Good morning, ladies and gentlemen. Once again, I have the pleasure of presenting our quarterly results. Let's go to the summary with key highlights of our performance for the first quarter of 2026. We've generated net profit of CZK 1.6 billion. This is an improvement against comparable period of 2025 by percent. The result, the first quarter, accounts for 24% of the guidance that we put out in late January of this year. I would say that we are performing according to expectations for this year. The result comes on growing operating income. We've generated CZK 3.5 billion of operating income with a nearly 5% improvement against, again, comparable period. We enjoy stable cost base, which increased by 1% to a level of CZK 1.5 billion. There is really consistency of what we guided at the beginning of the year.
With respect to the balance sheet of the bank, we reached CZK 520 billion, expanding by 3.9%. This is on basis of expanding funding base of the bank, which reached CZK 474 billion, an increase by 3.9%. We enjoy strong demand for our credit products, namely from small business and SMEs. The portfolio grew 6.8% to a level of CZK 297 billion. Here I would like to underline the fact that we are currently focusing on small business and SMEs due to favorable capital allocation and margins, which will enable us to accomplish the NII target in relative terms, increasing it to a level of 2.1% by the end of this year. Going to capital. We have capital adequacy ratio of 17.9%. This is negatively impacted by one-off event, which will reverse itself during the second quarter, and Jan Friček will give you a little bit more detail.
The impact is in the magnitude of about 40 basis points and actually reverse itself, as I said, during the second quarter. Tier 1 ratio at 13.7% and very comfortable MREL position at 27%, exceeding the regulatory requirements which have been levied upon us. We have this Tuesday held a shareholder meeting and approved the dividend of CZK 11.5 per share proposed by the management. In totality, this accounts for CZK 5.9 billion of net profit of 2025 to be distributed to our shareholders. With respect to the return on tangible equity in the first quarter, we've accomplished 21.6% return, which is 2.1 percentage points better than in a comparable period of last year. Liquidity coverage ratios to the record high, 415%. This is due to one-off deposit, which came in at the end of the quarter and subsequently left the bank.
If I summarize the shareholder meeting, we accomplished approvals of several key corporate documents, namely the financial statements on both consolidated and individual basis. As I mentioned, we have approved the dividend and we have amended the remuneration policy of MONETA. The amendment concerns improvement or increase of payments to our supervisory board. That increase accounts for about GBP 80,000 , EUR 80,000, sorry, annually. It had been increased as well as the remuneration report of the bank for 2025. We enjoyed strong presence at the shareholder meeting, exceeding 73% through physical presence and correspondent vote. Now, I would like to briefly summarize the operating environment of Czech Republic. Last year, we enjoyed better GDP growth than was expected at the level of 2.6%. This year had been predicted at 2.9%. Obviously, this prediction was done before the war in Persian Gulf.
We will see what impacts we will have from the higher fuel costs and related inflation pressure. Nonetheless, so far, Czech Republic has been in very good shape. If you go to government deficit and indebtedness, so there's nothing to report on indebtedness. It actually decreased slightly. The deficit is projected for this year at CZK 310 billion, and the first quarter had seen deficit of CZK 27.6 billion. The last one, unemployment. Year-on-year, you can observe the unemployment increase by 50 basis points. So far we haven't seen any effect on NPL formation, size of NPL portfolio or defaults as such. We will cover that in the risk section, which due to Normann's absence, I will cover later on in the presentation. If you look at inflation and interest rate environment, inflation seem to be subdued.
Annual inflation stood at 2.2% and month-on-month at 1.9%. You can see from this that the Czech National Bank is close to its target of 2%. Again, it remains to be seen what will happen to the inflation due to elevated fuel costs and then the trickle-down effect, how it will translate into the economy as such. Nothing to report on the key benchmark rate. It stands at 3.5%. However, if you look at other financial instruments, the probability seem to be skewed heavily towards rate hike. I'm referring to the FRA market, and the probability seems to be about 70%, but we might have 25 basis points rate hike in a relatively short period of time. Yield curve. If you look at the yield curve, the short end stable against last year actually decreased, against the comparable period of 2025, the first quarter.
On the medium- to long-term, there is evident increase in the expectations of rate and the swap market. The swap market reacted relatively strongly to the conflict in the Persian Gulf. Here we have contributors to inflation. What is most notable, I would say, is transport and communication category, and then restaurants and services, seem to be continually expanding. So much for the macroeconomic environment. Let me comment our operating platform, which consists of four key pillars for our operations. We have steady situation in terms of clients, branches, and the ATM Alliance network. Unemployment against stability, very slight decrease. However, a trend of decreasing front end employees. This is on basis of digitization and changing behavior of our customers, as you will see on the digital platform commentary. We have increase in the middle and back offices of the bank.
Here I would comment that it has three components. Number one, as we are processing more transactions, we need more people on the risk management side and on the back offices. This is the first element. Second element, we continually invest into cybersecurity and crime prevention professionals. Third, IT. We need more analysts, we need more solution architects, and as we are trying to keep up the pace on digitization of the bank, this is obviously placing strong demand on the bank in terms of these skills in those three areas. Now going to digital platform. We have healthy growth of digital users. This increase is namely concerned with download and usage of our mobile platform, Smart Banka. You also see fairly healthy growth on the daily touch points. On the given day, on average 745,000 touch points.
Coincidentally, this is pretty close to how many visits we realize per annum throughout the branch network. Very strong growth on lending volume, +20%. We are very happy with how the platform performs, and this is not only Smart Banka, but it's also our mortgage platform, finance and refinance, where we see a rapid increase of interest by customers to refinance their mortgages and to originate primary mortgages through those digital platforms. Strong growth on payment transactions. We have slightly less third-party transactions, and I believe this is due to discontinuation of some auxiliary products and strong growth on servicing transactions. Servicing transactions are very important because account maintenance management, be it on the asset or liability side of our balance sheet, third-party products, we are successfully moving these tasks from the realm of the physical world into self-service down through the Smart Banka application.
Going to the branch network, here on the first line, you see stability, nonetheless decreasing front office staff. However, a headwind or an issue that we struggle with as all of the banks in the market is decreasing level of staff pay in our branches. The way we will deal with it is further optimization of the network in terms of coverage. That's first dimension. Second dimension concerns relocation of branches to high traffic areas. The third improvement, which we will implement by the mid of this year, we will pilot it, is an appointment setting platform in order to utilize the branches and skills residing in them for high value products. We actually already see, I would say, transition from mundane tasks into high value products, and the testimony is the more than 13% growth on the sales of insurance and sales of wealth management products.
You also see that the network continues to be very material to us in terms of ability to lend. We have originated more than CZK 13 billion through the network with an increase of nearly 32%, so it remains to be a strategic asset for the bank. We are very happy with the performance of the network in terms of Net Promoter Score. The satisfaction with the network exceeds 90 points, and we are at the vanguard of the banking sector in Czech Republic in terms of that metric. Now going to the contact center, which is the third pillar of our business model. Throughout last year, we saw a decline in quality, and increasing traffic is continuing into the first quarter. We have increased the staff somewhat to a level of 224%, which is rounded up 2% increase, against 5% increase in traffic.
The bank is seeking to find ways how to prevent calls coming in, and we have already taken some measures to manage the cost structure of the contact center. On email, we are successful in redirecting these queries onto the digital platform. Nonetheless, here, we are implementing artificial intelligence in order to sort emails to provide precise and consistent responses. We will see an impact of that project in the second half of the current year. Increasing the staff enabled us to improve the performance in terms of lowering quite substantially the abandon rate, which now is at 6.6%, and we decreased the average by 5.5 percentage points. We've reacted to a situation which was unfavorable in our view with some marginal cost investment, and we improved also the metric on answered calls quite substantially.
The client satisfaction improved marginally to 82 points on the Net Promoter Score. Now continuing into the ATM network. On the size of the network, we have stability. As you know, we share this alliance with three competitors, which is Komerční banka, UniCredit, and Air Bank. The benefits are quite substantial for us. What we've accomplished with our partners through the first quarter is an expansion of the deposit taking ATMs. We now have 957 machines at our disposal. This is quite good because we see a rapid increase in usage of those machines in terms of deposits, and it enabled MONETA to start the reduction of cashiers and cash desks throughout our network, and this process will be accomplished by the end of the year. We will really have majority of the network on cashless basis. This is quite an important benefit.
The other thing which is worth mentioning here, that not only we digitize the service transactions, but also the software which is implemented on our network enables clients to perform a fairly significant number of service transactions, and these are growing, as you can see, by 6%. If I summarize the synthesis, we've generated net profit of CZK 1.6 billion. What is important to us that this is on the back of improving operating income and against the background of steady operating expenses. The credit cost or cost of risk at CZK 160 million is according to expectation and at the lower end of the guidance that we have provided. We consider the quarter as expected, and with that, I will turn over Jan Friček to give you more detailed view of the P&L, and will walk you through the details on that. Thank you for your attention.
Thank you, Tomáš. Good morning, ladies and gentlemen. I am now on page 15, and it's my pleasure to walk you through the profit and loss statement section. Let me repeat the key financials. In the first quarter of the year, MONETA delivered net profit of nearly CZK 1.6 billion, representing a year-on-year improvement of 8%. Earnings per share stood at CZK 3.1 , and return on tangible equity improved by 2.1 percentage points to 21.6%. Improved profitability was driven by higher operating income. The growth reached 4.8%, and the balance generated stood at CZK 3.5 billion. The improvement was driven by higher net interest income by 7.7% up year-on-year, stemming from improved net interest margin by 10 basis points and higher lending income. Net fee and commission income line improved by 1.8%, supported by ongoing strong performance in distribution of wealth management products.
Cost base came at CZK 1.5 billion, only marginally up year-on-year by 1%, and this amount includes annual contribution into the Deposit Insurance Fund and the resolution and recovery fund of CZK 209 million. Broadly stable cost base, accompanied by operating income growth of 4.8%, resulted in a significant improvement of the cost-to-income ratio to 38.3% against 40% reported in the first quarter of last year. Credit cost line came at CZK 160 million or 22 basis points of the average loan portfolio, which is a low result at the bottom of our guided range between 20-35 basis points and was enabled by persisting benign risk environment, supporting low delinquencies and low NPL portfolio. Moving forward on page 16, we report the development of the net interest income line.
In the first quarter, we delivered 7.7% growth year-on-year, and as I said, this is a function of increased net interest margin by 10 basis points and also supported by higher lending income by 7.3%, which was supported by the loan portfolio expansion of 6.8%, accompanied by positive repricing within the mortgage book. Andrew will provide you with more detail on this in the balance sheet section later. 25 basis points decline of the two week repo rate also resulted in a lower treasury income, partially mitigated by cost of funds reduction. Moving forward on page 17, we provide development on net fee and commission income in detail. In the first quarter, we delivered a year-on-year improvement of 1.8%, which is a combination of higher commissions from the distribution of third-party products by CZK 40 million up.
As you can see, this was mostly supported by nearly 20% growth of the commissions generated in the wealth management product distribution franchise, accompanied by broadly stable result in the insurance products distribution franchise. Fee income category shows year-on-year improvement of CZK 25 million, supported by both categories, higher penalties by 4.1% and higher transactional and servicing fees by 6%. Lastly, fee expense line shows an increase year-on-year due to an extraordinary bonus analyzed last year. On page 18, we provide further detail about the performance in the wealth management product distribution franchise. As you can see in the chart, in the first quarter, we delivered CZK 262 million up by 20% year-on-year due to higher trail fee by 34%, reaching CZK 172 million in the first quarter.
This was delivered on the basis of the rapid growth of the outstanding amount of distributed wealth management products of 29%, reaching CZK 81.4 billion at the end of March. In the first quarter this year, our customers invested with us CZK 5.7 billion, which is nearly the same volume as invested a year ago. This is reflected in the broadly stable opening fee reaching CZK 90 million in the first quarter. Moving forward on page 19, we provide the detailed view on the performance in the insurance product distribution franchise. In the first quarter, we generated CZK 293 million here, and this is nearly the same result as delivered last year. This is also reflected by number of sold insurance products being at 45,200 of new insurance policies sold this year against 45,000 policies sold last year.
On the right side on the page, you can see that in two areas out of three reported, we delivered improvement. We strengthened the performance, namely Payment Protection Insurance went up by 6.9%, expressed as a gross written premium, and also pension insurance performance improved by 12.9% in terms of number of units sold in the first quarter this year against the last year. On the other hand, in the first quarter, we suffered a slowdown in the distribution of life insurance by nearly 10%. On page 20, we can continue with the cost base development. As mentioned before, the cost base landed at CZK 1.5 billion in the first quarter, only marginally up year-on-year.
Two out of four categories show a cost reduction, namely depreciation and amortization charge is down by 9.2%, resulting from a regular revision of remaining useful life of fixed assets, accompanied by 6% reduction in the admin and other cost category. On the other hand, regulatory charges went up by 7.2% year-on-year. This is broadly in line with the deposit base expansion. Personnel costs are up by 8.5% year-on-year, which is a combination of a higher average salary accompanied by higher performance-driven variable compensation to the front office and to the management. On page 21, we provide further detail to the personnel costs. As you can see from the chart, on the recurrent basis, we report 4.9% increase year-on-year. This is attributable to the 6% increase of the average salary, which is still below the average wage inflation in the Czech Republic being at 7%.
This is only marginally mitigated by small 0.3% FTEs reduction year-on-year. The reported growth of 8.5% is also driven by higher one-offs in the first quarter this year, and this is a combination of higher performance-driven annual variable compensation for the management, partially offset by a release of provision for unused vacation and severance costs. On page 22, we complete this section with a detailed view on the administrative and other expenses development. As mentioned before, we report a cost reduction in this category of 6%. This is a combination of lower IT costs stemming from a near completion of the cloud migration in 2025, together with a 24% reduction in other cost subcategories. The most significant saving within this area was achieved in the postage. On the other hand, in the first quarter, we spent more on the marketing by 15.6% to support the business development. Andrew will give you more detail on that on the balance sheet section. I hand over now to Andrew Gerber. Thank you.
Thank you, Jan, and good morning, ladies and gentlemen. Moving to page 24, we look at some highlights of the balance sheet development, starting with the loan portfolio. Overall, the loan portfolio grew 6.8% year-over-year, 1.8% quarter-over-quarter, reaching CZK 296.9 billion. At the same time, the yield on the portfolio increased 5 basis points, reaching 489 basis points. This was driven largely by the continued repricing of the mortgage portfolio as it moves through refixation. The funding base of the bank grew 3.9% year-over-year, 2.2% quarter-over-quarter, reaching CZK 473.8 billion, while the cost of funds decreased 13 basis points to 211 basis points. I think this is a pretty strong performance given that in order to keep a lid on the cost of funds, we had to adopt a relatively uncompetitive position in the market.
The fact that we were still able to drive deposit growth in that situation I think is a good outcome for us. Moving to page 25, we take a look at the high-level view of the balance sheet. Overall, the balance sheet grew 3.9%, or nearly CZK 20 billion. You can see that the customer deposits growing 4% are the key driver of the growth. On the asset side, the net customer loans grew 6.7% year-over-year. Investment securities up 3.7%, while the cash and balances at the central bank decreased 21% as we look to deploy the additional liquidity productively in the market. Moving to page 26, we take a look at the new business development. Overall, new business lending volumes grew 27.3% year-over-year, reaching CZK 20.9 billion, with strong performance in consumer lending, which is up 22.9% year-over-year, small business up 20%, and SME up 66.8% year-over-year.
On page 27, we see how the new business lending performance translated into portfolio growth. Overall, the portfolio grew 6.8% year-over-year, reaching CZK 296.9 billion, with strong growth in SME up 14.2% and small business up 25.7%. The growth in retail was more muted, 1.9%. If you move to the next page, you see that this was driven by consumer loans with solid growth of 8.3%, but much more modest growth in mortgages, just 1.2%. However, as Jan mentioned with the marketing costs, we ran a very successful mortgage campaign in March and the first half of April. We now have very strong pipeline in mortgages, which I think will come through in the numbers during the remainder of the second quarter and into the third quarter. We should see better performance in the mortgage portfolio going forward. The category other loans decreased 12.8%.
As I've mentioned in the past, this is predominantly a result of the bridging loan portfolio, which is a legacy product we used to distribute through the building savings entity, and which is now essentially a run-off portfolio. We continue to see the decline of that portfolio. On page 26, we look at the commercial loan portfolio. Overall, the portfolio grew 16.3%, with strong growth in investment loans up 20% year-over-year and small business up 25.7% year-over-year. I think what's important here is that the majority of this growth is driven by secured lending, which is a product where we're very well differentiated in the market. It's well-priced, and due to the collateralization, the profitability is very good. This is a very positive development for the bank, as Tomáš mentioned earlier. On page 30, we take a look at the yield development.
Overall, the yield on the loan portfolio has been stable, with slight increase in retail. As I said, this is driven by the repricing of the mortgage portfolio as it moves through refixation. In the last 12 months, we saw nearly CZK 24 billion of mortgage volume repricing through the refixation process. At the same time, the commercial loan portfolio yield is broadly stable as the floating rate part of that portfolio has basically been stable due to the market rates being stable. Overall, I would say solid start to the year from a lending point of view. Very good performance, obviously in commercial, solid performance in consumer loans. As I said with mortgages, thanks to the campaign, we now have a solid pipeline which should see us through the remainder of the second quarter and into the third. I think for now we're well placed to keep up with all of our targets for the first part of the year, but we will see how the market develops going forward. With that, I will hand over to Jan Novotný who will take you through the liability side of the balance sheet.
Thank you very much, Andrew, and good morning, ladies and gentlemen. Now we are on page 31, where we are showing the growth of the funding base throughout the last four quarters. We have grown by almost 4% to CZK 473.8 billion. You can also see the split per segment, and it's a year-on-year growth on the right side of the page, where both segments contributed to the strong funding base expansion. Starting on the next page 32, we move to a specific segment development starting with retail. The combined position of retail deposit and wealth management grew by 7.3% year-on-year, while we know that 65% of the investments are funded from the existing deposits. The overall balance ended up in Q1 2026 at CZK 422 billion, which represent almost CZK 30 billion growth year-on-year.
Next page 33, shows the evolution of the retail deposit base, which grew up from CZK 330 billion in Q1 2025 to CZK 341 billion in Q1 2026. This represents a very good growth rate of 3.2%, and you can see that, in fact, the growth was accelerated following the introduction of the competitive retention interest rates in Q1 2026. On the page 34 is the same split for the commercial segment. We have achieved the growth of 6.5% year-on-year, and the balance of commercial customer deposits stood at CZK 109.3 billion at the end of Q1, while a big part of the growth comes from current accounts products. Now let's move to the last page of the balance sheet section, which is the evolution of the funding costs.
We have ended the Q1 at 2.11% overall cost of funds average, with very little change quarter-on-quarter due to effect that competitive market situation does not allow the further decrease yet. However, in year-on-year comparison, you can see that we were successful in further improving our funding rate positions. With that, thank you very much for your attention, and please let me hand over back to Tomáš to walk you through the risk section of today's presentation.
Okay. Let's go to the risk. If we summarize the situation, that our credit cost ratio is at 22 basis points. As I said, this is the lower end of the guidance that we've provided, and this is driven really by our ability to successfully manage the portfolio. Performance, the repayment discipline of the portfolio is good. The second factor is our ability to decrease the NPL level, as I will show in a second. Loan loss provisioning decreased by 24 percentage points. This is due to the fact that we have, A, decreased the level of non-performing receivables, and B, we have updated the IFRS 9 model, and the scenarios work positively for the bank from this perspective. If you look at the non-performing loan coverage, this actually improved by 12 percentage points, and it's fairly sturdy. Lastly, non-performing loan ratio at a historical level of 1%. If we go to the segment view of the cost of risk in the first quarter of this year, we've incurred cost of CZK 160 million on retail CZK 182 million, which is in line.
It's nearly identical to the first quarter of last year, and we have released some commercial exposure related provisions on, I would say, half a dozen of names where the performance of those exposures warranted additional decreases. All in all, as I have mentioned, we disposed NPLs with a write-back of nearly CZK 40 million, around CZK 79 million, which is higher than what we had accomplished a year ago. If we go then to the provisioning again, the gross portfolio grew by 6.4%. Loan loss provisioning decreased by 12%, and the decrease is attributable mainly to the reduction of management overlays. The overlays were placed there with the intent to cover risks arising from repricing of mortgages.
Nonetheless, these risks have not materialized during the past 12 months, so the position had been decreased by CZK 200 million, and we still have this potential benefit should the repayment performance on the repriced mortgages continue to be favorable. In absolute amount, we carry CZK 2.9 billion of non-performing receivables, where roughly 50% of those receivables are under regular repayments. They are, again, assuming continued good performance on those, we have some potential for updates. Now we go to the formation view, formation of NPLs at 963 on gross basis. The cure rate at 809. You can see that this is pretty much stable compared to the last three quarters, and the 262 write-off is representing the volume that we took off the books through the sales.
On the net basis, the formation had been actually positive, decreasing the overall level of the non-performing receivables to CZK 2.9 billion. The benign situation continues to prevail so far. If we go on the next page, this is also evidenced by the past due rates, which if you look at the 30 days, this hovers around 0.3%. If you look at the 60+, we also have stability on that figure. The 90+ decreased, and this is again attributable to our efforts to continually crystallize the risk, dispose of the NPLs and the write-backs in the first quarter in the amount of CZK 39 million against the net book value. The carried net book value testifies to the sufficiency of provisioning policies that the bank executes. Thankfully, we continue on this front to be in a good position that we expected at the end of last year. With that, liquidity and capital will be covered by Jan Friček.
Thank you, Tomáš. Ladies and gentlemen, I am now on page 43, and let me continue with the liquidity management section. Throughout the period of last four quarters, MONETA maintained a robust and stable liquidity position, which is demonstrated across all ratios on the page. Namely, loan-to-deposit ratio being at 66%, and share of high-quality liquid assets on customer deposits stood at 39% at the end of March. Below that, we report the regulatory ratios. Both are significantly above the regulatory minimum limit of 100%. On page 44, we report the development of the high-quality liquid assets. The position at the end of March stood at CZK 176.7 billion. The year-on-year decline of 2.4% is fully attributable to the loan portfolio growth of 6.8%. You may notice that in the first quarter of the year, we continued to invest excess liquidity into predominantly Czech government bonds.
With that, let me move forward to the capital management section starting on page 46. MONETA Money Bank maintains a solid capital position demonstrated by capital adequacy ratio of 17.88% against the management target of 15.25%, and also Tier 1 capital adequacy ratio of 13.72% against the management target of 12.5%. The excess capital in absolute amount stood at CZK 4.5 billion, and out of that, the distributable Tier 1 excess stood at CZK 2.1 billion. Risk-weighted assets went up by 4.6% since beginning of the year, and I will provide you with more detail in a minute. Moving forward on page 47, we provide the detail about the capital position on the consolidated level. Regulatory capital in absolute amount stood at 30.8%, being stable since beginning of the year. Risk-weighted assets density, also stable at 32.7%.
In the chart with the excess capital development in the bottom right corner, you can see that on top of the excess capital, MONETA holds accrual for the future dividend distribution of CZK 1.4 billion, representing 90% of the consolidated net profit. We complete this section on page 48 with the capital position on the individual level. Here, the position stood at CZK 45.6 billion in absolute amount, up by CZK 1.2 billion since beginning of the year. This represents MREL adequacy ratio of 26.97%, significantly above MREL management target of 22.05%. As I promised, the risk-weighted assets went up since beginning of the year by CZK 7.8 billion or 4.8%, and this is a combination of CZK 3.3 billion of incremental RWAs attributable to the loan portfolio expansion, CZK 2.8 billion due to temporarily higher euro liquidity, and CZK 1.1 billion is driven by annual update of the operational risk requirement.
It is important to mention that CZK 3.2 billion of increase of RWAs is only temporarily and will be released in the second quarter as Tomáš already indicated at the beginning of the presentation. This was my last comment to the capital management section, and I will now hand over back to Tomáš for guidance and final remarks. Thank you.
As I said at the beginning, with respect to the guidance, the minimum target of 6.6 has now been achieved at the level of 24%, and obviously the first quarter is impacted by the full amount of mandatory charges. From that perspective, we stand exactly where we should be. I think if you look at the medium term, our aspiration over the medium term is to increase the five year profitability of the bank by CZK 10.4 billion. This assumes or is necessitates rather, generating net profit of CZK 37.1 billion, which if we are successful in doing so, will improve the forward five year cumulative earnings of the bank by nearly 40% compared to last five years. What we are doing in order to achieve this target.
First, on the capital side, we are currently evaluating some options how to further optimize the capital structure, and the assessment should be completed by the end of May. I believe that we still have quite sufficient room to improve, optimize the capital structure in favor of keeping, perhaps exceeding the target of the 90% payout. This is the first dimension. Second dimension, on the revenue front, I mentioned it at the beginning. The lending policy of the bank is now focused with a lot of precision on high margin, low capital allocation products that we are able to place into the market. We are successful in that. If you look at the growth of consumer lending, we exceed 7%. If you look at growth of the small business franchise loans, we exceed 25% growth rate. On SME-secured lending, investment loans + 20%.
We are very focused on this. Second thing, we are focused on improving the wealth management distribution by addition of new products, by continuously reviewing incentives and trying to withstand whatever uncertainties or volatilities appear as we go through the year. With the expansion of the bank, we also see a stronger intermediation in terms of payments, and this was demonstrated in the first quarter by the 6% growth on the transactional fees accompanied by lower cost load that we have to put into the intermediation as such. In terms of cost base, we show unfavorable development in the personal expenses, 8.5%, but this will subside to a level, I would say, between 4% and 5% during the next three quarters as we absorb some of the one-offs that came in from improved commercial performance of the bank and so on and so forth.
We are not particularly worried about this. Nonetheless, we have a challenge of reevaluating the physical coverage of the branch network, as we need to deal with this continuously. 10 years ago, I said when we had more than 250 branches, I made a commitment to shareholders that this would be 120. We are at that level. Nonetheless, we will have to again reevaluate, optimize, reallocate the coverage into places where we can partner and generate additional business volumes. On the overall efficiency front, we are deploying artificial intelligence with the view that the payback should be below four years. So far, we are in experimental phase, as I said, on the AML, on the cyber crime prevention. Now we are moving into back offices and contact center, and we are discussing with some strategic partners how to do a more focused, AI-driven transformation of the bank.
Should we decide to do that, we will absorb it into the regular investment budget, and we will realize the program over the next 12 months. I think, assuming we can start in the summer, we should continuously harvest some fruit that will come out of that. The management team is stable, motivated. We are all in good mood that we survived the first quarter. With those words, I will turn it to Q&A.
Thank you. We'll now begin the Q&A session. If you would like to ask a question and you have joined the call via Zoom, please write into the Q&A chat box or use the raise hand function on your screen. Before speaking, please make sure that your device is unmuted. Once your question is answered, please cancel the raise hand function. If you've joined via the phone, please press star followed by one on your telephone keypad to enter the queue. One moment please for the first question. Our first question comes from Thomas Unger. Please state your company name and proceed with your question.
Yes. Hi. Hello. This is Thomas Unger from Erste Group. I have a couple of questions. The first one, and the main one is on the conflict in the Middle East and the impact that you see on your outlook. Obviously, there's a different kind of inflation pressure now from energy prices that we've seen in recent weeks that will affect interest rates and also macro assumptions. What does that mean for your outlook, 2026 and maybe beyond in terms of costs, net interest margin, risk costs? Are you anticipating any changes in the forward-looking element of your risk costs management overlays in the coming quarters? I'd be interested in that. Secondly, the loan portfolio composition. Obviously, loan growth is largely driven by the commercial segment, and you mentioned a very good pipeline in mortgages.
In terms of loan growth and composition, what can we expect for Q2 and Q3? Lastly on your capital structure, you said that you have measures or might decide on measures to come to optimize the capital structure. Is an extra dividend as you've paid it in the past in the cards for the second half of 2026? Thank you.
Okay, let's take it from the back, from the easiest to the most difficult one. On the capital measures, I said we are assessing them. We should finish the assessment by the end of May and decide which way to proceed. I'm not really at liberty to explain exactly what we want to do, because the phone will start ringing. Thomas, let us go through the homework, and we will report this on the 24th of July. What we have decided to do. Obviously, all of the optimization is to accommodate, number one, growth of the bank. Number two, maintain, potentially strengthen distribution of funds to our shareholders, as long as we believe that the cost of distribution of excess capital can be outperformed by investments of our shareholders.
Should it cost 15% for us to optimize the capital on the released capital, we will not do it, obviously. We are looking for some reasonable equilibrium in what cost it brings, and what benefit it might provide to the shareholders. Mentioning the capital, you should expect growth at a similar pace, slightly improving. As we have grown the performing portfolio at the level of, what is it? 6.3%. 6.8%. I'm sorry. I always underestimate us. This is the growth of the performing portfolio and gross portfolio, 6.4%. I think in your assessment of the bank, the safest way is to assume this on ceteris paribus basis, where the main improvement that will come is on the mortgage book, as we currently have a pipeline of about CZK 23 billion in transactions, and we have currently CZK 3.3 billion in off-balance sheet commitments. We are confident.
I'm trying to say we're confident that we will fulfill with some ease the operating plan of the bank for 2026. Nonetheless, it is not in our interest to rapidly grow the mortgage book. If you look at the guidance and the portfolio shape, I hope it's visible from that. We see it as a retention product for our customers, number one. Second, we want to be competitive in the market of refinancing transactions, which are 55 LTV and below. We are very successful with that, because if you look at the pipeline structure, about 50%-55% of that constitutes refinancing of our competitors. We are able to create value on the refinancing transactions, particularly, as they have low LTV established, repayment history and some credit strength.
We are focusing on the sub-segment of the market, which is in relevance, a lot smaller than is the totality of production of mortgages in the Czech Republic. This is on the long road. On the Middle East, the short answer is that we are not at a point of creating overlays at this moment. We do not want to overreact to it. I'm sure that we will have a discussion about that, but currently, as the markets in the U.S. are shrugging off the war, we want to see what will be the development of growth and inflation numbers during May, June, and obviously April, because April will be partially impacted by that. Come July, we will assess that situation and decide whether we need to do something on overlays or not. I would hope, I'm not promising this, but I would hope we will have a very clear answer on this part of the question on the 24th of July.
Super. Thank you very much.
Thank you. As a reminder, if you did want to ask a question and you have joined us on Zoom, please use the Q&A function or raise your hand. If you've joined us on the telephone lines, please press star followed by one on your telephone keypad. We currently have no further questions. I'll hand back to Mr. Spurný for closing remarks.
Well, we are tremendously grateful for your participation. We are grateful for the attention you pay to MONETA. We are committed to deliver not only the minimum target, but as I said in the very beginning of the presentation, our aspiration is to over-perform it as we have done in previous years. With that, we wish you a successful rest of the day and very good weekend. We are looking forward to seeing you either at one of the events that we plan in terms of roadshow and other events or at the next management conference call, which will take place on 24th of July 2026. With that, thank you very much and bye-bye.
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