Good morning, ladies and gentlemen. On behalf of the management board of BNP Paribas, I welcome you to our conference devoted to the results of the bank, not just quarterly results, but annual results. I welcome all of you here in our new green headquarters, but also all those who are with us remotely and participate in the meeting online. The agenda of the meeting is relatively typical, so I won't be discussing it in detail. Let's now get to the key highlights. Let me now start with a reflection that in spite of the fact that our bank has achieved profit last year, this profit is definitely not satisfactory, as is the return on equity that we've achieved at the level below 4%.
We know very well that our investors expect the return that at least covers the cost of capital. If we assume that at a level of 10%, we have not managed to earn enough to cover the cost of capital. This is very frustrating because the results of the bank would look completely different if it weren't for a number of external burdens, and the cost of provisions related to legal risks for CHF loans, mortgage loans. I will probably be going back to that a few times. The level of burdens that Polish banks have been, or banks in Poland have been subjected to, has exceeded the limits of imagination really. The banking sector, banking system is really weakened. The level of capital is low. There are banks that have noted losses last year.
The system is not uniform, which is also worth remembering. Different participants of the market are in different conditions, I think we should be thinking responsibly and with care about the future of the banking sector. This meeting is not about the condition of the banking sector, but about the results of our bank. As you know, and as you can see, the net profit has been PLN 441 million, of which PLN 253 million is the net profit for Q4. Relatively, Q4 was a good quarter from the point of view of the profit. This was also the quarter when we've already noted the signals of the slowdown of the economy, and that was visible in the loan volume that fell year-on-year.
I think that the slowdown will be with us also this year. This is again, something that must be remembered when we think about how the banking system should be regulated this year and in the coming years. The income, you can see, has grown. Again, this growth would have been much higher if we hadn't had to take into account the cost of credit holidays that have been really significant. It was a growth year. We have been implementing our strategy, the GObeyond strategy. It was the first year of that strategy. We approved the strategy in March last year, soon after the breakout of the war in Ukraine. We've been methodically implementing it. Yesterday we described the implementation of the strategy to the supervisory board KPIs.
Here you can see just a few KPIs that are related to the four pillars of our strategy. The up pillar, that is acceleration of digital competencies. We are becoming a bank that is even more digitalized. A number of interesting initiatives that have already been implemented. GOdealer is one of the most visible ones, but not the only one. We have received two important prestigious rewards from Newsweek and Forbes, which shows that also, as regards the quality of our customer relations, we are going up. The positive pillar is also important for us. In general, it means just in operations that are in line with sustainable development.
We've noted an increase in green loans in our portfolio, and we are here, in fact, above the trajectory that is to lead us to our strategic goal, 10% of green financing by 2025. I hope that we will be able to achieve this goal or even exceed it. Also last year, we received a rating at the level of 10.9%, which is the highest level of sustainability rating in Polish banks, among Polish banks in Europe. That means that what we do is compliant with ESG rules and principles, and we treat this area very seriously. As regards the pillar stronger, we continue our IT transformation. We can see our huge project that we call GoCore , which means severe change of main systems in the bank.
We've spent quite a substantial part of our budget devoted to that last year. We have improved the level of operations per employee, but there is still room for improvement there, definitely. As regards the pillar together, which is mostly about people, we are really satisfied that the NPS score has improved among our employees. We measure it regularly.
That also shows the level of engagement of our employees, we are on an upline train, which in times that are so strange, so uncertain, is something really good and is the reason for satisfaction because it shows that we as managers, we work with our staff in the right way, that translates into a situation when they see this bank as a place where they want to work, where they want to engage, and where they can develop. The digital statistics in the visual form, we can see the increasing the number of customers using our remote channels. That's particularly visible in GOmobile. Our mobile app, which is efficient, not too sophisticated because once could really argue whether it makes sense to include different bizarre functionalities into banking apps.
I think that the simplicity is really a value, and we can see 30% increase in the absorption of Apple Pay or Google Pay solution and a significant increase in BLIK transactions, which is especially a good solution for e-commerce payments. If we look at the evolution of a number of KPIs, quarter-on-quarter, first of all, we can see that the dynamic of acquisition as regards personal accounts is lower. That's caused by the fact that the bank has sort of changed its strategic thinking and shifted more towards the clients from higher segments, more transactional, and therefore more valuable for the bank. We then don't want engage in races about who has more personal accounts reported. We really want to focus on the quality of the customers we get.
As regards the retail loans, well, we will see what we can see. This is really a collapse of the market of mortgage loans and significant decline in consumer loans of different types. That's particularly visible in the figures for new sales, and the reasons are obvious. High interest rates, the economic slowdown that leads to uncertainty, the ongoing war, which also makes this uncertainty even greater. Customers are simply not prone to taking out loans, are more prudent in their expenses. As regards mortgage loans, you know the situation very well. We are one of the banks that said that this year we only give fixed rate loans, no floating route rate loans.
We are also preparing to implement instruments that will be based on the new rate, and we are active members of the working group that is to develop the transition of the market benchmark towards WIRON. As regards corporate banking, that was definitely a good year. We've managed to acquire a number of valuable customers, and we can clearly see the increase in transactionality as if you would look at the payment volume. That has grown both year-over-year and quarter-over-quarter. Traditionally last year, we have managed to close some huge transactions with big corporate customers. High-value transactions that in effect increased both our market share and were beneficial for our results.
Now, this shows the growth rate in our loans and deposits. I should like to note the increase in the deposit base derives from all the customer segments. We took a prudent approach to liquidity management. We decided that in those uncertain times, we need to have a solid liquidity buffer, hence a dynamic growth. For a number of months, we have been optimizing the costs of our deposit base, and this will have a positive impact on our P&L. As regards lending, year on year, we grew. We maintained our market shares. The first three quarters, as I said, saw an increase. Q4, however, slowed down.
We acquired more customers. As I said, year-on-year, we noted a slight, or rather quarter-on-quarter, we noted a slight decrease due to our intentional measures and the decision to terminate our relationship with customers who are not willing to do daily banking with us. Let's look at the results. The net banking income. Had it not been for the credit holidays, it would have been 1/3 better than a year before due to an increase, a strong increase in commissions, a good performance of our global markets segment, and an increase in the interest rates. In all of our income lines, we reported a growth last year. Expenses increased both quarter-on-quarter and year-on-year. Net of one-offs, the expenses were driven by one-offs, especially the contribution to the IPS, the Institutional Protection Scheme.
Without those contributions, the growth would have been relatively acceptable in the high inflation environment that we live in. The cost of risk as such was very low. Our portfolio is sound. We continue reviewing the portfolio, and there's no reason for concern, as Mr. Kembłowski will mention in a moment. In Q4, we also set up additional provisions for the Swiss franc loan portfolio. We have a good coverage ratio. You may be asking again, is it all? I will say the same as usual, it is probably not yet the end. The story with Swiss franc loans will probably continue for a number of quarters to come. The net profit, as you can see, compared to last year's loss, net result in 2022 was solid with a strong year-on-year increase.
Again, as I said in the beginning, we have much bigger aspirations and a much bigger potential. Cost of risk. I've mentioned the cost of risk before. ROE, the return on equity, 3.9% is the reported ROE. Net of the cost of the credit holidays, ROE would cover the cost of capital. There are a number of factors which hurt our ROE. Our net interest margin stabilized, as we reported last quarter already. Now, looking at this picture, I should like to point out the top right-hand corner, which shows by category all the different components that eroded our profit, the components that are non-business related at all. On the one hand side, we have the cost of the Swiss Franc loans, which is a legacy item, I should say.
We will go back to the Swiss franc loan portfolio when we discuss the settlement program. PLN 900 million was the cost of credit holidays, adjusted by PLN 70 million in Q4. That's in plus, but still PLN 900 million. If you add up all the different components, you get a neat PLN 2 billion. This is a terrifying picture. I think the industry, which is the bloodstream of the economy, which has strategic importance to the economy, it shouldn't be subjected to such huge burdens, which prevent it from rebuilding its capital base, prevent it from actively supporting the economy and the customers. Given the diverse nature of banking institutions in Poland, we are running a systemic risk, a point I would like not to dwell upon because I don't want to spoil the mood.
Net profit grew by 150% year-on-year, but the net profit is a function of the performance of the bank itself and the burdens we have had to carry on our shoulders and the provisions against Swiss franc loans that we had to set up. That's all from me at this point. Now, Michał Dybuła will discuss the macro view.
Good afternoon. Good morning, ladies and gentlemen. Thank you, Przemek. Last year, GDP grew by nearly 5% year-on-year, but we all know that starting last spring, we have seen a fast slowing down of the economy and economic activity. We started last year with a 10% year-on-year GDP growth. The year closed at around nil. Most likely over that time, the downturn that started will continue into the coming months, at least looking at the statistics.
However, let me focus on the longer term because the future is not all that pessimistic. According to available data, hard data from the economy reported for January and most of the forward-looking indicators suggest that the worst time was Q4 2022. That was the worst moment. The months and quarters to come should bring a gradual rebound, recovery of economic activity with GDP growth. One of the key fundamental factors or drivers of improving economic activity is disinflation. Starting in March, inflation will start to drop sharply, mainly due to external global factors, lower fuel prices, commodity prices, and the base effect, which means that inflation will be dropping. What is also important is that the inflation expectations of businesses and households are dropping. A factor we were monitoring closely last year and continue to watch.
On the plus side, the inflation expectations seem to slow down. Speaking of inflation, I should mention domestic factors which go beyond the global context and the global price pressures. Domestic factors will continue to drive higher inflation this year and maybe next year. Salaries continue to grow at a double-digit rate, and the prices of services will continue to grow in the longer run. This will be the key factor preventing a sooner cut of interest rates, end of the hike cycle. Double-digit inflation will stay with us preventing that. The financial markets, as you know, still show increased volatility, given the many global and local factors at stake. Volatility will continue high for a longer time. Last but not least, the banking industry, as Mr. Gdański mentioned in his introduction.
The banking industry sees a drop in demand for lending across all segments, not only in households, but also in corporate lending. The economic downturn and high interest rates will prevent recovery of demand for loans. We are facing difficult times, but the worst is now behind us. The biggest downturn is slowly starting to phase out. Thank you, now over to Jean-Charles.
Good morning, everyone. First, as already highlighted by Przemek, 2022 was a very challenging year, financially burdened by many unexpected factors. Creation of IPS, additional contribution in the Borrower Support Funds. However, we were able to grow in the business. Loans portfolio grew by 4.2% year-over-year. One important topic, we strengthened our liquidity position. Deposits grew by 18.4% year-over-year. One good information compared to the previous presentation, we were able to improve our capital ratio. Tier 1 ratio reaching the level of 11.28% in December. In term of financial result, I'm not going to enter into the detail. I think Przemek already gave a lot of information.
The main one being indeed, the net net result reaching the level of PLN 441 million. Net banking income growing by 11.3% year-to-year. Two main information. The first one related to NII, significantly impacted by the cost of the credit holidays, PLN 895 million. The second information related to net trading income, very good result. Net trading income, so growing by 19.1% year-to-year, supported by the volatility of the market. Expenses under huge pressure, first inflation, plus all the additional regulatory cost. Cost growing by 19.5% year-to-year. If we exclude BFG and IPS, I would say cost under control, + 11.6%. Cost income ratio reaching level of 56.8%.
We book additional provision for FX mortgage loan portfolio in the amount of PLN 740 million. Cost of risk in the amount of PLN 275 million. The quality of our portfolio is there, so no alert. Coming back on the loan portfolio. Overall, our portfolio grew by 4.2% with two different trajectory. The first one related to corporate business. I would say strong performance in 2022, despite a slight decrease in Q4. As you know, for individuals, the demand was affected, demand was very low, and the decline in retail loan is in line with the market. In terms of structure of our loans book, I would say the good news is that the CHF mortgage loan portfolio is representing only 4.4% of our book.
Let's have a focus now on the FX mortgage loan portfolio. We increase the coverage ratio, so we book additional provisioning, and the coverage ratio is reaching 46.2%. The amount of the provision PLN 1.2 billion . One of the good news is that we are keeping on converting the CHF mortgage loan with our customers, and we are not observing any slowdown during the two last weeks. I think it's an important information. Conversion are there, and we are keeping on working hard on this topic. Let's have a focus on the deposit. We took the opportunity in 2022 to strengthen significantly our deposit base, our liquidity situation. Liquidity of a deposit grew by 18.4% with a different speed depending on the business.
One of the good news in the fourth quarter is related to the fact that we are able to stabilize the share of the term deposit, so reaching 31.1%, so slightly lower than in Q3. During the two last months of 2022, we stabilize the cost of the deposit. We reach a sort of plateau, and we are now trying to improve as much as we can the cost of the deposit. The overall situation in the market has changed, and there is less tension on the market in terms of liquidity, so we are taking this opportunity. In terms of investment product, obviously it has been significantly impacted by the interest rate hike and the crisis. There was a significant drop till the third quarter and a rebound in the fourth quarter.
We are rebuilding the scale, hoping that no additional bad news will come in the future. In terms of revenue, net interest income, supported by the growth of the portfolio interest rate hike, NII grew significantly by 39.7%. As a consequence of the credit holidays impact, the NII grew only by 11.2%. I already shared with you that we stabilize the cost of the deposit. It's visible on the right side of the slide, we slightly increase the margin in Q4 when you look at the normalized margin, neutralizing the impact coming from the credit holidays. In Q4, we readjust our estimation in terms of impact coming from credit holidays, we release PLN 70 million. In terms of fees and commission, I would say the situation normalize over the year.
Slight decrease in Q4, with a decrease in revenue mainly in terms of cards, insurance, and sales of certificate of deposit. Net trading income, very good, I would say information, strong result during the year and in Q4 as well, supported by high volatility. Net trading income increased by 19.1% year-over-year, with very good performance in Q4. On top, we have to mention that in Q4 were higher revenue on derivative result and some positive valuation has been observed in terms of share and IRS hedging. In terms of costs were really under pressure. It's not new. High inflation and usual regulatory costs, Borrower Support Fund, IPS creation. Costs grew by 19.5% year-over-year, 11.6% if we exclude BFG and IPS.
The trend is I would say that the costs are under control, remain under control. We have a seasonality effect in Q4, but if we neutralize the unexpected effect, we are below inflation. What is also important to highlight that we are keeping on changing the model of the bank and the number of FTE is decreasing quarter after quarter.
The quality of the portfolio and the cost of risk. Let me start by saying that both the quality of the portfolio and cost of risk remain stable at an acceptable level. The cost of risk in 2022, the cost of risk was about 30 basis points, which is much less than the market average, mainly due to the continuation of a situation where in all segments of our business, Stage 3 was limited. We talked to our customers before starting debt enforcement or selling NPLs, because we do that too. All in all, Q4 brought 20 basis points of cost of risk, which was very low. There were also additional operations which we present on this slide. We could not keep up the COVID q uick fix anymore of PLN 200 million . That provision was released.
Another significant item was a provision against the portfolio of agricultural loans at PLN 65 million. In 2021, a new law was adopted, which limited the possibility of enforcing debt of this kind. In 2022, that law was reversed, so it made no sense anymore to maintain that provision. We also had some opposite operations as well. We picked customers who are very sensitive to potential economic developments. On the one hand, institutional customers, for example, customers who reported high consumption of gas or other energy carriers. On the other hand, individual customers. As effective interest rates increased, we selected individual customers with active mortgage loans who could potentially have trouble repaying their mortgages, were it not for the credit holidays. If you look at mortgage loans, the normalized cost of risk for mortgages was PLN 69 million over the year.
What we did on top of that is the interest rates were increased, were raised significantly. Credit holidays were therefore offered. Some customers covered by the credit holidays who applied for the relief could have had problems repaying such loans. The vast majority of customers did not face that problem at all. Their creditworthiness, their ability to repay their debt was completely stable. We picked a group of fragile customers and set up a provision of PLN 104 million based on the parameters that we set as appropriate. As you can see, PLN 104 million where customers could potentially have problems repaying their debt. That's 9x less the provisions we had to set up against the overall credit holidays program. We also analyzed that sample of customers, that pool, quite accurately. These provisions are very safe.
Were it not for the credit holidays, the cost for the bank would have been much lower. From my perspective, there's no reasonable grounds to continue credit holidays because our customers, the vast majority, have the ability to continue repaying the loans. Number three, were this risk to materialize, given the group of customers whose ability to repay their loans is limited, that is already addressed. If the credit holidays expire this year, I hope they do, in 2024, we will be covered for the potential non-repayment of loans due to high rates as we set up provisions in 2022. Regarding the quality of the portfolio, it's very stable, 3.3%. That's the NPL ratio. Across all segments, our ratios remain very stable.
Whether you look at loans to institutional customers or individuals, the nominal NPL is PLN 3 billion following a significant drop over the past few years. Now this will be less easy to improve the NPL because the portfolio now includes the most difficult loans. It is not really possible or hardly possible to continue improving the NPL ratio. Our NPL ratio is the second best in the industry. Any ratio below 3% would be hard to achieve. Another question is, do we need it? We have to strike a balance between the risks we accept and the risks which actually materialize. The coverage ratios in all stages are adequate.
If you look at the share of the stages in the portfolio, on the left-hand side, the top picture shows that phase, Stage 2 is rising, which is only due to our efforts to prepare for any potential future risks. All our customers, both institutional and individual, whom we put in the fragile group, were moved to Stage 2. The risk is not materializing, but we are covered in case it does materialize. Concerning the coverage ratio. It's about 61% for the entire portfolio, up to 62% for the individual customers' portfolios due to the part of the mortgage loan portfolio where we picked customers who may potentially have trouble in the future, and they were put in Stage 2. Which means that the overall coverage across all stages increased to the number I quoted. Capital adequacy.
A few words about the capital situation. I would share with you that end of year gave positive information, so we improved the capital ratio. I'm focusing on the Tier 1. Reaching the level of 11.28%, due to two parameters, I would say. We launched specific initiative in term of RWA optimization, meaning that we are speaking about sustainable solution for RWA, and we benefit from better valuation of bond portfolio. Przemek.
This is the last slide before we open the Q&A. We live in times of uncertainty. That's the key word, the buzzword we hear a lot these days. We know that the economic slowdown continues. We don't know how long and how deep it will be. We hope to go back to trajectory of growth this year. Inflation remains high, but we are reasonably optimistic, expecting that inflation may drop already this year, which would be welcomed. Next year, we may see first interest rate cuts. A war is ongoing beyond our border. We are closely watching the developments, but even the military experts do not know how and when it ends. If Ukraine prevails, that would be a great incentive for the Polish economy as well, but when will it happen? We don't know.
There are new risks emerging in the sector. Intellectually or ethically speaking, they concern me a lot. For instance, the risk of court claims undermining the legitimacy of WIBOR. I don't have to explain that. Were it if the courts ignored the position of the National Bank of Poland, of the Polish Financial Supervision Authority, and if the courts canceled agreements based on WIBOR, that would wipe out the banking industry in Poland. I hope that doesn't happen. The banking industry has the financial security institutions on the side, on the bank side. Now, those institutions have issued their opinions in favor of our position, which still means that the transition of the benchmark is a complex and high risk development fraught with operational risks. The environment is very uncertain. The industry is weak.
The capital base has been eroded. It will take time to recover. This is an election year, which again, raises concerns. I do hope that the decision-makers will remain reasonable. We will continue to do the right thing. We will continue to digitalize the bank to improve our ICT infrastructure. We are focusing on improving the quality of customer service with our very ambitious strategic objectives. I hope we will deliver as planned. We are still focused on sustainable development and on transactions that support sustainable development and especially energy transition. We will continue doing what we have to do. We will be monitoring the reality around us. We will be responding to whatever appears, comes up in the public space, and we would offer our comments according to our...
the best of our knowledge and according to our values. I wish us all that it is a good year for all of us. Now let's start the Q&A session. First let me ask, are there any questions here in the room? Then we will go to the list of questions that we have online.
Good morning. I wanted to ask about the prospects concerning loans, because you say that this, the West is behind you already, but we can still expect that over the next two quarters, the situation will still be difficult. How do you assess the volume, both in the retail sectors, individual customer sectors and institutional customer sector? Will you still see the decline or will we see the rebounds?
Nobody knows the future. I am more optimistic as regards corporate loans, and I even assume that we will see some growth. Obviously different in different segments, but I do not expect a quick rebound of mortgage loans. I think that consumer loans will be still under pressure, but here again, a lot depends on the results of GDP dynamics and how that will influence the general mood, to what extent real income will go down, and to what extent they will stop falling with the decline of inflation. There shouldn't be any sudden developments and any sudden good developments in that respect, but I'm generally optimistic.
Bloomberg, Robert Krasowski. I will be asking about what you've said that you won't see the quick rebound in mortgage loans. Is this just a matter of demand with high interest rates, or is it also that banks will not be willing to grant such loans because of the regulatory and legal risks? You've had an opportunity to see what the general advocate of the Court of Justice of the European Union thinks about your litigation against customers. There are also new ideas such as loans at 2% or 0%. Is there some thinking now starting in the legal departments of the banks how to construct such loan agreements and whether to give such loans at all?
It's difficult for me to speak on behalf of the entire sector because the sector, as I said, is not uniform. I have also mentioned that earlier that the mortgage loan has turned out to be the most toxic banking product which nobody has expected. Even if the loan risk, credit risk was all the time at a decent level, some legal risks have materialized.
We all know about the Swiss franc risks. In the case of Polish zloty loans, w e have credit holidays attempts to undermine the WIBOR benchmark. I think we will be very cautious in granting such loans, mortgage loans. As regards the loan agreements, we will construct them in such a way that they are clear, transparent, easily understandable. Whether it is possible at this condition and at a situation of such approaches to obligations, is it possible to construct an agreement in such a way that it is absolutely resilient to all attempts to undermine it? Well, I doubt it is possible.
Łukasz Wilkowicz, Gazeta Prawna. Referring to what you've said about the difficult situation of the sector as such, I wanted to ask, do you expect that there will be a greater willingness of investors to leave our banking market or our market in general? In this context, how will BNP Paribas act, assuming that you stay on this market? How do you see your chances for acquisitions or perhaps faster organic growth? Another thing, what will be the risk appetite on your part this year, taking into account the fact that GDP is growing relatively slowly, but perhaps there are some opportunities. There is a number of very weak players on the market. The last element, what are your limits as regards the risk appetite? For instance, is the capital issue a limit to growth?
I will start maybe with the issues related to risks and then about consolidation. I always believed, and I still believe, that regardless of how difficult the times is, there are still good, valuable customers with good risk profile. We do have risk appetite and the willingness to provide loans in all the segments. Our capital situation is better than it was a quarter ago, but it still means that we will be very prudent and reasonable in managing this capital. This probably is discussion less about risk, credit risk, but rather about whether this particular loan is properly valued, whether the loan is extended to a customer that treats us as his transactional partner.
Therefore, the organization has a more definite DNA, if you like, by looking at return on equity for every Polish zloty of the loan granted, the regularity and permanence of the relationship. As regards the appetite of investors for leaving the market and our own appetite, well, nothing has changed on our part. We have completed the process of acquiring banks on the Polish market with the completion of the Raiffeisen acquisition transaction. We are not going to purchase any more banks. Of course, we are looking around to see new technologies, new business models, maybe new platforms. This type of transactions is something I wouldn't exclude or MRI transactions or maybe our own initiatives in those directions.
The group is very attached to the Polish market. I think it was yesterday or the day before, we announced the creation of an IT hub in Poland that is supposed to employ 250 IT experts working for the group all over the world, but they will be based in Poland. As you know, in Poland, we have a dozen of group subsidiaries. Some of them belong to the bank, some of them are just our sister companies, so we're not even thinking about leaving the market or buying another bank.
As regards other investors and other banks, well, all I can do is speculate, and it seems to me that if there were serious partners to buy such banks, those they would be able to find those who wish to sell a bank in Poland. The issue will be the price because the valuation of the banks is very heavily burdened with this unpredictability and all those developments that were to be addressed at external banks and in fact affected the internal banks' results and rates of return.
My question is about accounts, because you've seen the significant decline in the number of accounts. Was it the decision of the bank, as you have mentioned, to just cleanse the portfolio, or rather maybe other factors influenced that as well, such as, for instance, the customers from Ukraine decided to give up your accounts, or maybe there were some other reasons?
Well, we haven't really seen the significant decline in the number of customers or accounts, but we regularly sort of cleanse our deposit basis. Maybe review would be a better word here, because we review the portfolio of our customers and sometimes we decide to conclude the cooperation with those who don't really work with us. We also have other ways of acquisition, where we look actively for customers who would like to do banking with us, who would be active, and maybe not just using a single product only.
As regards the portfolio of Ukrainian customers, I don't really see anything significant happening here that would result in a significant change in the numbers. Now we can move on to the questions we received online. There's quite a list. First question or two related questions. Mariusz Siwiński, TFI PZU: Are you planning to issue MREL this year? If so, how big and when? Number two, Jaromir Szortyka, PKO BP: Could you share more details on the initiatives the bank has taken to optimize its risk-weighted assets, RWA?
I'm going to start with MREL. MREL, the plan, based on the current situation is to issue MREL in Q4. I would like to remind you that we are under SREP, we will do it with the group. The range from PLN 2 billion-PLN 3 billion. The second question about RWA optimization. We have different topic. Not entering too much into the detail, it's of view that we have reviewed the data quality, which are one of the standard topic. We look at our database, and we clean the data because sometimes it has an impact on the RWA calculation. We implement umbrella insurance for mortgage loan, which was a way to release the risk weight. These are some topic like that which generate a positive impact on RWA.
Kamil Stolarski, Santander: According to Bloomberg, well, Bloomberg reported in mid-February that BNP is considering to pull out of consumer finance in Central Europe, Romania, the Czech Republic, et cetera. What are your plans in consumer finance? BNP Poland, are you happy with your current market share in the banking sector in Poland?
Let me take that question. It's important to note that the operations planned by the group to pull out in the countries you mentioned, these are very small operations. Our Polish consumer finance franchise is big in the context of the group, one of the biggest that the group has in the different countries, and it is fully integrated with our bank. We are not planning to pull out. On the contrary, we are planning to grow, and we are growing this business organically, not through acquisitions. We are also innovating quite heavily, and we will be ready to share more details soon.
Kamil Stolarski, Santander . What is BNP Polska's appetite to continue lending to farmers? The year-on-year drop in mortgages, was it 99% due to credit holidays? Minister Kowalczyk is considering credit holidays for farmers. PKO has announced a bigger initiative in that segment. What is the approach of BNP Poland? Another question from Jaromir Szortyka. What is your perspective on credit holidays for farmers as an idea, as a concept?
That's the questions I like. You're asking them, which shows that the imagination of decision-makers has no bounds. It's important to know that the Polish farming industry has had a number of phenomenal years. Last year was particularly successful for farmers. There's no structural problem with repayment of debt, so farmers simply do not need credit holidays. In this case, Minister Kowalczyk has been open to enter into a dialogue with our community, our industry.
That dialogue showed that potential credit holidays for farmers would probably kill quite a number of cooperative banks. As a result of the dialogue, it is our expectation, our impression, our hope that this idea will not be implemented and that it is not a risk. We still have an appetite to continue financing the food and agro industry. We have made some strategic movements approaching, or rather turning to customers who are higher up in this food chain, so to speak, so processors, exporters of food and agricultural products. This has largely been done, and we will continue with that. As regards PKO BP, we are ready to compete with any bank. Maybe it's a good thing that competition in the market will grow in the segment of lending to farmers. This will only put more pressure on everyone to be more innovative and more inventive.
Kamil Stolarski, Santander. BNP is required to increase its free float of BNP Polska by the end of 2023. Are you working on it, or do you want to extend the deadline?
Let me remind you one more time that this is a commitment of the group, BNP Paribas. BNP Paribas, it's for BNP Paribas SA in Paris. It is not our commitment. This question should be asked to representatives of our group, because we have nothing to add on this point.
Kamil Stolarski, Santander. What is the outlook when it comes to the NII in the coming quarters?
Usually, by principle, we are not sharing any outlook. I will say strategically, having in mind that also we have many uncertainties in front of us, the minimum target would be to be stable. Also having in mind that it's always better to be better.
Robert Lidke, Bankier.pl. Could you comment on the government's program of a 2% loan? Will you join the program? Do you have any doubts about the program? That's to the CEO. Should anything else be clarified for the bank to be safe offering such loans? Because those loans will be for more than 10 years each.
When the program is ready, we will look at it very carefully, and then we will decide whether or not we are interested. Well, it's too early to tell, to have a clear opinion. When it comes to the program, well, I don't want to comment. I would rather not comment on the idea of the leading opposition party to offer 0% loans. I don't think loans should be granted free of charge. 2% is also below the market price, but this is a special year indeed, and it's not the end of those ideas yet.
Four questions about CHF loans. Let me ask two questions first. Two questions from Kamil Stolarski. Looking at your target coverage ratio of CHF loans, what is your target? Now the coverage ratio is 40%. What is your target? Second question, what is the weight in the model of the scenario where the loans will be invalidated?
Let me take the first question first. We don't have an optimum in mind. Clearly, our coverage ratio is quite solid. Other banks have some of the other banks have bigger coverage ratios, but as I've said, it's not yet the end of the story with the Swiss franc loans.
Those provisions reflect the number of new court cases, the expected number of court cases, the number of settlements signed, the expected number of settlements. They are all estimated using a very sophisticated model. If the input for the model changes, the amount of provisions will also change. On your second point. The majority of provisions that we've set up are for court cases and the risk of invalidation of loan agreements.
Two further questions. Anna Cieśla, Rzeczpospolita. What the level of provisions for Swiss franc loans and the percentage of the coverage of this portfolio you believe to be safe and target, and how much may it cost to get to that target level? The second question, is the litigation related also to the foreign currency loans or only denominated loans?
I think I have responded to the first question, so I can't really add anything to that. As regards the litigation and the court cases initiated concern both the loans extended by the former Bank BGŻ and those extended by the former Fortis Bank. These are different categories of loans.
Is the increase of the NTI can be treated as the equivalent of the NII related to the hedging policy? At ING, it was the similar situation and the bank transferred some of the trading results to the interest results, so the interest income.
We are presenting the result. This is the first topic. It's much more coming from the way we manage our over-liquidity in euro, which is more or less specific to our banks. We have a significant over-liquidity in euro, in the past we conclude an FX swap. In the third quarter, the costs were really high. We have decided to change our strategy, meaning that the negative impact... I will try to make it easy. The negative impact which was visible in the past in the net trading income is now to some extent translated in NII. Okay. We stop concluding FX swap. By doing so, the negative impact is lower by not doing FX swap.
Kamil Stolarski, Santander. Why is the revolving loans for companies, corporate loans, fell 10% quarter-on-quarter? Will the sale of mortgages remain in the coming quarters at the level of the fourth quarter of previous year?
As regards the first part, the inventories in the economy have declined. They changed into cash, that was used to pay the debts. That really happens every year. The scale may be different. As regards the question about mortgage loans and the market of mortgage loans, I don't really expect any significant reverse of the trend, at least not very soon.
Is the bank planning to give access to individual customers the sale of treasury bonds of the Ministry of Finance following the, in the footstep of Pekao S.A . and PKO BP?
Currently, we don't have such plans.
Kamil Stolarski, Santander. What is the guidance for the cost of risk for 2023?
Well, in principle, such forecast of cost of risk is not something that we would present. Taking into account the fact that the situation in our portfolio is stable and we measure very accurately the portfolio of institutional customers, group customers, the individual customers' portfolio on an individual case-on-case basis. Also taking into account something that we would like to continue, that for a long time we haven't had a situation in the bank that we would have an incident with a customer, to which we would be significantly exposed and to the risk of which we would be exposed.
Main provisions that are created are related to the entire portfolio or very low individual provisions because some customers defaulting. Generally, we have very few entries into Stage 3. That's a limited number of loans, and we would like to continue this trend. Whereas obviously there are certain risks. If the interest rates keep growing, keep increasing, the mortgage loans may be, may pose a threat. If the GDP growth is limited also in micro or SMEs, among them may be companies that were able to operate with the loan that carried a low interest rate. When the GDP is limited and the interest rates are higher, such companies may get into trouble.
Generally, everything in our books and calculations of the cost of risk and the impairment value or the value of the loans and deteriorating value of the loans, all that looks very good in our books.
You are pausing the floating rate mortgage loans. Aren't you afraid of the risks that in a few years they may be undermined with, as the loans carrying very high, very high rates?
I understand that the question is about fixed rate loans. First of all, we extend very few such loans. Even if such a risk might materialize, that would not concern a huge part of the portfolio. If, if the interest rates go down, it can always be refinanced to either a fixed rate, which is a different rate, or can be changed into a floating rate. Where are we afraid? When you ask if we are afraid, well, nothing will really amaze me now. I cannot be worried all the time because I would be just stressed. Since we are having such a nice day, I don't want to focus on those concerns and fears too much.
Jaromir Szortyka. Is repricing of the loan portfolio to higher interest rates has been completed or is there still room for improvement compared to Q4 of 2022?
Seeing the permanent job we have to do, it's obvious that the part has been done, but we are keeping on working on this topic permanently. On top, I would like to add that we have also to analyze the full relation with the customer sometimes. Okay, on one side, potentially, no repricing, but if we are able to grow or to improve the cross-sell, it has to be considered. Repricing combining with cross-selling is a permanent topic.
PKO BP, what's the level of the customer participation in credit holidays?
69%, 70%, not in term of number of customers, but in term of volume of loans subject to credit holidays .
Ladies and gentlemen, that was the last question. I hope we haven't ignored any of the questions. I'd like to thank you very much for all the questions. Thank you for being present at our meeting, and I invite you to contact us. I wish you a lot of health, optimism, and all the best. Thank you.