Ladies and gentlemen, welcome to the conference call of MONETA Money Bank regarding 3Q 2025 financial results. Please note that this conference call will be recorded. This event will have a live presentation followed by a Q&A session. As a reminder, all participants will be in a listen-only mode. Today's speakers are Mr. Tomáš Spurný, Mr. Carl Normann Vökt, Mr. Jan Friček, Mr. Jan Novotný, and Mr. Andrew Gerber. May I now hand over to Mr. Spurný, who will lead you through the conference call? Sir, please go ahead.
Good morning, ladies and gentlemen. I have the honor and the pleasure of presenting the third quarter results. If I can ask you to turn to page number two, I would like to summarize our performance on a year-to-date basis. With respect to net profit, we have delivered CZK 4.9 billion. This is 15.7% higher than in the comparable period last year. The result comes on the basis of revenue growth, which stands at more than 9%, and we reached CZK 10.3 billion. We have stable cost base. Operating expenses remain at a level of CZK 4.2 billion, and additionally, cost of risk year-to-date at 16 basis points. With respect to the total assets of the bank, we stand at CZK 499 billion, constituting growth of 2.3% and in line with our original expectations from February 2025.
If you look at the loan book, the loan book grows at a level of 6.3%. This is consistent with what I commented as a target growth at the end of the second quarter, and the overall loan portfolio is CZK 288 billion. Funding base increased by more than 3% to a level of CZK 458 billion. What I guess is the most important message from today is that we stand behind the upgraded guidance in the corridor of CZK 6.3 billion-CZK 6.4 billion crowns for the full year 2025 unless something really extraordinary happens in the market or to us. If you turn page on to number three, briefly on the capital position. At the end of September, we enjoyed overall capital adequacy ratio at 20% with an excess of capital against the management target at the relative level of 4.7%.
Tier 1 at 15.2% with excess in Tier 1 of 2.7%. This translates into CZK 4.5 billion, out of which we will distribute roughly CZK 2 billion subject to positive vote on the interim dividend that we proposed two weeks ago. This will obviously decrease the Tier 1. We also enjoy a super strong morale ratio on the individual basis. That ratio improved by 6.9%, and this improvement is driven partly by successful issuance of Tier 2 capital instruments in the amount of EUR 100 million, and we issued it on the 9th of September, at the end of the quarter. Now, if I may, I will turn your attention to the macroeconomic environment. The section starts on page number five. The positive news here is that the Czech economy is growing. It is growing at 2.6% against initial estimates of 2%- 2.1% at the beginning of this year.
This is positive for the full year. The expectations across the spectrum are 2.6% for the full year. With respect to government debt and government deficit, the deficit this year is projected at CZK 241 billion. The third quarter number of the deficit amounted to CZK 254 billion. What is also perhaps important for 2026 is that the government approved or pre-approved budget, which shows a deficit of CZK 281 billion. Nonetheless, we have a change of government, so we will see what the incoming administration will do with that. The other positive news is that unemployment remains low and it's stable, and this, both the economic growth and low unemployment, positively project into the NPL ratio and cost of risk of the bank. Now, let's go to inflation on page six. Currently at 2.3%, the inflation still remains above the Czech National Bank's target.
If you look at the CPI at 2.6%, it increased during the nine months of this year from the level of last year. Given the inflation, the government deficit, the Czech National Bank changed its stance on the monetary policy. The rates remain stable. The key rate remained stable from May at 3.5%, and through the commentaries of the Czech National Bank, one would assume they expect the rates to remain at a stable level for a longer period of time. If we look at it from the market yield curve, which is constructed on the short end based on PRIBOR and on the medium to long- term based on the swap market, you see a remarkable shift. If you look at the dotted line, this was the expectation at September of 2024. The yield curve at the medium to long- term was fairly positive.
The latest, which is the dark blue line, shows you that the short end has come down significantly. Nonetheless, the medium and long- term shifted upwards. A major part of the shift happened already in 2024. There is a continued upward trend of the medium to long- term rates, even though these have abated a bit during the month of October. Minding that, let me move to the operating platform, which defines our business model. This is on page eight. The bank enjoys a customer base of 1.6 million. The customer base is growing at a relatively slow rate of 0.5%. If you then look at the branch network, we have rationalized the branch network to a level of 122 units.
9% of the branches were closed, and we are focusing on the number one issue, which is the relocation of branches to more attractive locations, and we strengthen our position in the Prague market. With respect to the ATM network, which we share with three other banks, this remains fairly stable at 1,942 machines. We reduced overall in the bank employment by nearly 2% to a full-time level equivalent of 2,465. You see a relatively notable decrease of the frontline employment by 4.5% to slightly above 1,300. You see a 1.3% increase on the other functions in the bank, which stood at 1,149 at the end of the quarter, again on a full-time equivalent basis.
This is chiefly driven by expansion of the IT personnel, namely in the realm of digital development, as the bank seeks to further improve digital capabilities, both introducing new products, new options, and closing some of the gaps that we have between the physical and digital worlds. Now, if we turn the page, the digital platform has 1.6 million users. We have four components of the digital platform, where the most important is constituted by the mobile banking platform, which we call Smart Banka. That is growing at 11% usage, and Smart Banka has 1.3 million registered users. We have fairly solid growth in moving customers from the physical to the digital world. We have also solid growth of 5.8% on usage. This is expressed in average daily visits. We have robust growth on the intermediation that the bank performs. Payment transactions grew by nearly 9%.
There is stability in the servicing transactions, and we have a decline of loan applications on the digital platform. This is due to, I would say, two factors. One factor is the fact that we changed our credit policy, where people on the digital take typically smaller tickets and ended up historically with a high number of loans. We changed that to a policy that you can take maximum three loans. If you want to adjust your lending position, we consolidated, and that obviously has an impact on the number of lending transactions. With respect to sales transactions, there is fairly decent growth of nearly 5%. Moving on to page 10, to the branch network, I commented the rationalization of the network. If you look at it from the optics of how many people we employ within the network, the decline is at 5.8%.
What is interesting here, as we have been closing branches and reducing the staff somewhat, we improved the Net Promoter Score of the branch network to a level of 88 points, and this constitutes a 7.3% improvement. Nonetheless, the bank struggles with the intensity of footfall within the branches. Visits declined by more than 17%, and this is attributable to two factors. The first factor is the closure of branches, and the second factor is lesser interest in visiting the branches. People are moving to digital, and this movement is unstoppable. Henceforth, our investments and for the core part of the network, we seek to relocate to better locations so we capture the footfall. Distribution of third-party products lags behind our expectations in terms of growth. We have a decline of 10%, and this is chiefly driven by lower production on pension insurance.
However, this is also a result of our focus on quality and cash flow flowing into these products, and we believe we have significantly improved the cash flow flowing into the funds. Our partner, Nationale-Nederlanden, manages it. The second factor of the decline was the Liberation Day in the U.S. when we saw some market volatility in terms of wealth management products, and we lost two months of production due to the market uncertainties. Obviously, this has recovered since then. Loan applications are down by 7.2%. Again, it is attributable to branch closure and to the policy we instituted on consolidation for multiple borrowers. Page 11, let me comment on the contact center. We have a 71% Net Promoter Score, which we consider substandard in a view of the branch network.
Henceforth, on a temporary basis, we increased staff in the call center due to the fact that we would like to improve the service ratio in terms of percentage of answered calls. Nonetheless, we have a very good level of decline of email communications, and this is attributable to our efforts across the products and services on the digital platform. We see a decline here, and we have healthy growth in terms of lifetime value of income generated by insurance sales, both incoming and outgoing on the call center. The bank plans to rationalize the employment. Nonetheless, this is going to take some time as we are deploying artificial intelligence tools in order to increase the efficiency of the contact center. Lastly, very quickly on the ATM network on page 12, what is important is that we enjoy through the corporation-wide network.
We have an excellent market position in deposit machines, and we rationalize the machines that we own in line with the market. In the next two to three years, we will have to face a decision to what degree we will rationalize the ATM network, and the target is that we will take it down to 510 machines, reducing the cost and intensity of cash transportation and maintenance of the MONETA own network. If you look at the performance of the network, we see a fairly significant decline in cash withdrawal transactions. This is due to, again, digital people moving into the realm of digital payments. With respect to deposits, we see exactly the opposite trend. We have a super strong growth of 20% in terms of the number of deposit transactions as we enjoy the wide network of deposit machines across the country.
This should further improve because this year one of our partners, [Nederlanden] Bank , should join the system. Henceforth, we will gain some additional machines. The network is also fairly important in terms of simple service transactions, where we see healthy growth of 6.6%. If you look at the intensity of the service transactions on the ATM network, it is fairly significant. With that, we have enjoyed the best result in terms of nine months' performance. We also delivered the strongest quarter in the history of the bank. We also enjoy a benign credit environment. On those bases, I would like to reaffirm that the management targets the range of CZK 6.3 billion-CZK 6.4 billion in net profit for this year. I will hand over to my colleague, our CFO, Jan Friček, to walk you through the P&L and other components.
Thank you, Tomáš. Good morning, ladies and gentlemen. I am now on page 14, and it's my pleasure to walk you through the profit and loss statement section. Let me repeat the key financials. In the first nine months, MONETA delivered a net profit of CZK 4.9 billion, representing a year-on-year growth of 15.7%. Earnings per share reached CZK 9.6, and the return on tangible equity improved to 23.1%. Operating income reached CZK 10.3 billion in the first three quarters, and this represents year-on-year growth of 9.1%. This was supported by net interest income growth of 11.6%, stemming from a higher lending income and reduced cost of funds. This was accompanied by net fee and commission income growth of 12.4%, stemming from ongoing solid performance in distribution of asset management products, together with reduced fee expense.
On the other hand, the other income line shows a decline of 24%, and this is driven by a lower result of FX derivatives, together with the bond sale gain realized last year and not repeated this year. On the cost base, you can see that we managed the cost base broadly stable year-on-year. We show only a marginal increase of 90 basis points, and this, together with the higher operating income, resulted in a significant improvement of the cost-to-income ratio from 44% to 40.7% this year. On the cost of risk line, we report a benign result of CZK 342 million, or 16 basis points of the average loan portfolio, which is at a similar level as reported last year. Let me now continue on page 15, where we report a detailed view on the net interest income development.
In the third quarter, we delivered a year-on-year growth of 7.9% and 2.7% improvement quarter to quarter. Drivers of this development are provided on the right side. If I start from the top, lending interest income is up by CZK 134 million, supported by loan portfolio expansion by 6.2%. Gradual increase of the two-week repo rate resulted in lower treasury income by CZK 622 million, CZK 29 million year-on-year. However, this enabled us to continue with the repricing of our client deposits. As you can see, a lower cost of funding by CZK 677 million more than offsets the reduction in treasury income. Moving forward on page 16, we provide a similar view on the net fee and commission income development. Here, we delivered a year-on-year growth of 13.9% and a 5% improvement quarter on quarter. On the right, we provide key drivers of this development.
As you can see, we delivered improvement across all three categories. Namely, third-party commission income is up by CZK 46 million year-on-year, mostly supported by improved performance in distribution of wealth management products, while insurance products distribution remained broadly stable. The fee income category shows a year-on-year increase of CZK 23 million, supported by both penalty fee income improvement by 14%, together with transactional and servicing fee income improvement of 3% year-on-year. Lastly, fee expense shows a year-on-year decline of CZK 36 million, which is an improvement supported by improved commercial terms with Visa already at the beginning of the year. On page 17, we provide a detailed view on wealth management products distribution. In the first three quarters, we generated CZK 639 million of income in this franchise, which represents a significant improvement of 24.7% year-on-year.
This was delivered on the basis of the significant expansion of the outstanding amount of distributed wealth management products by 34.6%. This year, we have also expanded our network of investment specialists by 15 bankers in order to strengthen our distribution capacity going forward. Nonetheless, this year, our customers invested with us CZK 16.25 billion, which is by 5.4% less than the amount invested last year. This is mostly attributable to the drop in volume following the Liberation Day announcement in April this year. In summary, the opening fee is up by 14.8%, supported by a higher effective opening fee, and the trail fee increased by 31.3%, supported by the expansion of the outstanding amount. On page 18, we provide a detailed view on insurance products distribution.
In the first three quarters, we generated CZK 864 million of income in this franchise, which is just marginally better than the income delivered last year on a recurrent basis. However, on top of last year, we realized a one-off gain of CZK 39 million, not repeated this year. In terms of the number of sold insurance products, this year, we distributed 143,500 insurance policies, which is by 3.2% less compared to the same period last year. This is mostly driven by a slowdown in distribution of pension insurance products in the first half of the year. On the other hand, we improved our performance in distribution of payment protection insurance, as well as life insurance. We completed this section on page 19 with the cost base management. As mentioned before, we managed to keep costs stable.
The marginal increase of CZK 36 million is mostly attributable to the admin costs category, which is the only category showing an increase by 8.1% year-on-year. Out of that, the most pronounced increase is in the IT area, where we had incremental expenditures with the migration to the cloud. Apart from that, regulatory charges are down by 9.7%, supported by a lower contribution to the resolution fund. The depreciation and amortization charge is also below last year by 4.1%, predominantly supported by the extension of use of life of key software applications, which we did in the first quarter this year. We managed to keep stable personnel costs year-on-year at CZK 1,877 million, which is a function of persisting inflation of average salaries, fully offset by a reduction in FTEs by 1.9%.
This is all from the profit and loss statement section, and I will now hand over to my colleague, Jan Novotný, for the balance sheet.
Thank you, Jan. Good morning, ladies and gentlemen. I have the pleasure to walk you, together with my colleague Andrew Gerber, through the next section of today's presentation. Please let me move to slide number 21, showing the loan portfolio and funding base evolution. We have continued our growth in the lending portfolio by more than 6% year-on-year, while at the same time, we were successful in keeping a broadly stable funding base, despite a continued decline in the cost of funding from 2.7% in Q3 2024 to 2.08% at the end of Q3 this year. Now, moving to the next page, page 22, where we are reporting the balance sheet development and its components. We have a very solid growth of 2.3% year-on-year, with the fastest growing categories of investments in securities with +17.4% year-on-year and net customer loans with +6.2% year-on-year growth.
You can also see the slowdown in balance sheet growth on the liability side, caused by a decrease in deposits during September 2025, partially offset by Tier 2 bond issuance. I would like to comment further on the key category, which is growth on the lending side. This is shown on page 23. We are very successful in this effort. The year-on-year increase of the new production is almost 30%, from CZK 42.5 billion in 2024 to CZK 55 billion in 2025, comparing the same period of the year. What is also very positive is that the growth comes from all product lines, mainly in mortgages with a 51.2% increase, small business by almost 40%, SME with 28.5%, and consumer loans with 15% growth year-on-year. This is a really outstanding sales result, and it translates directly to the loan portfolio growth on page number 24.
Our lending book has grown by more than 6% year-on-year and ended up at the level of CZK 287.8 billion. If you look on the right side of the slide, you can see the split of the growth per segment: +8.2% on SME, +24.8% on small business, and almost 4% in retail. Talking about the retail portfolio growth, please let me hand over to my colleague Andrew, who will walk you through the more detailed split per product category on page number 25.
Thank you, Jan, and good morning, ladies and gentlemen. On page 25, we present the development of the retail loan portfolio in a bit more detail. Overall, the portfolio grew 3.8% with the two major product categories contributing to the growth. The mortgage portfolio was up 5.1% year-over-year, and the consumer loan portfolio up 4.5%. In both cases, I would say it was driven by significantly better new business origination, as Jan mentioned, and also supported by broadly stable retention performance. Going forward, in mortgages in particular, we face significantly higher refixations, actually starting this month. This will continue to be an area of focus for us, making sure that we're able to maintain the level of retention in the face of significantly higher volumes coming through refixation.
To briefly touch on the other loan category, which declined 11.8%, the predominant part of this portfolio is the bridging loan product, which was distributed by MONETA Building Savings Entity. This is effectively a run-off portfolio, which explains the decline there. I'll hand over to Jan now, who will take you through the remaining part of the asset presentation.
Thank you very much, Andrew. Now, please let me show you a similar overview for the commercial lending growth. The portfolio, for the first time in history, surpassed CZK 100 billion at the end of Q3 2025, with the key growth in small business loans and investment loans with 24.9% and 15.8%, respectively. Let me also mention one thing that I've already highlighted at the last investor calls. There was a change in geography of the categorization of one large exposure in Q4 2024, which moved due to refinancing from the working capital line to the investment loan line. However, this credit was fully repaid in Q3 this year. Despite this, we have still managed to deliver the growth of the investment loans by 500 million in Q3 compared with Q2.
Now, on the next page, we are showing the evolution of the loan portfolio yield for the whole lending book. We ended at the end of Q3 at the level of 4.8%, which is practically the same level as a year ago. This is driven mainly by the retail portfolio, with the year-on-year growth of yield by 0.2%, while commercial went down from 6.1% to 5.8% due to the part of the portfolio on floating rates, as those are, especially in the beginning of 2025, going down, as this is linked to the primer. That was the last slide about the loan book evolution. Now, let's move to the deposit side of the business. For that, please let me hand over back to Andrew.
Thank you, Jan. Moving to page 28, we look at the development of the funding base of the bank. Overall, the funding base grew 3.1%, supported by Tier 2 bond issuance and strong growth in the commercial segment. Overall, the commercial deposit base grew 5.4% year-over-year, with retail growing at 1.9%. However, you can see clearly visible in the third quarter, we see a decline in the retail deposit portfolio for the first time in a considerable period. This is a reflection of intensified competition in the market, with a number of players offering rates significantly above the repo rate, some as high as 4%. Considering the strong liquidity position we've built, we've taken the view that we won't try to compete with those rates and rather focus on the profitability. This has affected the performance in retail deposit balances.
Moving to page 29, we look at the development of the funding cost and net interest margin. Here, you can see that although we show quarter-on-quarter improvement in the funding cost, the funding cost was effectively stable during the third quarter. This again reflects the intensified competition in the market, which limited our ability to further reprice the portfolio downwards. This is also reflected in the NIM, which was stable at 2%, around 2% for the quarter, 10 basis points above the low point, which came after the doubling of the mandatory reserves at the beginning of the year. Moving to page 30, we take a closer look at the development of the retail deposit portfolio. As I said, the retail deposits were up 1.9% year-over-year. You can see the current accounts growing slightly faster at 2.8% and the savings and term deposits growing at 1.7%.
Here, you can clearly see the decline in the savings and term deposits as a result of the competitive intensity in the market. I should also add that we continue to solicit the deposit base to transfer to the asset management portfolio. There's something around CZK 12 billion of balances that we have moved into asset management over the course of the year. This also affects the outcome. Moving to page 31, we take a similar view of the commercial deposit portfolio, which grew 5.4% year-over-year, with very strong performance in current accounts up 16.2% and a decline in the savings and term deposits down 3.1% again as we face competition in the market. Finally, on page 32, we look at the detail of the development of the funding costs of the bank.
Overall, the funding costs declined 50 basis points across both retail and commercial, while wholesale funding increased 45 basis points. When we look at the segmental view on the customer deposits, you can see retail cost of funding was down 74 basis points to 2.08%. This reflects the continued repricing of the portfolio. However, during the third quarter, we were very limited in our ability to further reprice the portfolio. In commercial, the cost of funding decreased 53 basis points to 1.47%. Overall, I would say it was a more challenging quarter for the deposit business. However, I think the strong liquidity position we've built for ourselves has allowed us to stay focused on profitability and weather it out. I do believe that the pricing that our competitors are offering in order to attract these deposits away from us is not sustainable in the medium term.
I'm fairly confident we'll get an opportunity to compete for that money back in the future. With that, I will hand over to Normann, who will take you through the risk metrics and asset quality.
Thank you, Andrew, and good morning. This takes us to the risk section on page 34, where we have an overview of key risk metrics for the first nine months of this year. On the top left of the page, here we have the cost of risk, which has come in at 16 basis points, which is a drop by 2 basis points year-over-year. If you look at the loan loss provision coverage and the total NPL coverage, here we had ratios of 1.33% and 121%, respectively. As far as the NPL ratio is concerned, here we have seen a drop of 30 basis points from 1.4% to 1.1%, which is an all-time low. If we continue to page 34, here we have a more detailed overview on cost of risk for the last five quarters.
In absolute amounts, we recorded a cost of risk of CZK 342 million, which is on a comparable level compared to the same period last year. If you look at the overall elements which impacted the nine months' cost of risk result this year, here, first of all, we had NPL sales north of CZK 800 million, generating a positive impact on cost of risk of CZK 78 million. We also had management overlay releases north of CZK 150 million. Last but not least, we also updated our macro variables within our IFRS 9 reserving models, which supported the cost of risk line. On the next page, 36, here we have five data points each on the development of the loan portfolio, loan loss provisions, coverages, and the NPL balances. Let me start on the top left.
Here, as we see, the portfolio grew by almost 6%, or CZK 16 billion. At the same time, loan loss provisions dropped by CZK 580 million. Out of the total stock of provisions, CZK 3.87 billion, we still do have CZK 242 million management overlays. The NPL stock on the bottom left dropped by more than CZK 780 million, as I said, with an ending ratio of 1.1% and a total stock of provisions of NPLs of CZK 3.2 billion. On the next page, page 37, here we show the development of NPL in and outflows since September 2024. If we just look at the last quarter, here we see smaller formations, stable Q rates, leading to a net reduction of the NPL stock of CZK 265 million, and an ending balance of CZK 3.2 billion.
The last page on the risk section, page 38, here we show the evolution of delinquency ratios 30, 60, 90+ since 2020. The bottom line message is delinquencies remain on very moderate levels and even dropped further in the 30 and 60 days past due bucket. Summarizing the risk section, we can state clearly that the credit performance with 16 basis points on the cost of risk is well on track to deliver under the full year updated guidance of 17.5- 22.5 basis points for the full year. As far as management overlays are concerned, we will revisit and look at the balances towards the end of this quarter, also in the light of the pertaining macro. We will decide what kind of adjustments will be made. With that, I hand over to Jan Friček to walk you through the liquidity section. Thank you.
Thank you. Thank you, Norman. I'm now on page 40, and let me continue with the liquidity management section. In the third quarter, MONETA maintained a robust liquidity position with a significant excess. This is demonstrated across all ratios, namely loan-to-deposit ratio stood at 66% and share of high-quality liquid assets on customer deposits stood at 40%. Below that, we report the regulatory metrics. Both are well above 100% regulatory limit, namely net stable funding ratio stood at 177%, remains broadly stable year-on-year, and also liquidity coverage ratio stood at 335% and also oscillating around this level during the whole year. Moving forward on page 41, we report the development of high-quality liquid assets. The position at the end of September stood at CZK 171.4 billion. As you can see, it declined by 6.3% year-on-year.
The decline is visible in the category balances at the central bank, and it has three reasons. First of all, we utilized part of the excess liquidity in lending in the loan portfolio expansion. Secondly, we allocated about CZK 8 billion of liquidity to cover double the mandatory minimum reserves since the beginning of the year. The rest was reallocated into investment securities, into government bonds, in order to improve yield. With that, let me move forward to the capital management section. I will continue on page 43 with capital ratios on a consolidated level. As was mentioned before, in September, we successfully issued a Tier 2 bond of EUR 100 million, which supported our capital position. This is visible in the capital adequacy ratio improvement, reaching nearly 20% at the end of September, against 18.25% at the beginning of the year.
At the same time, Tier 1 capital ratio increased to 15.21% against the management target of 12.5%. The development of excess capital in absolute amount, you can see in the bottom right corner. This year, we expanded the excess by 41.5%, reaching CZK 7.8 billion at the end of September. This position consists of Tier 2 capital excess of CZK 3.3 billion and the distributable Tier 1 capital excess of CZK 4.5 billion. On page 44, we provide more detail about the capital position on a consolidated level. The total amount of regulatory capital increased during the year and reached CZK 33.2 billion. Out of that, Tier 2 represents CZK 7.2 billion and Tier 1 capital CZK 25.3 billion. On the right, you can see an improvement of risk-weighted assets density supported by CRR3 regulation, which was implemented at the beginning of the year.
What is important in the chart in the bottom right corner, we report the development of the excess capital position. This shows that MONETA maintains to accrue dividends at 90% of the consolidated net profit. On page 45, we complete this section with the capital position on the individual level. The total position of regulatory capital and MREL instruments increased to CZK 47.6 billion at the end of September, which represents an MREL and equity ratio of 29.29%, well above management's target of 22.35%. You can see that MONETA maintains a robust capital position on both levels. This supported management to propose the interim dividend, also to keep a dividend payment or dividend accrual at 90% of consolidated net profit, and also provides sufficient capital for the future growth of the bank. With that, let me hand over back to Tomáš.
Very good. I'd just like to reiterate something. The 90% accrual is from current earnings. The interim dividend is from retained earnings. Just to make it very, very clear for everyone, I'm on page 47, where we reiterate our performance against the guidance. The original guidance issued, I suppose, in February showed CZK 6 billion. Now, we are communicating that the minimum target for the bank is CZK 6.3 billion. Ideally, we would like to land somewhere between CZK 6.3 billion and CZK 6.4 billion. This comes from the belief that we can keep the cost stable, plus we get improved operating income streams based on the current year's performance. Should we reach the minimum target, the earnings per share would be [CZK 12.3] per share, and the return on tangible equity would go to 21%.
This is due to the fact that the fourth quarter is heavier on cost because, for instance, the annual bonuses in the bank are accrued only in the fourth quarter, not throughout the year, because we want to be certain that there is basis for payout. This is one item. The other item is that at the end of the year, a lot of things actually come to materialize themselves. On page 48, we would like to again reiterate that on a cumulative basis, in the next four or five years, it's actually four years and one quarter remaining to the cumulative target, we would like to ensure that the shareholders enjoy a cumulative profit of CZK 33.3 billion , which, if achieved at the level of, and I stress this, minimum target, this would be CZK 65.1 per share.
With respect to that, should we achieve it, we will seek to maintain a dividend payout policy at 90%. In the current policy that we have, we have minimum 70%, subject to regulatory environment and our ability to meet, to comply with all of that we have to comply with. Maybe very briefly, on page 49, what has changed is the GDP is slightly better. We had an estimate of 2.4% in our plan. The unemployment is slightly below the 3% level. I went through the presentation at 2.7%. Inflation is higher. It is at 2.3%. Two-week repo rate is higher at 3.5% versus 3%, if you look at the second column from the left. Obviously, the PRIBOR is better. Most notably, the Czech crown to euro is currently trading at 24.3. There is a fairly significant deviation from what we had expected at the end of last year.
If we go to page 50 for this year, on the portfolio development, this is on a gross basis. We believe that we should be able to meet the target of a gross portfolio of CZK 298.8 billion. Sorry, CZK 98.6 billion. We are on a good way to go there. If I had to make a prediction, I would say the commercial performance will be stronger. This is due to the fact that we enjoy a better contractual rate on underwriting commercial transactions, namely in the small business realm and also in the SME realm. With respect to capital deployment, we have changed the strategy somewhat, where a lot of focus is placed on the small business growth in order to maintain the overall yield that we enjoy from the lending activity. With respect to the customer deposit development, we have here for the current year CZK 435 billion.
I believe that we still have the ability to maintain the deposits at this level. We might come a bit short. I apologize, when I commented the loan book, I mistakenly looked at 26. The gross portfolio is CZK 288.3 billion for 2025. We are already at the target. Whatever comes extra over and above the CZK 288.3 billion will strengthen interest income bases for the next year. We are trying to max it out in order to have a good year next year. Now, on page 52, where you can meet us and the shareholder meeting. The shareholder meeting will take place on the 14th of November. The record date for the meeting will be the 7th of November. Whoever is a shareholder until the 7th will enjoy the dividend stream. I'm sorry. The record date for dividend is on the 21st. I said it wrong.
The payment date is on the 16th. We would like to shorten this, but our supplier needs a month to process the dividend. If you want to know who the partner is, it's Société Générale Group, Komerční banka . They need one month. We tend to do things faster. We tremendously enjoy your time, appreciate your time. We are grateful for your participation. I would take the liberty of opening the floor to questions and answers.
Thank you. We will now begin the Q&A session. If you would like to ask a question and have joined the call via Zoom, please write it in the chat in the browser or use the raised hand function on your screen. Before starting, please make sure that your local device is unmuted. Once your question is answered, please cancel the raised hand function. If you have joined us via the phone, please press star followed by one on your telephone keypad to enter the queue. We will now take our first question from Thomas Unger . Please unmute locally and ask your question. Thomas has withdrawn his question. As a reminder, if you would like to ask a question, please use the raised hand function. Thomas , please go ahead with your question.
Yes, hello. Can you hear me now?
Yes.
Wonderful. Thank you very much. Thank you for taking my question. Congratulations on your Q3 and your strong Q3 results that you delivered today. I'd like to talk about your outlook for 2026. Vis-à-vis the press, you've mentioned an upside for the coming year. Can you be a bit more specific? What developments you anticipate? What is working better than you had previously anticipated? Is it the upside that you see now on income and lower expenses moving into next year as a basis for this expectation? Do you see that as sustainable? Also, your rate outlook for the coming year and your expectations for deposit and funding costs in 2026. I think you've mentioned that you don't see this strong competitive pressure on the deposit side as sustainable.
Do you see any positive effects now on your funding costs, as well as the net interest margin for the coming quarters? Lastly, maybe on risk costs also, if you could share an outlook for 2026, I'd really appreciate that. You've mentioned the management overlays. The stock remained the same or nearly stable in Q3. You will revisit that at the end of the year. If you just could give me your thoughts of what you think might happen and what you anticipate for the macro development in that respect. Thank you.
Right. Thomas , you asked a lot of questions, actually. It's good to have you on the call. I think, broadly speaking, 2026, we reaffirm the guidance, which currently stands at CZK 6.3 billion. That's number one. With respect to upsides, we hope and we pray that we have upside on the lending activity, which is demonstrable from the fact that we have already met the guidance target of CZK 288+ billion at the end of the third quarter. Should we continue at the same pace, focusing on the higher contractual yield products, which are also secured, we should have a good basis for 2026. We hope to continue in 2026, especially in the first and second quarter, which improved both interest income. The second part of your question we already answered in the presentation, which was on the cost of funds.
Under the current environment, we are unable to lower the cost of funds because you have your neighbor in Vienna, Raiffeisen Bank, paying 4% on deposits and waiving any transactional conditions. That's a regional player going against the grain of the banking market. You have challenger banks such as Trinity, such as Partners Banka, such as mBank, which is, again, a regional or neighbor player from Poland offering the same rates. Everybody's waiving any conditions. We conscientiously decided that we will not use these predatory pricing policies. We will remain fair and transparent and let's see what price we pay for that. Right now, we cannot comment on the lowering because there is no room for lowering. The third part of the question is how do we expect the rates to come out for 2026. Judging from His Excellency, the Governor of Czech National Bank, Mr.
Michl, the rates should remain stable. Repo rates are stable, PRIBOR is stable for the majority of next year. Unless something changes in the next month, the assumptions that we put into the operating plan will be at that level. With respect to the operating income upside, there are a couple of other categories which we hope to achieve. Continued growth in the asset management franchise within 30%- 35% next year. We have a solid foundation for this belief because Andrew, together with our strategic partner Generali, have built a structure which we call MONETA Fund. It's a special vehicle registered in Ireland, where instead of individual investment products, we sell five fund profiles. In the first two weeks, about three weeks since inception, since we received the go-ahead from the Czech National Bank, we have had what I would call a spectacular result.
This is another platform apart from the 41 funds that we offer, which helps our branch people to motivate customers to invest into something which is relatively simple, transparent, and you don't have to think about which fund you pick from a very long Chinese menu. Apart from that, we see stability and I would say a relatively decent growth across the other fee categories with the negative, one negative , which is FX margin. This is not driven by our inability to increase the volumes. It's more or less driven by a competitive position of some other players, namely Revolut. It is unfortunate that Revolut is not properly supervised by the Czech National Bank. It is unfortunate that they are able to circumvent regulation and subsequent compliance and probably the tax regime of the Czech Republic. We are working on making the relevant authorities aware of that.
That is one negative on the FX margin. If you look at cost base, we are the only bank in the Czech Republic that has a steady cost of personnel. This is, I would say, remarkable. Going forward, we will seek to optimize employment in the bank and continue to manage the cost. On the administration cost, the administration cost is driven by two factors. One is abuse of market position. From my point of view, I'm not saying it's a reality, but by the big tech companies from whom we procure various IT services, because the inflation that we see in the asking prices is very significant. We have low negotiating power against the giants, but we have other means to bring them to senses. We also have, like everybody else who rents retail space, indexation of the retail space that we procure.
Plus the head offices at inflation levels. We reduce the space. Nonetheless, this adds to the complexity to manage the administrative costs. On the cost, we will do our best to fit into the corridor, into a reasonable corridor. I see maybe I always see an upside there, because there's always room for weight loss, not loss weight, weight loss, sorry. With respect to risk, I will not allow Normann to answer this. We will use a standard range in the guidance and knock, knock, knock. If the economy grows and improves, which we believe will be the case under the new administration, we will benefit from that as we have benefited from the last 12 months, or rather last nine months of the growth. Being conservative, we will build in some risk into the expectation on the cost of risk line.
I believe there is also room for, let's say, stability on that line. All in all, too early to give you anything. How big is the upside and how big is the downside and what are the probabilities? Let's have this discussion in February 2026. Thank you for a very good set of questions.
Thank you very much. I highly appreciate your answers as always, and I'm sorry for taking so much of your time. Thank you.
As a reminder, if you would like to ask a question on the call today and you've joined us via Zoom, please write it in the chat in the browser or use the raised hand function on your screen. Before speaking, please make sure that your local device is unmuted. If you've joined us on the phone, please press star followed by one on your telephone keypad. Our next question comes from [Krishnendra Dubey]. Could you please discuss the deposit trends in Q3? Also, are we expecting any deposit campaigns and could you please talk about the current offers?
Andrew, why don't you take that?
Yeah. Okay. As I mentioned, what we saw in Q3 was fairly aggressive competition from a number of players that Tomáš already mentioned. I think the primary challenge we faced was from players offering rates above 4%. As I said, these are conditional offers, and it's not clear how long they will guarantee to pay this rate to clients, with the next repricing opportunity at the end of this month. We will wait and see how it plays out. With the repo rate at 3.5%, it's my opinion that they will not be able to maintain it in the long- term. That said, just to comment again on the outlook for cost of funding, with the repo outlook now stable into the latter part of next year, this is a matter of being able to stabilize and the deposit base not reprice down further.
I think what we're looking for is competitors to come back to more rational pricing, which will allow us to stabilize the base rather than reprice down further. I think for that, we would need to see change in the rate outlook from the Czech National Bank. As regards the kind of offers, as I said, what we're competing with is typically offers around 4% with some conditions. Our standard offer for savings is at 2.6%. We have term deposits available at 3.2%, and we have a series of retention offers which we use to try and retain clients that are transferring money to other banks, which go up as high as 3.4%, depending on the type of client and the bank to which they're transferring money.
However, we've taken the decision not to go above that, certainly not to go above repo, in order to protect the profitability of the business. I think this is how we will.
I would add to that, if you look at it from net outflow inflow basis. If I take the largest bank in the Czech Republic, we are positive in terms of inflow. If you take the four suspects that I mentioned, we are negative against them, and we do not believe that they can sustain it past the end of the year, this pricing. If you waive the conditions, you pay the rate for at least three months, and they are already in a situation that they will pay the rates for five months because they started in mid-August, and they all have waivers on the conditions. We have taken a conscious decision to sit it out, and we will not comment anything on marketing campaigns or what propositions we will put into the market because this would not be wise on our part.
The other argument is we don't need the money right now. We simply don't need it, and we manage the bank for profitability. The last comment I would make on this, if you add up the retail deposit position with the asset management, you will see that we've gained about CZK 12 billion, if I remember the number correctly. The third prong of our strategy is to convert as much as possible into the asset management because the margin that we earn on the introductory fee and on the trailer fee is far superior to the spread that we get against the short-term rates.
Thank you. As a final reminder, if you would like to ask a question and you've joined us on Zoom, please use the raised hand icon or the Q&A box and type out your question. If you've dialed into the call, please press star followed by one on your telephone keypad. It looks like we have no further questions at this time. I'll hand back over to Mr. Spurný for closing remarks.
As I said, we tremendously appreciate your participation. How many do you have registered? 51. We keep it stable. We keep it pretty much stable every quarter. I would like to underline that we look with confidence into the fourth quarter of this year. We have sufficient basis for that. We look actually with confidence into 2026, because we are recalibrating the bank from an operational platform point of view. We are also on a good track improving efficiency of the operations, and we have good demand for our products, be it on transactional banking, be it on wealth management, be it on lending. I would say the brightest moment in the last three months was when a colleague of mine told me that he had used our digital platform to obtain a mortgage, and told me it was a fantastic, fantastic experience.
This was one of the good moments of my 10-year career with MONETA , and thanks to Andrew, thanks to Andrew, we have this. I wish you the best. Very good holiday season starting with Thanksgiving and progressing to all the other holidays, and we are looking forward to either meeting you in person or at the close when we disclose the full-year results. On behalf of the management Board, all the best. Thank you.
This concludes today's webinar. Thank you all for joining. You may now disconnect from the call.