would rather exploit these capital buffers for this. Acquisition space. So it is still a function of us believing there might be some opportunities nevertheless in the upcoming, let's say, 12 to 18 months, right? If there were none and we believe there is a really low probability for them to surface or rise, we, of course, could reconsider one-off tactical uplift in the dividend. And on the cost, I would ask Archie to give you more flash. I mean, I wouldn't want to be too specific. Yes, last year's guidance. I expect a bit stronger.
Move this time around, given that we are really in the midst of. Launching new platforms all over the place. So. It can be a bit more than what you've seen last year. But again, we don't manage quarterly cost income ratios here. We just spend on. Technology that will facilitate future, not just revenue growth, but also cost containment. That's our guiding paradigm. But again, 48 to 49 really doesn't make much of a difference on capital. I would just. Re-emphasize that. First, we are, as I indicated, very interested to now get capital structure more efficient. And by that, create space both for organic, non-organic, but ultimately also dividend. Growth. Which we envisage. So even on a. Static payout ratio, we envisage dividend growth quite visibly on the back of. Results growth. So we are a growing business. And so in that sense.
Playing with payout ratios, personally, I'd like to see this evolving in a stable pattern because it's always about expectation management at the end of the day. But we have the space. And. Come, we are successfully placing a hybrid plus no M&A. For sure, there's also room for slight uptick in payout ratios. So. I think the total shareholder return is what we are looking at, what we are, by the way, also incentivized for. So we look at stock performance. We look at. Cash returns. And all of it in combination. We believe that will continue to be a very attractive proposition. Very clear. Thank you. Welcome. Thank you. Thank you. It seems we're going back to our chat questions. And the first one is from Mr. Antun Horvatic with Allianz. Congratulations on the good results.
Your cost of risk is still very low in the first nine months, but you didn't lower the outlook for the full year 2025. Do you expect any negative surprises in the last quarter? So look, I mean, it's a question how you define negative surprises. I mean, I'm saying this now since months. That this year will not be any more a zero cost of risk environment. I do expect that we will see some cost of risk in the last quarter. A little bit from retail in Slovenia and. Somehow a little bit more from. Corporate in Slovenia. But with all of that, we will stay. Most probably even a little bit below. The guidance of 30 to 50 bips cost of risk. If we are in this guidance, then for sure at the lower end. So I wouldn't say this is any negative surprise.
But what is now really confirming is what I'm actually mentioning in these calls now, I think already for half a year, that simply this environment now is a little bit more vivid. And it will stay for a while a little bit more vivid. And at one point of time, of course, you see that also on cost of risk. But I mean, as you also mentioned, cost of risk. Is still very low. And I would say also 30 bips cost of risk. You can still see as very low. It's not a zero environment anymore. And I'm expecting that to. Stay at least in that way next year. And then, honestly speaking, it should again. Improve even compared to that. We are in risk management, not risk avoidance business, right? And 30 basis points is totally reasonable expectation.
So in the last decade, more or less, we were benefiting from the right backs. And this is, of course, getting reduced now. And in transition terms, we see a bit of the single provisions that we somehow. Were not being used to anymore. But automotive and steel is in a shape that requires some restructuring. Some are publicly known. And once you put businesses in restructuring mode, right? Talking about super senior funding, talking about master restructuring agreements and so on, until everything is done and wrapped and you see companies then fully recovering from it. Transitionally, you have, of course, a bit of an increase of the MPLs and some provisioning. We don't expect losing all of this money, but at least interimistically, you have to recognize it simply. But it's still on a very moderate level, talking about 30 or even less, a bit less basis points.
In these times. It's still a very solid output. Thank you. And there was one part of the question that I missed. Sorry. Can we expect investor day in 2026? And if so, where? Yes. In May, in Sarajevo. Thank you. Moving on to the next question, Jovan Sikić Odo. Where does the increase in the public exposure in Serbia of around 100. Comes from? Where does it come from? 100 million come from? Sorry, I'll repeat the question. Where does the increase in the public exposure in Serbia of around 100 million. Come from? It will be the infrastructure buildup of the country, I guess. We can't comment ever single exposures or counterparties. But I think it's well publicized that we are, of course, participating in infrastructure projects, of which Serbia has many. And we are happily and proudly also sponsoring such projects. Not more to be. Said. Okay.
And second question. Loans to deposit have been growing since quarter due to strong loan growth. Where do you. Expect the ratio going forward in the next 12 months? Well, it's hard to speculate on that, but anywhere in the ballpark of 75% to 80% is somehow still a pretty conservative ratio, right? So we have been consciously, of course, working on optimizing it because having mid-60s, as it was still the case last year, was then, of course, addressed by acquisition of leasing, which we then totally funded on our own, of course, and growth, right? Sitting on a 77% ratio is still pretty inefficient, right? In a sense that, of course, there is still a lot of placements sitting on the accounts with rates affected by the ECBs and so on, and local sovereigns and local banks, central banks.
So it is still by no means an optimized level. So that's why we are not forced to pay up deposits, right? This is still a very healthy and profitable growth that there is still some room, quite some percentage points. It's going to be at 77% or 80%. It's speculation, but it's going to be somewhere in this ballpark, I guess. Okay. Thank you. And the third question. Would you be able to continue with the same loan growth rate in 2026 and 2027, also without 81 capital? Yes. We run plenty of buffers. So the 81 is strategic reserve. And of course, we tend to run a conservative balance sheet by all means in terms of liquidity and capital. And be pre-funded to the largest extent for capital deployment, capital return, M&A. So. It's overall a fairly conservatively run balance sheet. I think that's the message.
Positioned for growth. And pre-funding the growth in terms of liquidity and capital. And that's, I think, where we are. It's not always perfectly efficient at a point in time. However, we run this for the midterm, and we run this to deliver on a 2030 strategy. So in that sense, I think. We are not kind of focused on the next quarter or the next three quarters. This is a midterm plan, and I think it's robust and resilient and sustainable. Okay. Good. Thank you. And now we're moving on to Mr. Svet Klimento with EBRD. And the first question is. Firstly, congratulations on the performance. I would appreciate if you could comment on two questions for me. So the first one, what is the expected corporate tax rate for the group going forward? So the statutory rates are unchanged.
Our effective rate is fairly close to statutory rates on group level. A little bit below. And if you add the balance sheet tax, a little bit above. So we talk effective contribution rate, as we call it, in the. 18% ballpark. And that's for group, including the Slovene balance sheet tax. Okay. And the second question. There is 18 million of SLS costs. What does that relate to integration or recurring? If related to integration, how much more of SLS expense is expected? So that's the run rate, and the integration is fully absorbed. So basically, that's a done deal. But it's through the first clean year of SLS, or the lease and go group, as we call it, it's going to be 26. And we are very actually hopeful that the contribution can. Approach fairly fast the 40 million plus territory, not immediately next year.
But that's also one of our growth platforms going forward. By the way, it operates in Croatia. We had a discussion earlier on Croatia. It operates very successfully in Croatia. And so. We see this to become a significantly contributing business as it was envisaged. So as I said. Something ballpark 30 million approaching fairly fast the 40 million horizon in terms of group contribution. Thank you. Ladies and gentlemen, thank you all. In the interest of time, the remaining questions will be answered by email. And now I will hand over to our management for closing remarks. Thank you, Lily. And thank you, everyone, for hanging in there, being with us along these years. And of course, you see that we are delivering what we promise. And this is going to stay this way. So we really don't want to overpromise and underdeliver, but just the other way around.
We feel very confident despite the turmoil in the environment, high uncertainties in this right away. We first believe in the region. We believe in, of course, a smooth transition of this region into Central European integrations and also then European Union at a certain point of time. And we are betting on, of course, convergence towards more developed markets in terms of penetration with banking solutions and universal financial services solutions. And we claim to have been one of the best, if not the best distributor of universal financial services, for sure proven in Slovenia, and want to replicate this throughout the region as well. So growth is there. It is organic. It is predictable. It is within our framework of what we want and what we desire, which is very good news.
And we are frontloading and accelerating the investment into digitization so that it really brings us into a position to be also perceived as actually a digital bank with a very strong asset management arm. And that's something what we envisage us to be in 2030 at a size of 50 billion. And from today's perspective, I have no significant concerns not being able to reach this size. Profitability is a bit of a function of the rate environment and thus being able to pull off the efficiencies out of this frontloaded and accelerated digitization. But we are very well on track. So stay on the track with us. Let's share this journey together. And please do not forget to test your blood for PSA twice a year. Thank you.
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