Good morning, ladies and gentlemen. Welcome, everybody, here in the room and those of you who participate in our quarterly results conference online. We will talk about the second quarter and the first half of 2025 results. The scenario of our event is fairly typical. We will present the important information, talk about the macro situation. Our CFO, Piotr Konieczny, will do a deep dive into our financial results. We will talk about risk, and then we will discuss the perspective for the next quarters. The most material information: it was a good quarter for our bank. We had a net profit of PLN 734 million. It is a result that is only slightly lower than the first quarter of this year, but much better, over 18%, than the profit of the second quarter of 2024.
We have noted a very significant double-digit increase in revenues after factoring out the credit vacation. I believe it is a very solid result, plus 10%. As for net interest margin, it has decreased a little bit. I know that we are in the interest rate easing cycle, so this is showing the decreases that were already materialized. As for credit volumes, they ended up flat quarter to quarter due to a confluence of a number of elements. Good news in terms of CIB banking, and that would be corporate and institutional banking. We have noticed significant increases in retail and personal finance banking. We have reversed the trend. As you remember, due to a low level of mortgage loan production, the volumes were decreasing in previous quarters. This quarter, the trend was reversed. We have zero plus.
Frankly, I am optimistic with regard to the following quarters, especially in terms of mortgage and cash loan production. As for corporate banking and SME, the result is not satisfactory. This results from a number of phenomena. Some significant repayments of corporate loans. The most material one was the one that the bank was actually striving for, and we were able to achieve full repayment from a client whose profile risk was concerning to us. On top of that, we have the repayments of preferential liquidity loans for farmers. As you remember, in 2023, the government has launched a special program of very attractively priced subsidized loans for farmers. Since we are very specialized in this segment, we had a significant market share. Those loans were profitable for the bank and very attractive for the borrowers. The program was not repeated. Hence, the loans are being repaid.
Therefore, SME dynamics is not what we might wish for. However, the very fact of recovering those losses by new transactions, I see as a good outlook for the future. ROE, 18.8%, a very solid level. I would like, however, to draw your attention to the cost-to-income ratio w here quarter to quarter, we have improved by 4 percentage points, and year to year, 6 percentage points. We are working to improve our efficiency, and you can see the cost situation. We consistently work on our costs, and we are going to continue to do it in the future. As for our strategic pillars, just a few information. Sustainable financing level, almost PLN 11 billion. A very interesting service, GOdreams, a service that we have launched. It is an innovative gamification-based product, encouraging people to save.
It allows savings for previously planned objectives, making dreams come true, while at the same time teaching people how to save in a smart way. It's a service that we offer to our clients free of charge. They are happy to use it. We also have a number of new clients that find this service attractive. Our Mastercard World Elite card, offered to our affluent clients, has won the first place in Money.pl ranking. It is indeed a card that is offering a wealth of additional services and rides. It enjoys trust of our clients. As for other pillars, let me just mention the so-called Golden Shield of Cyber Security. It is an award that was granted to our bank under the Golden Banker competition. I do believe that the entire sector is safe and resilient, but only one bank, our bank, has received this award of cyber safety Golden Shield.
Starting from January, what is rather clear from this graphic presentation of our activity is major dynamics of mortgage loans. We are gaining momentum here, and in every subsequent month, the result is higher. We are expecting this trend to be maintained in the coming months. We also have very good dynamics of cash loans sales, which are the highest margin product in our bank. Here you can see the dynamics of loan deposits and the number of clients. Loan volumes, I've already mentioned the fact that the retail client portfolio was stabilized is a very positive phenomenon. We hope it is the beginning of a positive trend. I mentioned, actually, I discussed the corporate banking in extenso a moment ago. As for client deposits, the growth is small but rather tightly controlled.
We have a slight increase in liabilities, client deposits, and we are particularly happy to see positive dynamics of balances in current accounts, which is tied to improved efficiency of acquisition of individual retail clients. We continue the process of, one would want to say, cleaning up the client base. We closed down the accounts of permanently inactive clients. We were not able to convince them to renew their relationship with the bank. Keeping them on systems would result in costs and the need of going through KYC. Keeping them purely for statistics just doesn't make sense. This operation will be continued. What I would like to draw your attention to is positive dynamics in terms of the number of clients in the affluent private banking and wealth management segments. We have over 8% quarter- to -quarter growth here. These are the client segments where we feel strong.
We work on them, and the scale of those clients is more attractive to the bank. I hope this trend will continue as well. Moving on, you can see that the net banking income has decreased a little bit quarter to quarter, but I have already mentioned the solid double-digit growth. If we look at reported data, we have over 10% growth after excluding the credit vacation, the loan vacation effect. It's definitely satisfactory. Please, look at operating costs. First of all, we managed the costs in a very disciplined manner, all cost categories, including personnel costs, where we continue the process of employment optimization at the bank headquarters. This is a process that we are going to continue.
The very fact that our costs have decreased both quarter to quarter and year to year in a situation, I mean, if we exclude the regulatory cost effect, compared to our competitors' data, this definitely stands out in a positive manner. In the second quarter, we have established many more provisions for legal risk related to mortgage loans in Swiss francs. You can see nearly PLN 250 million compared to PLN 65 million in a previous quarter. Despite that, the net profit in the current quarter is practically on the same level. I would like to add, and we are going to talk about that, that our cost of risk has been, as is usually the case with us, on a very good level. Here, you can see two bits: accumulated cost of risk for the first six months. In the second quarter, the cost of risk was actually positive.
This shows that we are working on a very well-structured, safe, and well-managed portfolio. We are very effective in terms of restructuring activities. Hence, the cost of risk seems to be lowest in the markets. I've already mentioned the cost-to-income ratio. It is not the level that exhausts our aspirations. We will continue working on improving the bank's effectiveness. The significant efficiency, the significant 4% decrease quarter to quarter, 6% year to year, is material for us. The net interest margin on net assets is slightly decreased, but I have already mentioned the return on equity on a level of nearly 19%. This is it from me. Now, I give the floor to Michał Dybuła , the Chief Economist of the bank.
Good morning, ladies and gentlemen. The economic situation, that's my witness. I think that at the backdrop of what we're having around us and around the economies in general, the speed of economic activity remains quite decent, about 3%-3.5% in the entire first half of the year. What is worth emphasizing is the fact that compared to last year, the structure of this growth has changed. It's not only consumption anymore. There are also other factors contributing to economic growth, such as investment. I think that in the coming months, this trend will continue. We already see it in the data related to loans. I think that we won't have good news related to export. At least in the next few months, exports seem to be the weakest link in the economy.
Taking into account the fact that the EU countries will be subject to tariffs introduced, or some additional tariffs have been introduced by the Trump administration on imports of goods from the EU, that fact will not be conducive to our development in the coming months. Still, the domestic demand, that is investment and consumption, should allow us to remain at the level of 3.5%. The level of growth may be higher in the second half of the year. Consumers will be also helped by lower inflation. What happened in July is something that everybody has expected. The inflation slowed down quite significantly to about 3%. The coming months will probably bring us even further decreasing inflation and slowly getting to the National Bank of Poland's inflation target. The lower inflation also means lower interest rates. The second quarter has brought the return to the process of monetary easing.
In July, the Monetary Policy Council decided to introduce another decrease of interest rates, which probably is not the end of it. We'll probably see some more of them this year, and the process will probably be continued also in the first half of next year with the reference rate nominally below 4%. So far, these activities of the National Bank of Poland do not seem to impact the exchange rate. I think that on the one hand, we have an advantageous structure of our payment balance, the deficit of the current currency there. It is funded with the influx of capital, foreign capital in the form of direct investments, but also portfolio investments, which positive interest rates are conducive to. As I say, in the next few months, in spite of the nominal lower interest rates, in real terms, this interest rate will still be attractive for foreign investors.
Lower interest rates, a relatively decent economic situation. This translates into higher demand for credit. This can already be seen in all the main segments of the market, be it consumer loans, mortgage loans, or corporate loans. In terms of the latter, it does not mean that the demand is growing in all the sectors of the economy in the same way. Still, I believe that the coming months will bring us at least the continuation of those trends, and the loan activity will be growing at a decent pace, better than in previous months or years. Finally, I think it's also worth mentioning one more thing, that we have still higher growth of deposits of the non-financial sector, that is enterprises and households, over loans. We see the surplus of deposits over loans.
We don't expect change in this respect in the near future because the demand is not only created by the credit of the retail loans, but also influx of funds from abroad and loans of the public sector. The decreasing ratio of credits to deposit is something that the whole banking sector will have to come to terms with. That will be all from me and I shall hand over to Professor Konieczny.
Good morning. Let us go back, perhaps, to financial results in the half-year terms. As in the first part, very good results after the first six months, almost PLN 1.5 billion, built practically on all growth pillars. Interest income, but also trading income, and all that supported with the fixed commissions income.
This income has also been built in the backdrop of the already mentioned very good results in cost management by the bank, as well as the costs of loan activities. Therefore, if we look at the ratios, all the financial ratios related to our activities are in the green area, good or very good results of the first six months of the year. If we look at the loan portfolio here, as it has already been mentioned, we have two streams. On the one hand, we can see the acceleration of new loan generation, particularly in retail banking. But because of the process, we can't really see it in full in our balance sheet, but we can be optimistic about it.
On the other hand, we have the situation which is related to the repayment of loans, which is also an element of the fact that we are getting into the cycle of decreasing interest rates. Refinancing as well of the existing exposure to lower interest rates also contributes to this particular dynamics. Still, the first quarter was really flat if we look at it. We believe that there are no reasons for the bank not to be able to sort of accelerate the loan generation and loan origination. Two words about the Swiss franc loans portfolio. The first six months saw this stable dynamics of the influx of new cases, 417 in the first quarter, 423 new cases in the second quarter. We can say this is an apparent element, we can say, of our financial environment.
Compared to other cases, we adjusted our allowance trajectory, and there were no other events related to that in the previous six months. We continue concluding settlements with our clients. At the end of the first half year, we had 6,348 settlements concluded with our clients. As regards our deposit portfolio, both the economic situation and individual liquidity situation of our clients mean that there is no need for very aggressive activity to actually acquire these funds. We are trying to make sure that the growth takes place at the lowest possible costs. What really makes us happy is the growth of the deposit base based on current accounts, both in the enterprise sector, corporate sector, and retail sector. These are the directions which are very important for us. Investment project that we continue to grow in this sector after a very good first quarter.
The second quarter is slightly lower, but still, if we look at the first six months, the growth dynamic is very strong. The profile of our client remains more or less the same. There are no real comments to that anymore. As regards net interest income, as I said, we have entered the cycle of the decrease of interest rates, which we can already see reflected in the net interest margin, which has gone down just slightly. As regards the growth of the net interest income, this still contributes very strongly to the general income of the bank. We are really working very hard on retaining the interest margin when we build our loan portfolio. As I also said before, we make sure that the margin costs related to shaping that portfolio remain under control.
As regards to net fee and commission income, here, 5% growth year on year in the first half. Robust growth on this particular part of the bank's business related mainly to the card payments supported with loan portfolio income. It's a very strong element. If we look at individual quarters, it really contributes to our overall income in a very robust manner. The first six months, very, very good result on net trading income, both in CIB sector, which is related with several very big transactions, but also in retail banking. The double-digit robust growth in this area of our activities supported as well by the bank's policy of hedging the interest rate risk with a number of hedging transactions, which positioned the bank or placed the bank in the right position in terms of the place of the interest rate decrease cycle.
Costs, as we've heard already, very good quarter and good six months. We pay a lot of attention to costs and all types of costs for that matter in the first six months. As it usually happens at the beginning of the year, there's a number of increases in personal costs where we have a pay review. That's one big event that took place at the beginning of this year, as usual. Still, we review all the costs very carefully related to internal cost consulting, cooperation with our suppliers and vendors. We try to make sure that this growth and the cost policy is strongly under control. A lso, we are doing that in the environment while we still continue optimizing the employment and the runs related to creating employment. Generally, we reduce the employment in the bank. Now, I should probably hand over to Wojciech.
Good morning, ladies and gentlemen. The cost of risk in the first half of the year was very limited throughout the bank. In the second quarter, we had two very positive modal events that had an impact on that. Even if we remove the effects of those individual phenomena, the cost of risk would still be very limited. We have done a full review of the portfolio in terms of the customs tariffs. The impact will be limited, PLN 7 million. All the clients were shifted to phase two. As a result, we maintain a portfolio with very good indicators in terms of impaired loans, both in nominal and percentage terms. It's below PLN 3 billion, PLN 2.8 billion, actually, and 3.2% in terms of percentages. This is a very good situation in all segments, very good, very stable.
In the second half of the year, we do not expect any dramatic changes. The only impacts may come from one-off events. The further phases are also very stable, with very stable coverage. Phase three, we have a minimum increase in coverage after the second quarter. This would probably be the case in the third quarter as well until we decide. It is a cyclic activity. If we decide to sell non-performing portfolios for retail, SME, and corporate segments, then usually the coverage is decreasing a little bit and gets rebuilt subsequently. Now, capital adequacy. As for capital position, the base capital of the bank was strengthened by one very serious event. After the decision of the General Assembly, the envelope or the part of profit, the portion of profit redirected to equity was increased. Our equity was strengthened.
The bank is very solid in terms of asset quality and liquidity. All the constituent elements of credit growth are met. We continue the policy that resulted in a very subtle increase in the cost of operations. We work on acquiring a deposit base. We can say that the first six months are really very good. As a result, we have certain expectations. We are building certain expectations as to the second half of the year on this. Thank you. Ladies and gentlemen, we are arriving at the end of the presentation part. Perspectives and priorities. I have a feeling that the world has not changed much since the end of the first quarter. We still have geopolitical uncertainty. We still have conflicts. We still have major volatility in U.S. policy versus the rest of the world. We have a somewhat new political situation in Poland.
This is a fresh development, however. The new development, we will see how this is going to impact the economic environment. For that reason, I will not really discuss that. As for the situation of the bank, I will say we will continue doing our thing. This involves acquiring new transactional clients in all market segments. We are really focusing on that. We go to the market with new ideas, new products for retail clients. I hope it will work well in the third quarter, that it will gain momentum in the third quarter. Building the loan offer and portfolio, this works. When I look at the pipeline, it looks promising. The fact that the negative trend in retail banking was halted may also be a reason for optimism. We will continue working, as we always do, on improving the quality of our work with clients, their experience, their response time.
We see a significant decrease in the number of complaints that we receive at the bank, although, of course, we are far from perfect yet. Efficiency that we mentioned at every turn, of course, this will continue working on costs. Piotr mentioned that. I would add information on activities aimed at effective or efficient human resources at the bank headquarters. We are implementing new organizational models. It will effectively happen at the beginning of the next year. I am, however, expecting that this employment or headcount optimization will continue. This is more or less it. The world is uncertain, but there are many reasons to think that the bank is well prepared for that and that in conditions of a clearly positive economic growth in Poland, the bank will also continue to grow, develop, grow organically, and deliver satisfactory results in coming quarters.
Thank you for your attention, and let us move on to the Q&A session.
Good morning. Do we have questions from the room? Good morning. Andrzej Powierża , Citi Handlowy Brokerage Office. Congratulations on your results and the increase. And two items that were a very positive surprise for me. The cost level. To what extent will you be able to maintain the cost level from the second quarter? So how much is it a starting point and how much it is a new normal? And finally, the financial revenues. To what extent the good result of the second quarter can be maintained? And to what extent was the result of a happy coincidence of positive circumstances?
We will definitely keep a keen eye on costs. I do not want to declare that the cost result would be repeated in the coming quarters because we still have the deferred inflation impacts, the cost pressure. It will be difficult to maintain the costs at the current level. I can, however, promise that we will continue working on costs very intensely. As for trading transactions results, this is a kind of business that consists of a perennial part, but also major hedging transactions. This result is certainly under the influence of the volatility of the market, the scale of the volatility. It is, once again, difficult to promise repeated results. We do see, however, that this income line is developing very well in the bank. It is a significant contribution to the result. We're looking at it in a strategic manner, and we hope that it would continue.
Thank you for your kind words about our results in the first quarter, second quarter. Moving to questions online. Have you created in the second quarter, have you established provisions for SKD and unauthorized transactions? If so, on what level? Second question, what does the management think about the new legal risk and the related transactions? As for the numbers part, in terms of reserves or provisions for unauthorized transactions, we have two elements here. First, the formal part of the process, the legal proceedings are ongoing. Nonetheless, the bank has created a provision, established a provision in the amount of approximately PLN 49 million. Some of it in the first quarter, some of it in the second. As for sanctions for the free loan, as of at the end of June, the level of provisions was PLN 1.3 million. It's not a significant amount.
If we look at these transactions, like I said, it's difficult at this time to present a complete position because we are in the process of negotiations as the entire sector. However, in understanding the proceedings and the official course of things, it is a very symmetric look, we could say, at the relationship between a consumer and the bank in this respect. Like I said, we are in the process of negotiating.
Another question, [Puls Biznesu] . How does the bank define the permanently inactive clients and when the process of cleansing the base of such clients will complete? The permanently inactive clients are the clients who for many months have not undertaken any transaction on their account in spite of the fact that the bank has tried to contact them through every available channel, and they decided not to respond to such contacts.
The balances on such accounts are really very small, just grosze rather than złotych. After months of inability to contact the client and to convince the client to revive the account, we take the decision and we send a letter to that effect, informing the client about the procedure of closing the account. We will be continuing to act very intensely by the end of the year, and we hope we will complete the process by the end of the year. Another question from [Puls Biznesu] . What is the reason for the rise in employment costs, about PLN 44 million in the first half? And does the bank plan a change in the system of pay and bonuses for employees in this year? This growth is a result of our pay rise process.
We launched the process in March, and therefore, the personnel costs grow in the immediate months after that. The costs are also the other costs involved, which are costs for the balance pay of the employees that leave the bank. As regards the bonus and pay rights system, I assume this is alluding to the information about one of our competitors. The answer is simple. We are not planning any big systemic changes, which does not exclude some calibration movements in that respect. Another question from [Puls Biznesu] . Which part of the sale of mortgage loans in the first six months were loans for people who had not been clients of BNP Paribas before that? Does the bank expect a reversal of the decline in the retail customers' portfolio? Let me start with the second question.
That trend has already been reversed in the second quarter, and we expect in the coming months a strengthening of the reversal of the trend. As regards the first question, about 90% of new mortgage loans are loans for new clients of the bank. Question from PKO BP. Has the bank sold that part of your NPL portfolio in the second half of the year? First half of the year. Yes, we have done that. The process is stabilized. The retail loans are sold in the first half of the year, whereas in the second half, around November, we continue SME, corporate, and retail loans. That sale was worth about PLN 114 million, so not a very big transaction, whereas the entire portfolio is PLN 2.8 billion.
It was not a big part, but that means that the level of provisions that we had for this non-performing portfolio was at least adequate. Another question from PKO BP. What's the outlook for the efficient commissions income in the second half of 2025? As we've heard today, we are building this outlook on increased client activity and also increase of loan origination. We don't have any precise plans in terms of review of our fees and commissions tariffs. Of course, we look at what our competitors are doing. If you build your forecasts right now, so between 280 and 320, that's the range you could adapt. There can be fluctuations between quarters related to some one-off events. Robert Dybka, [Bank PL]. In relation to the construction of the individual investment accounts announced by the government, does the bank expect the outflow of funding from your current accounts?
It's too early to refer to that. It's just a design now. We don't have the details. On the basis of what we know now, we are not afraid of the outflow of funds from our bank. [audio distortion], w hen do you expect to see the ABB stocks to be sold in order to increase the free float? I would like to be able to answer that question, but I can't. The question should be asked to our majority shareholder, but I don't have the knowledge, and I don't have authority to respond to that question. Michał Konarski , m Bank. Could you please update the sensitivity of the bank to the decrease of interest rate? It hasn't changed compared to the first quarter. So PLN 200 million for Polish złoty and PLN 300 million for all currencies.
[PKO BP], could the bank tell us some more details about the strategic partnership with Media Expert? Not really. I can't really give you any more details. It's a very important partnership for us in terms of providing installment loans, consumer loans, but also, as a result, acquiring new clients for retail banking. I can only add that this is not the last word that we've said in terms of partnerships with leaders of the household appliances market. That was the last question. How come? I understand it's August. We've got sun. We've got holidays. If we have no more questions from people here within the room and people who are with us remotely, I wanted to thank you for the questions, for the open dialogue with the bank. Please keep your fingers crossed for us. We will do our best not to let you down.
I wish you a very good rest of the summer. Thank you.