Okay, hello everyone, it's 4:00 P.M., we can start. Welcome on Citi Handlowy conference regarding Consumer Bank exit and bank and the new strategic directions, which is called Bank for Global Business. My name is Adam Piotrak, I'm Investor Relations Head at Citi Handlowy. I'm with Patrycjusz Wójcik, CFO of Citi Handlowy, and Maciej Krywoniuk, Head of Strategy and Investor Relations. We will go through this presentation, the presentation you can see on the screen, or you can find on our website, Investor Relations Citi Handlowy. Okay, I will, Patrick, the floor, you have the floor.
Adam, thank you. Hello, hello to everyone. Thank you for joining us. I have the pleasure to present to you our new strategy and also transaction highlights, which we announced yesterday. We are looking at the transaction together with a new strategy. The transaction will allow us to focus on institutional clients and Institutional Banking. Institutional Banking is where we have a competitive advantage and proper business scale. Institutional Banking is already delivering high profitability and has very high, very good cost efficiency. Our aim is to reinvest capital, which will be released from the transactions and resources to increase clients' assets and to increase Institutional Banking revenue and to achieve higher long-term returns. We are aiming at returns around 19% by 2027. 2027 will be the first year when we are operating as Institutional Banking only.
What is very important is that Citi Handlowy will remain to be listed on the Warsaw Stock Exchange. We want also to continue as a dividend bank. Our strategy is to share between 75%-100% of current profits, but on top of that, we want also to share excess capital. I will be talking about this on the next slides, subject to the regulatory approval, obviously. Let's move to the next slide, please. In terms of transaction highlights, we are selling the Consumer Banking business, which includes credit cards, loan portfolio, all deposit products, wealth management services, including retail brokerage, together with our entire team and also branches. What's staying with us is a small FX portfolio and also selected industry-wide risks, but up to a cap, which is significantly lower than the total risk exposure.
In terms of the transaction structure, we are transferring through a demerger of an organized part of the business for an exchange of shares of VeloBank. However, these shares will be bought by Velo investors in a very short period for a great cash consideration. In terms of transaction economics, the total shareholders' value related to the transactions amounts to PLN 1.1 billion and consists of three components. One is the fixed price component, another one is the variable price component, and the third one is released excess capital along with retained net profits. I will be talking about these components in detail on the next slides. This quarter, we are going to recognize net loss on sale amounting to PLN 380 million. We received two fairness opinions from the independent financial advisors. One is from EY, and this opinion will be public.
Both opinions confirm fairness on the transaction parameter for all shareholders. What is important is the dividend strategy going forward. First, our intention is to pay out the entire proceedings from the sale of the retail business, so up to PLN 532 million in the form of an extraordinary dividend in 2026 upon regulatory approval. Also, having in mind that our capital position is strong and it will be even stronger after the demerger of the business, our intention is also to distribute undistributed profits from previous years in 2025 and 2026. We are talking about PLN 642 million, and our intention would be to pay out PLN 450 million this year and the remaining part next year, subject to regulatory approval. In terms of the timeline, the transaction is expected to be finalized in the middle of next year. Moving to the next slide, please.
You can see on the left-hand side transaction parameter based on the first quarter data. We are demerging PLN 6 billion of loans. We are demerging PLN 22 billion of deposits. Transaction includes PLN 900 million of equity, which will be transferred in cash. Also the remaining balancing items will be transferred either in cash or in short-term securities. We are also transferring half of our employees. On the right-hand side, you can see the shareholder value of the transactions. The total shareholder value related to the transaction is up to PLN 1.1 billion, and it translates to price to book value of 0.85. The shareholder value consists of three elements. Fixed price estimated at PLN 432 million, variable components up to PLN 100 million dependent on the business volumes, and the capital release and earnings until demerger, which is estimated up to PLN 570 million.
Capital release is related to the fact that we are transferring the business with a significantly lower capital than it consumes on the balance sheet of Bank Handlowy. Let's move to the next page, please. You can see how our balance sheet would look like after the demerger based on the first quarter results. Our loans portfolio would be around PLN 19 billion, our deposits PLN 36 billion, total assets PLN 54 billion, and equity around PLN 10 billion. What I'd like to also highlight here is that transactions do not have a direct impact on the capital position. The effect which we are showing here is the distributions of proceeds expected in 2026. That would be all on my side on the transactions highlights. If we can move to the next slide on our new strategy.
Starting with macroeconomic assumptions, we are assuming that GDP growth in Poland will be around 3%–4%. We will also be benefiting from the high investments supported by EU funds. Poland will stand out from the European countries in this aspect. When we look at the inflations, it is going down and hence the interest rates are also decreasing. Our assumption is that the interest rates will go down up to 3.5% in 2027. I believe it is a quite conservative assumption. Having in mind the deficit budget, the interest rate cuts may be lower. However, we took these assumptions into our new strategy financials. If we can go to the next slide, yes. We are the most global bank in Poland, and it was always great benefits, but I believe that it is even bigger benefits for the coming years.
We have access to the expertise, and we have access to the global client base and investor base, which wants to engage in the key country priorities as well as industry trends. We are talking here about national security. Poland will be one of the leaders in terms of spending in this aspect. We are talking about energy transformation and also geopolitical changes related to trade corridors and nearshoring and friendshoring. We are going to capture this opportunity and also help our clients to win abroad. If we can move to the next slides. On page 12, you can see how our Institutional Banking looks like nowadays. We are a very profitable business with a cost-to-income ratio of 25%. Our product mix is well diversified, almost 50% of revenue coming from transactional banking, 30% professional markets, and remaining parts are FX, custody, and lending.
In terms of the clients mix, the majority of our revenue is coming from the global clients, 26% are commercial bank clients, and one fifth of our revenue is generated by corporate bank. On the next slide, we are showing our product mix, how we serve our clients. We have three products, services, which focus on liquidity management, payments, and trade products, as well as digital platforms. Markets are delivering our clients' FX capabilities, offering derivatives, but also capital markets and security services. Banking is focusing on the financing and investment banking. On the next slide, we are showing the track records of our transactions. It's public, so we don't want to go into the details. You probably know the majority of them, showing that we are very active mostly in the structured deals.
Now, I would like to hand over to Maciej, who will be talking about the details of our strategy.
Thank you very much, Patryk. Let us now focus on the 2025-2027 strategic directions, which, as we started the meeting, we are calling Bank for Global Business. Let's move to page 17, where we will be sharing with you our path forward. I'll start with the vision. We want to be the banking partner for clients with cross-border needs and aspirations. We are the most global bank in Poland, where we have 155 years of experience in Poland, and we want to enable growth and economic progress of the country as well. Briefly about our strategic pillars on the left-hand side. We are and will be delivering the unique value proposition, which is characterized by the access to global markets.
We have got a track record in bringing Polish companies abroad and helping them win there. We are number one and want to maintain the number one position as a bank for international companies. Patryk mentioned some of it, so we will be supporting country economy and key themes. Definitely, two of them that are on the top of the agenda are energy transformation and national security, which is connected with the defense spend. Last but not least, Poland, because of energy mix, needs to transform the energy mix and will be helping in the transformation. I will be covering it in the following slides. What are the phases of the journey? Today, we are in phase one, i.e., we have just signed the sale of our consumer business to VeloBank, and we have already started to build the fundamentals for new strategy.
Phase two is 2026, where we want to close and migrate the consumer business in mid-2026. The go-to model, the fully-fledged go-to model with the repositioned Citi Handlowy institutional bankers from 2027 onwards. Moving on to the details of the strategy and our strategic pillars. Let me briefly walk you through the national security and the defense budget. Patryk mentioned 5% of GDP. This, when you look at the Polish debt of the Armed Forces Support Fund, equals the budget by 2027 amounts to up to PLN 300 billion . Significant spend, and definitely Citi Handlowy wants to be part of the investments that will be happening and in terms of how we will be helping clients and what's the value proposition. Financing is part of it, including trade finance. These contracts, they require the risk management.
Different hedging solutions where we will be helping our clients to manage the risk they are exposed to in these projects. Last but not least, we'll be active with supranationals and government of Poland in helping them and supporting raising debt. What's important here, we will be covering the whole value chain, including suppliers. By the way, these suppliers quite often are our clients already. We have good relationships with them already established. Moving on to page 19, which is the energy transition page. This is about Poland moving away from coal as the resource, which will be gradually replaced by renewable sources. Significant amounts of money involved in the transition, up to PLN 900 billion. What we can offer our clients is definitely the industry expertise from other markets.
We have been transforming successfully clients in their path to green and other geographies. Olmsted, the Scandinavian company, can serve as an example, and it's public information you can tap into. Definitely, the FX and risk management are an integral part of the value proposition, where we'll be helping our clients to manage interest rate risk as well as FX risk. These are long-term projects, and the risk management component is very important here. Trade finance and capital markets experience will be also important here. All in all, the financial component of the energy transition is something that we'll be very active in. The next page covers page 20, new economy. This is definitely the fast-growing market segment. You see the growth rates on the page. These are definitely outperforming other industries. Tech, e-commerce, software, these are industries where we want to be active.
It's important that we have already established a dedicated team who understands specific needs of clients in this segment. Similarly to other themes, we have been doing it in other geographies. Also, some of the U.S.-based experience that we bring to Poland is definitely recognized and valued by the clients. In terms of the value proposition here, these are the industries and the characteristics of the clients around payments, primarily. This includes cross-border and reconciliation. That's the segment characterized by needs around high volumes of transactions. They are very much multi-country companies and, as such, also need FX solutions that we have good experience in delivering, and we have good dedicated solutions for this area.
Data, definitely here, an important component of the value proposition that needs to be flexible, and we need to deliver that with speed and agility since these companies are also acting in very agile business models. Now, moving to technology, which is page 21. Technology infrastructure is definitely an integral component of our strategic plan. We will be investing in our platforms, and what you can see on the page are the client-facing elements of the infrastructure. Briefly, online banking, CitiConnect. This is the platform which is helping to manage cash management and payments area. CityConnect, this is the system-to-system integration. It can be API-based. There are some file transfer protocols that are involved, and this aims to automate the transactions that the clients have and make their life and their experience more smooth and easier. We will be servicing companies that are cross-border companies.
Trade finance is core of their business activity quite often. Our dedicated Citi Trade portal with access to their giving full control in terms of the cost limits, transactions, and definitely customizable reports will be helping here. It is one of the components of the infrastructure. We are recognized in the market for FX, and it is my pleasure to share with you that our CitiFX post will be replaced by CityVelocity 3.0. This is the platform with access to global financial markets. Not only that, there is also research in it and some market color. It can be integrated with client systems. This is briefly the client-facing infrastructure. On page 22, this is just to share with you that we have got a well-thought-out plan and well-laid-out plan designed to execute the integration on one hand with city platforms.
I've been mentioning the investments, and this is the rollout plan. Several components focused around not only client experience, but also tools that will be helping our business to be more efficient. Tools like CRM, investing in digital tools, investing in AI tools, bringing efficiency to the model and allowing our employees to be more creative and more efficient in everyday tasks. All this having in mind that all of these platforms need to be secure and resilient, which is key for our institutional clients. This is briefly the strategic directions, and I'll hand back over to Patrycjusz to walk you briefly through the financial targets.
Thank you, Maciej. Let me show you how our initiatives and strategic development will translate into financial targets. First, we want to be the leader in terms of profitability with return on equity of 19%, return on assets 2.6% in 2027. Secondly, we want to be the leader in terms of cost efficiency with cost-to-income ratio below 30%. The third component, which is very important for us, is dividend management. We want to maximize the dividends through maximizing also returns. Moving to the next slides. What is key here is our plan to fully replace our consumer business net profit by 2027 with higher Institutional Banking net profits. We want also to diversify revenue mix towards a more balanced one towards higher clients' revenue. I was mentioning capital management.
Regular dividend payouts between 75% up to 100%, but also extraordinary dividends coming from the consideration price and undistributed earnings. On cost efficiency, we are going to reduce our cost by half due to the demerger, which will allow us to improve our cost-to-income ratio significantly. In terms of profitability, you can see the difference in our profitability between the strategy which we announced in December as the universal bank and the strategy which we now want to pursue. Moving to the next slide, we are presenting here the accelerated growth from 15% ROE to 19% ROE. There are three elements allowing us to do this. First, the demerger itself. We are demerging the consumer business, which during the low interest rate cycle delivers single-digit ROE. Second component are our investments.
Our intention is to invest the released capital into the Institutional Banking segment to increase the client's assets and to improve profitability there. The third components are related to dividends. Moving to the next slide, we are showing here our track record of dividend payouts. You can see that since we are listed on Warsaw Stock Exchange, we are paying out dividend in each and every year except for COVID and financial crisis. In total, we paid out over PLN 14 billion dividends. We have a dividend company, and our strategy is to continue as a dividend company, regularly sharing the current profits between 75%-100%.
On top of this, we would like also to share the extraordinary dividends up to PLN 1.1 billion in 2025 and 2026, subject to regulatory approval, as I said, coming from undistributed profits from the previous years and also the entire proceeds from the sale of consumer business. Now moving to the financial targets. ROE increasing from 15% to 19%, ROA from 1.8% to 2.6%. Our cost-to-income ratio improving from 45% to 30%, and we are having even higher dividend capacity. It would be all on my side in terms of financial summary, and we are happy now to answer your questions.
Okay. It seems that the presentation was very clear. Thank you, Patrycjusz and Maciej. And thank you for joining our conference and have a nice evening. Bye.
Goodbye. Thank you.
Goodbye. Thank you very much.