Ladies and gentlemen, this is Dominik Prokop from Investor Relations. Welcome to everyone to the conference of Alior Bank after the Q3, 2024. At the very beginning of our conference, we talk about the results of our bank, and the main message will be presented by the employees of the bank, which is the CEO, Grzegorz Olszewski, Tomasz Miklas, Vice President, CRO, and CFO. In the second part, after the presentation of results, we'll move to the Q&A session. However, before I give the floor to Grzegorz, I would encourage all of you to ask questions during the first part of the presentation, and therefore, it will be able to fluently move to Q&A. So Grzegorz, the floor is yours.
Thank you, Dominik. Thank you, ladies and gentlemen. Welcome to the results presentation for quarter three.
Let's move on to figures that you all know very well. We try to talk about the context of the figures. When we talk about revenues, which is exceeding the forecast of the brokers, agencies, this is due to the consistent realization of the strategy in the area of risk, which means we lowered the profile, we changed the asset structure so that we maintain a strong business dynamics. Which means so that we maintain the cash loans or the business client, business customer segment. This is what we are still doing. Macro, well, not everything is in our favor, which we'll present in a second.
However, the risk profile of the bank, we managed to successfully reduce that, and it brings us some tangible results, which will be discussed later on by the Vice President, Tomasz. When we talk about commission results, then President Gibała will talk about that. This is the result of the consequence of accounting. We are trying to maintain this result at a similar level, and we assume, especially in the business customer area, we assume a long-term development. In other areas, we did not perform a de-pricing. However, we are gaining new clients. Let's keep in mind that in a situation of high interest rates, we have to remember about acquisition, about getting new clients with regular payments. I'll talk about it later on.
When we talk about the indicators, I would like to drive your attention to decreasing NPL. We see the increase of the volume of working loans of performing loans. Also, the gross loans volume grew and assets as well. I believe that Alior is well-prepared for the improving macroeconomic situation so that we can benefit from it, especially the second pillar of our strategy, which is the business customer, where we want to build on that. We have some impressive results already, which we'll talk about in a second. I believe we are one of the most effective banks. C/I 33.4 , then ROE, COR, very, very good result below 1%, and this is all result of a really well-prepared strategy.
This is the direction we're going into, and at every press conference, we try to explain it in a transparent way, but you can see clearly the benefits already. When we move to the retail customer segment, 1.5 on loan sales, PLN 1.5 billion, close to PLN 1 billion on mortgage loan sales. Dynamics year-over-year is more than PLN 1.4 billion, and we are a leader in this segment. We've only improved that and the increase of customers year-over-year, this is +18%. And in the total number, the number of regular customers is also growing. In a higher mobile culture, we have also started with our flagship service, Alior Pay.
We have just started this month, the first campaign promoting this product, since the product is already available to the customers and to the potential customers who would like to benefit from it. When we talk about the business opportunities that we had this quarter, first of all, that would be the safe 2% safe mortgage. We have benefited from that from the very first day. Then the increase of sales, increase of mortgage loans above, really above, possibilities. I mean, so far, Alior Bank has not been calibrated, so that we could generate such sales. So for us, this is a huge success. Asset increase to PLN 176 billion. That means that we have a lower profile, PLN 17 billion, sorry, excuse me.
Then, one billion, two hundred million, excuse me, of the volume of positive decisions on the safe mortgage. And then by the end of September, we had 6% here in the share of the agreement signed. However, right now, on the fifth of October, it's above 12%. Let me go back to the market share. It's 2.3, and now the agreement signed, it's 12% and even above. Then cash loans. It is, it used to be crucial, it is crucial, and it will still be crucial. Over 50% of share of remote sales, but the Q1s, it is the Q1 since a long time when assets are on a higher level than in the previous quarter.
During our last conference, I told you that we've slowed down here, but this is the Q1 where this portfolio grew, where at the same time we have repricing and maybe a bit weaker sales in the Q3. However, what is important is repricing. Repricing has been done. We see that we are able to sell cash loans in a more effective way, and that's why we use that momentum. Consumer finance loans, that is also an important part for Alior Bank. The sales of CF loans is on a very good level. We're...
The fact that we are recognized among our partners, we put emphasis on our innovation, and that means that in the Q1, as I mentioned, we decided to let it go due to repricing, and now we can see that that strategy was the right one, because the market still would come back to us, and that really happened. When we talk about the relationship with our customers, retail customers, we have year-on-year increase, quarter-to-quarter increase. We are, especially here in the management board, happy with the system, systematic account inflows increase, so that this grows together with our bank. This is also confirmed by the number of accounts, Konto Jakże Osobiste, as well as the increase of the number of mobile application users. We have a quarter by quarter, we're growing by several thousand.
It's a very good result when we take a look at the market. At the same time, we are going consistently through the evolution. We are changing this mobile application. We are adding on next services, and we're improving sales services. This is as a result, we have +50% of the sales here. Right now, we are mobile bank exclusively for part of the services. We hope that this channel is going to be the dominant channel. The BLIK transactions grew by 40%. That shows that we are becoming a first choice bank for a greater number of customers. Then the second pillar, when we are supporting entrepreneurship, which is business customer segment here. Here, it's crucial that we are defining certain goals, and we are meeting those goals.
We are growing 2.5-fold faster than the market, up to PLN 5 million, which makes a difference for us because we are able to have the full relation with the client so that we have a product there and a deep relation. We are diversifying here. We used to be recognized mainly as a bank. We are still recognized as a bank that is that understands the sector of housing, of construction, real estate. So we are growing in trading as well quicker than market. So we are also. This is also a part of the strategy of the bank to diversify our activities so that we are adjusted to different possibilities.
When we talk about sales of non-loan products, one of the key things in the strategy, so this is the relation with the business customer, but also non-mortgage, non-loan products. So in order to make this relation strong, as you see, it's over three-fold increase when we compare this year versus last year. In order to maintain effectiveness, we have to, we have to simultaneously have this increase in market share, and as you can see, it it's being done in the retail customer. We have remote processes that are able to service our clients quicker. We are able to take the burden away from the bankers. And in the Q3, we have seen a dynamic increase in the remote-
... dispositions. It's over 60% right now. And now, when we take a look at this good trend in this remote services, it is right now over 60%, as I said, about the mortgage decision. It's good, because on the one hand, it's a quick decision for the banker who is working on the process itself. But also it gives us a better quality and the control over the risk process, and the possibility to forecast the risk costs for the future, which has this multidimensional meaning that we managed to implement in the retail segment. We had the goal to build on that segment, and we have consistently improved that. Moving on to the performing portfolios.
In each structure, we can see that we have an improvement. So that is, we are growing faster than the market. That's a very good, that's a very good information. The performing portfolio, year-over-year, we have those PLN 20 million commitments. So the market is slowing down, we're growing. For us, this segment is between PLN 20 million and PLN 60 million. That's the segment that is crucial for us. It's threefold greater dynamic, and it's a great achievement here. But we're also looking for possibilities for chances here. Since we haven't been in this segment, we are now using this possibility to the maximum. So over PLN 60 million, exceeding PLN 60 million, we are also trying to build the assets. When we take a look at balance of assets, year-over-year, we have -17%. Quarter-over-quarter also, we are systematically reducing this balance.
With the at the same time, we are taking care of the balance of performing balance. It's a good news since we are performing the transformation with the weaker macro. So I am an optimist, and I'm convinced that this is. Well, looking at the various factors like the situation on the market, a good prognostic for the bank, and a good signal, insofar as how we can tap into the opportunities appearing with the speed of economic growth in our country. Improvement of effectiveness, improvement of processes, this is a critical thing. Alior used to be a pioneer insofar as opening accounts. Now, we are a pioneer in combining this account on selfie with other options.
This is important because there are various channels for people to enter into contact with banks, also with the use of the mobile phone, but also with the help of a human being, to quickly open an account and to implement this process. This is a very important thing for us when we counsel individual customers with the sales of different types of loans. So, we get the biggest amount of cash out of that. We make available new ways of identification, like citizen or new possibilities of FX exchange with the use of BLIK. This is a big simplification for customers, and this is a great chance for the bank to get means FX to BLIK. So, increasing this relationship, we have made it available for all clients.
There was a promotion campaign in October for this product. Active quarter, insofar as CSR. This is quite surprising, insofar as ranking of the banks, when we are looking at, at the assets and our activity, insofar as our activities for inclusiveness, including people who have come to Poland, remembering how important it is, so that, people who are in Poland, who have adapted themselves, who've entered the market, it's important for their children to enter the process of education with the cooperation with UNICEF and the US Embassy. We have promoted a very difficult, but I think, a quite important, exhibition, From Darkness to Light, within the implementation of the strategy of the second pillar of supporting entrepreneurship. We continue our business breakfasts with entrepreneurs.
This is a very important element of the discussion of understanding the needs of the customers, understanding where do they need support, and building our brand within a micro, small and medium enterprises. Our prizes or awards that we received are the consequence of the results when we look at the number of implementation and the speed of implementation. The third pillar, the modern bond within the ESG strategy, we concentrate on social activities, but also within governance, and this is quite important for us insofar as KPIs related to dividend. We want to be transparent, we want to fulfill the highest standards within corporate governance, and we want this to happen with the benefit for the shareholders, first of all. We approach environmental issue seriously. We work on it.
We try to tap into the business potential related to energy transition in the country. So this is all from me, and now I give the floor to Tomek, who discuss risk area.
Thank you, Grzegorz. Tomasz Miklas, the risk area last quarter and the entire year, this is not only the good result of the bank and very good, sales result, but also very good results within risk. Insofar as Tier 1 capital fifteen, over 15%, TCR over 16%, three and a half billion, the Q3, it's +140 basis points. Insofar as MREL, within issuance of PLN 400 million that you know about, it fulfills the requirements that are imposed on the bank.
At the same time, as we communicated, we plan to have an additional PLN 1 billion of additional issuance because the old bonds will expire, so we plan new issuance. Insofar as LCR and NSFR, they're on a very high, safe levels, 188% and 140%, with regulatory minimums on the level of 100%. Before I move to discussing results for the Q3 within credit risk, a short piece of information for you. What do these results result from in this area, the good results? The first, the credit quality transformation within the years, it has improved. In 2019, the default rate, so the percentage of our portfolio that enters the default, was 5%, and then year after year, it decreased.
This year, 2.5%, so reduction of over 50%. The second thing is structure transformation. Grzegorz talked about used opportunities within mortgage loans. Looking at all those years, the share of mortgage loans has grown from 21% - 29% in our loan portfolio. So this has a great impact also on risk. And NPL reduction, besides the improvement of our portfolio, the sales are going up. In time, we reduce non-working, non-performing portfolio. In the years 2019, 2020, it was over PLN 1 billion. In 2021 and 2022, it was almost PLN 2.5 billion of reduction each of these years.
This year, until the end of Q3, 900,000, but the year doesn't, didn't, is not over yet, because these activities are not symmetrical over the quarter, so we'll be summarizing it in the future. Now, NPL indicator at the end of the Q3, 9.39%, from the historical level of maximal at the end of 2022, almost 14.5% in 2020. So, a reduction by one-third. So we are not slowing down insofar as the cost of risk dynamic improvement in time. So 2020, 2.8; 2022, 1.5. So this year, the first three quarters, 1.16, one of the lowest, if not the lowest level in the history of Alior Bank, with some positive events, one-off events.
After the Q2, we have communicated positive events. In the Q2... In the Q3, we also had a group of positive events related to positive restructuring of clients, corporate clients, which resulted in the fact that real money came to the bank in this process. Or within the improvement of the situation of the clients, we're able to go back to assess the clients, that the clients are in a normal situation and there is no threat to repayment. Insofar as this year, we do not expect that the cost of risk of the group would go over 1.1%. A similar result on a similar level is expected in 2024, and in the average, in the midterm perspective, we expect stabilization of the cost of risk at the level of 1%.
If we go deeper, the results of the cost of credit risk, NPL quarter to quarter is being improved. It's not only in years, but every quarter brings another improvement. If we look at business lines in the segment of individual customer, very good level, market level, business segment, 5.1571% with dynamic improvement. This is an area on which we concentrate so that to reduce this level. The coverage provision, NPL provision coverage very stable in the entire group, and the costs of risk, as you can see, quarters at the end of last year were higher levels. This was the time when dynamically percentage rates were growing, and we had to get adapted to interest rates were growing, and this has improved our credit portfolio that resulted from our organic activities.
This year, this is the moment when our clients have adapted to higher levels of interest rates, and this has translated into our results. The last two quarters, the cost of risk below 1%. If we would correct it with the
... one-off events, it's, there is an improvement. Also, there are very good results, very good improvement. Insofar as risk, very strong capital position, a lot of improvement, very high safe liquidity and consequent improvement of quality of credit portfolio, loan portfolio, and we decrease the cost of risk and NPL. Thank you very much. This is all on my side.
Thank you, Tomek. Hello, ladies and gentlemen. I'll allow myself to start with a slide with income statement and simplified one. Zloty. 1.445 billion in bank activity. However, one comment, one technical comment. You see the dynamic or the comparison quarter-over-quarter, or three quarters of this year compared to last year. I would like to remind you, and you remember it perfectly well, that last year, we looked into loan vacation or the support of commercial banks, which is also mirrored here. So, this is a simplified approach, and this dynamic is a bit shaken here. The subsequent slides will have normalized results.
What I would like to comment here, looking at this slide, the interest rate margin, 616 in this quarter. Net interest margin, 5.93. The second value is very close to what we have informed you about earlier. And the Q3, over 6%, this nominal difference, and the third point is visible, PLN 58 million. Some of it is because of re-estimation of our portfolio. But other reasons is the growth of financial income, some of this increase in income from financial assets, and other elements, some because of better yields that we get on those papers and on those securities.
The third factor that explains this difference is our hedging strategy, that we can say quarter to quarter, we have the amortization of the portfolio, and it takes away less in the interest rate cost. If we compare these, this is the result of PLN 200 million, and it's being improved. This is why, summarizing these factors, we have the highest interest rate margin. What is worth mentioning is return on equity. It's almost 28%, and the effectiveness of the bank with C/I factor, 33.4%.
Now, the percentage result. Well, I kind of informed it, however, I would like to draw your attention to the right top corner in the financing cost. We have here expressed it in the percentage, quarter-on-quarter, so it's 231%. If you take a look at the middle top graph, you see the nominal decrease. The difference is due to the service on those bills. It's around PLN 3.5 million per month. As we also informed you later, earlier on, we are constantly actively participating as one of the main market players in deposit market, and we are adapting our policy to this passive balance sheet, as and to our competitors, as well as to what the monetary policy tells us.
We've been talking about this since January, quite actively, and we're one of the first ones to optimize financing costs. What's worth mentioning is the deposit ratio, which is maintaining on above 80% all the time, which is aligned with our aspirations, because we would like to have a greater part of the deposit base working as a loan portfolio. Then, fees and commissions. Maybe a word of comment to start with. We try to present it in a transparent way, the commission results quarter-over-quarter. And now, the nominal value is the decrease. You can see the decrease. However, some of you already have noticed that, in fact, those additional PLN 41 million in the trade result, this is the result of accounting of FX transactions and the movements there.
So if we add what we have here in the result, trade result, then we are on the very similar level to the Q3. We are working on that. We want to stabilize it so that it will be reflected in the commission result. However, we owe you that comment, since we want to be transparent in our presentations. Well, as all the of the commission income is concerned, for several quarters now, we are stabilizing it, and we do not introduce big changes. We are hoping for an increase on of the relation here in the individual client. We hope it will be appreciated, and be reflected in the interest rates. That's why we talk about plus PLN 200 million per quarter. Now, costs. Maybe in two steps, the comment on the middle graph.
When we talk about the whole total costs year on year, then the dynamic is, as we informed you before, 16%. There is an inflation pressure still, and it is reflected somewhere in the activities of all the banks, I believe, in the market. I believe we are somewhere in the middle of this sector. But when we talk about the employee costs, year on year, that's 17%. We, as an employer, try to follow the market and not to... and to maintain, to still be an attractive employer in this macroeconomic environment. When we talk about administrative expenses, well, according to the previous assumptions and announcements, excuse me, we all know that rents and leases are growing, marketing costs are growing. This is absolutely an aware decision here when we manage our marketing budget.
Those administrative expenses include additional provisions for legal settlements, and each quarter we update this line. When we see that there's a need to update, then we update it in the additional provisions for legal settlements. More you will see in the comments to the balance sheet. When we talk about the next quarter, then it will probably depend on the inflation levels. I believe our base speed of our monthly cost is around PLN 150 million. Of course, there are events on the, like, legal risks or inflation. These may impact the situation. We'll communicate on that to you. Going away from this slide, C/I, 33%.
When we take up the total, then it's 35% for the quarter, for quarter three, which is a very good result, meaning that we are in the leader, the market leader. When we talk about the strategy on the financial targets that we've declared to you, as you can see, they're significantly better. However, just to comment on that, taking profitability into account, which looks very good in an annualized way, calculated whether this is the profitability and the effectiveness, whether this is cost effectiveness, and when we also take increases in capital into account, but also the work that we've done, that Tomek mentioned on the risk.
If we also add to it the liquidity indicators on the good level, I believe that we can say that we are somewhere midway of our strategy, and I believe that the bank is really, really well-prepared to the increase of equity and to Polish economy. Here we have a slide with our key points after this quarter. I'm not going to discuss this again, because that was already covered during the whole presentation. And now questions, Dominik. Thank you very much. We have quite a number of the questions on dividends. In the strategy, the bank assumes lack of dividends payouts. So the question is, because of this profitability, would you consider a bit less conservative approach to the dividends from the income of 2023?
Let me come back to February this year, when we communicated our strategy. We did say that we are determined, the management board, as well as the whole senior team, to pay out the dividends by Alior Bank. And as we said, responsibly, we want to build our capability to do that after 2024. And as you can see, this determination, this we still aspire to do that. We would stick with that declaration. However, please keep in mind that the bank is not paying out dividends, but has the plan needs to consider the regulators' consent as well. So we are sticking to our strategic perspective. Thank you very much, Radek. Next question: What kind of contribution to the ECL provisions?
Well, that was close to zero in the Q3, and that's the result that I've presented you with, is the result of the improvement in portfolio and corporate clients, and not ECL. Thank you very much, Tomek. Does Pay Now, Buy Now, Pay Later service is working? Is the interest in this product growing? Well, yes. And what are the volumes?
As I mentioned, for all the customers in September, we've noticed the increase of interest. Well, the October is already finished. It's around 20% of new limit of increase. When we talk about new limits, the promotional campaign is just starting. We are talking about millions and not dozens of millions. We are just starting with the promotional campaign of this product.
It is developing as expected. So which means we assumed internal implementation first, and then implementation for all the customers who have the resources in the bank. And then the third element, that's implementation for the customers that still do not have those resources in the bank, according to earlier planning, so everything goes according to the strategy. Thank you very much. Guidance for the cost of risk midterm has been agreed on so 50 BPs. Is it an ambition, or is it a real target? Does it also mean that the real cleaning of portfolio and NPL are behind us, as it used to be in the previous years?
I hope that, for the previous quarters, we've accustomed you to the fact that we are, reporting real goals and not ambitions, then, clearing of the portfolio. Well, we still want to, to have NPL, and it's not, finished yet.
However, if the context of the question is that it would have a negative, effect of, on the cost of risks, then this is actually included in the cost of risks, that we've, reported to you. When we talk about corporate client segment, we see more, opportunities than risks, in comparison to the previous quarters. Wonderful.
Thank you, Tomek. Another question: What is your forecast on the reference interest rate decrease, reduction in the coming years?
Well, ladies and gentlemen, we are in the process of budgeting the next year as well as the next coming years since August this year. These are the requirements of the group that we are functioning with. Our office of macroeconomic analysis told us after the reduction of 75 BPs in September; now the path looks like that. We are expecting, of course, assuming that the reduction of inflation, the decrease of inflation will continue, so it will be 5.25% by the end of 2023. Then 2024 is closer to 4%. That's how we see it, and then we are preparing our forecast assuming 3.5% or around 3%. That's our base path.
However, of course, we have to have a number of assumptions here. One of them, decrease in inflation, in inflation, inflation, and, but this is, what we've assumed. Thank you. Inflation, excuse me.
Okay, next, question: Is the hedging strategy that is being implemented by the bank, will it allow to, mitigate for the, revenue shortfall? Yes, to put it, easily. However, when we take a look at the number of interest rates and the level of interest rates, it is around PLN 200 million due to the hedging strategy is going, is given back in this, strategy. Within the whole year, it's PLN 800 million.
But when we take a look at the previous year and then the whole year, and when we take a look at the forecasts that I've mentioned, we are talking about PLN 300 million-PLN 400 million that will be-
... next year, due to our depreciation of our hedge portfolio. So just to sum up, for sure, yes. However, you have to remember that there's quite a amount of the loan portfolio with fixed rates, because the quite a big part of this mortgage loan, 80%-90%, depending on the time window, is with a fixed rate, and it is similar with the cash loan. So I believe it's an effect of a natural hedging. And with such a forecast of interest rates, we are expecting some revival of this volume.
Thank you very much, Radek. What is the volume of NPL loan was sold in the Q3? We did not sell that in the Q3. That was due to the increase. The improvement of NPL was due to in organic work.
Now, the employee cost dropped by 3% year-on-year, quarter-to-quarter, even though that, we had an increase of over 100 jobs. Well, it's a good question. I mentioned about year-on-year 18%, and quarter-to-quarter, we have decreased a drop in the nominal value. The question whether this is because of the provisions on holiday or that would explain that. However, quarter-to-quarter, it can vary still because we are during the implementation of the strategy. Thank you very much, Radek. And the next question: administrative costs have gone up by 7% quarter-to-quarter, although in the previous quarters, there were provisions for disputes. Are there one-offs in the Q3, or this is a new increased level of costs?
Maybe I'm gonna go back to the monthly cost that as we see them, PLN 150 million, as I've said, and we need to assess the legal risk and suppose disputes or inflation, generally understood, which appears in various ways in different lines. We are talking about PLN 160 million-PLN 180 million, taking into account current information. But remember that costs might be quarterly a bit disturbed or seasonally, because of BFG every year. Thank you very much, Radek. And the next question: what happened with the risk cost in the retail segment in the Q3 compared to Q2? 112 BPs versus 84 BPs. Could you explain this trend? Of course, the results of the Q2 in the retail quarter, we have communicated the specific amount.
This resulted from a very positive result of NPL portfolio sales. But if you look at the greater horizon with the positive disturbance, the trend is actually decreasing quarter to quarter. Thank you. Thank you very much. Tomek, we have exhausted the list of questions. I would like to thank everyone for the participation in today's conference. I would like to thank our CEOs, and please feel invited to this event in the future.