Hi, ladies and gentlemen. My name is Agnieszka Dowżycka. Welcome to the presentation of financial results of Santander Bank Polska for the first half of 2025. I'm here with the CEO, Michał Gajewski, CFO Maciej Reluga, and Wojciech Skalski, Financial Controller. Before we start, let me remind you that throughout the course of this conference, you can send out questions using the link online or you can send them directly to my email box. The presentation is available on the website of Investor Relations at Santander Bank Polska.
Thank you, Agnieszka. Ladies and gentlemen, welcome to the presentation.
To begin, I'll address two transactions from the last quarter. I'll start with the largest one. Announced on the 5th of May, the planned sale of a controlling stake in S B P to Erste Group. Of course, this is subject to regulatory approval.
It will most likely be completed around the end of the year. This is one of the largest transactions in the history of the Polish banking sector. We see it as a great advantage for customers. When this transaction is closed, we will become part of one of the largest groups in Central and Eastern Group Europe. Erste Group has a deep understanding of our region's realities, and like ourselves, they focus on building long-term relationships and delivering the best customer experience. At the same time, they invest in innovation, digitization, and mobile services. A major advantage of this change will be enhanced international cooperation and the ability to support our customers in newly and highly promising markets. We will offer new opportunities while continuing to ensure the best possible experience for our customers across all business lines.
I want to emphasize that the shareholder change process does not affect our current business operations. As reflected in our results, we continue to follow our strategy, operate under the same principle, the same team, and the same mission to help customers prosper. Regarding the name and logo change, it's too early to discuss this, but you know we have experience in managing such projects, and when the time is right, we will inform you. We will carry out this process efficiently, respecting the needs of our customers and our employees. The second transaction announced on the 16th of June is the sale of 60% of SCB shares to the Santander Group. All details were provided in the public current report. This transaction affects the presentation of our financial results for the first half of the year. SCB is presented as discontinued operations.
For the purpose of this conference, I will focus. The management report and financial statement include figures for both continued and discontinued operations. However, for the purpose of this conference, I will focus primarily on the figures for continued operations, that is excluding SCB. Moving on to the results. In the first half of the year, we generated PLN 4.12 billion in gross profit. Our tax and regulatory charges amounted to PLN 1.8 billion. The group's net profit for the half year was PLN 3.074 billion, with the second quarter alone, that was almost PLN 1.4 billion. In the report, you see discontinued operations, and it shows the loss of PLN 378 million. This includes SCB's results and the deferred income tax related to the sale of Santander Consumer Bank. Including this change, the net profit was PLN 2.762 billion, and in quarter two alone, that is PLN 1.018 billion.
Let's move on to slide seven with general operational data, where we remind you that we serve over 6 million customers. The number of digital customers continues to grow. We now have 3.9 million, the vast majority of whom—that is 3.2 million—use our mobile app. The number of digital customers has increased by over 6% year on year, and the mobile app users by more than 10%. At the end of the first half of the year, customer deposits totaled PLN 221 billion, and the gross loan portfolio stood at PLN 163 billion. Total assets amounted to PLN 315 billion. Now, slide eight with key financial results. I'm again reminding you that today's conference covers financial results as presented in the financial statement, that is excluding discontinued operations. So again, slide eight. The group's net profit from continued operations in the first half of the year was PLN 3.1 billion.
In the second quarter alone, it was nearly PLN 1.4 billion. Excluding discontinued operations, net profit for the first half of the year, that was PLN 2.752 billion, and in Q2, that was PLN 1.018 billion. Net interest income reached PLN 6.335 billion, up 7% year on year. In Q2 alone, that was PLN 3.4 billion. Compared to the previous quarter, net interest income remained at a similar level. Net fee and commission income amounted to PLN 1.47 billion, an increase of 6% year on year. In Q2 alone, this figure was PLN 744 million. Total income reached PLN 8 billion, up 8% year on year. In Q2 alone, it exceeded PLN 4 billion. A 2% increase quarter on quarter. We enjoy strong capital position. Return on equity for continued operations was 21.9%. The group maintains excellent liquidity with a consolidated LCR of nearly 200% at the end of June.
On slides 10- 12, we show you new offerings introduced for our customers where we go across our business segments. So let's move straight to slide 13 about selected business data. We start with retail banking. We manage 4.8 million personal accounts in PLN. That's 2% more than a year ago. In the first half of this year, we opened 212,000 new PLN personal accounts. Cash loans. We issued PLN 6 billion slot in cash loans in the first half of the year. That is 9% more than a year ago. In Q2 alone, we issued PLN 3.1 billion slot. This marks a record-breaking quarter for cash loan sales, which we're very pleased about. The value of newly granted mortgages was PLN 4 billion slot. In the second quarter, it was PLN 2.4 billion, and that's less than last year.
But let me remind you that we're comparing against a very high base due to the Safe Mortgage 2% Program. However, on a quarterly basis, as we're showing on slide 25 in the attachment, we're seeing a rebound in the market, and this is the best quarter for mortgages in the past four quarters. Similarly to last year, 97% of new mortgage sales were granted at an adjustable fixed interest rate. The share of fixed rate in the total portfolio reached 45.9%, and in March of this year, that level was at 44.2%. Now, net sales of investment funds totaled PLN 1.4 billion. Retail assets under management of TFC reached approximately PLN 26 billion slot. Our share in the market is over 10%. Let's move on to the SME segment. In the first half of the year, we opened 36,000 new business accounts. In Q2 alone, we opened 16,000.
The value of loans granted to SMEs in the first half of the year was PLN 2.7 billion. Leasing, very good performance. Sales reached PLN 2.4 billion. That's up 18% year on year. Business and corporate banking sales of new credit limits rose by 11% year on year. Credit volumes increased by 9%, while asset volumes by 12%. In corporate and investment banking, the revenues from capital market services doubled, while the revenues from treasury transactions were 17% higher year on year. It's important to say that we received the award for best investment bank in Poland at the Euromoney Award for Excellence, and so we were recognized by an international panel of experts. They named the best investment bank in Poland. We have a very strong position here.
Now that is most of the balance sheet, gross loans. You can see.
You have different segments contributing to that, including the discontinued business. In the first half year, the gross loan portfolio stood at PLN 163 billion gross. We are approximately. In slide 25, we are showing that we continue really good sales of cash loans, SME loans, as well as really good sales of mortgages. Slide number 16, customer funds. I have already mentioned the deposits of PLN 221 billion. Investment funds stood at PLN 26.5 billion, growing 20% year on year and 6% quarter on quarter. Overall, customer funds, that is, deposits and investment funds, totaled PLN 247.5 billion. Slide 17, net interest income and margins. We are moving to the profit and loss accounts. The net interest income totaled PLN 6.4 billion gross, growing 7% year on year, while quarter on quarter, the net interest income remained flat, growing only slightly.
Net interest margin for quarter two, annualized on a quarterly basis, as you know, for continued operations, totaled 4.89%. Just for information, we are showing the margin for both continued and discontinued operations. It is 5.04%. Net fee income, really good information here. Net fee income totaled PLN 1.5 billion gross, growing 6% year on year, and the growth against the previous quarter was 2%. We see good pace of growth, and we have the continued growth trend. Especially the fees for asset management, insurance, FX, and brokerage fees noted really good results. On a quarter-on-quarter basis, we show good performance when it comes to FX fees, but also card fees and brokerage fees as well, which grew quite nicely quarter on quarter. Let me highlight, and it is worth stating that this is all driven by the bigger number of transactions done by our customers.
We did not introduce any changes to our schedule of fees and charges. Slide number 19, income. I have already mentioned that PLN 8 billion gross, growing 8% year on year and 2% quarter on quarter. Let's move to slide number 20. In the first six months, these costs totaled PLN 2.5 billion gross, driven primarily by high contributions to the banking guarantees. If we exclude regulatory costs, the total costs grew by 7% year on year, of course, driven by inflation, salary increases, and the changes in service prices. Quarter on quarter, the growth was 1%. Compared to the previous quarter, total costs, excluding regulatory costs, increased by 1%. The pace of growth in quarter two alone remains low, and if we look at the cost-income ratio, it was 30.9%. A year ago, it was 31%, without any major change. Slide 21, loan loss provisions.
The net balance of provisions for expected credit losses at the consolidated level, excluding Santander Consumer Bank, was PLN 243 million. A year ago, that was PLN 448 million gross. This decline is the effect of the high base that we are comparing to. Just to remind you, in the first half of 2024, the bank extended the criteria for classifying loans to stage two, which led to a one-off impact on the net balance of PLN 124.5 million gross. We have a good effect of continuing good quality of our loan portfolios. We have a stable level of past due payments. We do not have a growth in the new NPLs, and we have a continuing large good level of recovery. All of that translates into the cost of credit risk, which is now 33 basis points. The key risk indicators remain at sound levels.
The NPL share is at a safe level of roughly 3.9%. There were no one-off major events in quarter two that could impact the net balance of provisions. We reviewed the parameters as we do on a regular basis, in line with IFRS 9, and these are the parameters that we use for calculating provisions. As you can see on the next slide, we sold non-performing portfolios worth PLN 301 million gross, and that gave us a gross profit of PLN 60 million gross. The banking tax and regulatory costs, I have already mentioned them. Out of the gross profit that we earned in the amount of PLN 1.9 billion, the regulatory and taxable levies stood at PLN 700 million gross. In the first six months, the gross profit was PLN 4.1 billion, while the levies totaled PLN 1.8 billion gross. Now, the summary on slide 23.
Our performance after the first six months was sound, and we are showing the net profit of PLN 2.7 billion gross. We also show the impact of excluding FCB from our group, and this loss on discontinued operations totaled PLN 327 million. This results, first of all, from the way we recognized the deferred tax assets of PLN 400 million gross, and this is the effect of selling Santander Consumer Bank shares. All the details were presented in the investor presentation that was published along with the current report in June, once we announced the transaction. Coming back to summarizing the first six months, I'm happy with the data, which confirmed the increased activity levels of our customers. This is reflected by the growing number of digital payments, remote payments, BIC payments. The number of accounts we have is growing. We have 7.5 million accounts, including 4.8 million personal accounts.
We are really happy with our net fees, and that's been growing quarter on quarter. Also, our net interest income improved. It's higher by 7% than a year ago. This reflects the activity levels and good condition of our clients. This also reflects the sound quality of our loan book and low level of provisions. When it comes to our business operations, we already mentioned the dynamics. That all fits into the good trends. We can see that it is going to continue in the quarters to come. Now let's move to the questions and answers session. Mattie, if you could, please.
Let me start with Swiss banks. We have two questions about that that could be easily addressed.
What is the outlook for charges related to Swiss FX mortgage loans and now also provisions? When do you expect the provision cycle to end?
Let me first highlight that we have the adequate level of provisioning. Our models are regularly reviewed by external independent auditors, and the levels we're presenting now after the first half of the year is adequate. It is aligned with all the regulations and our internal models. Let me remind you the coverage ratio for our portfolio is 148%. Now, the outlook. I don't want to enter into detail because, as I said, we have the right level of provisioning. We continue our settlement program. It's better to settle than to sue, both for the customer and for the bank. We continue to remain on that path. Strictly speaking, if we were to adopt provisions, we would have.
Now, questions about the political landscape. What implications do you see from the latest presidential elections on the monetary, fiscal, and regulatory outlook for the Polish economy and the bank?
Another question in the area. Press report indicates discussion of additional bank taxes in Poland. What is your outlook on the already proposed regulatory actions and its impact on Polish banks?
I don't want to comment on media speculation. We're working together with the Association of Polish Banks. The discussion is ongoing. However, we're not commenting on the press releases. It's really difficult to say. And talk about the impact. We have our. Stance has been firm. We have the most burdened. Banking sector in Europe and the world, probably. So every time we have an earnings call, we always make reference to the regulatory burden. They are very high. So any additional. Charge will only. Have. A more impact on that.
When it comes to politics, I wouldn't like to comment on that. I wouldn't like to. Refer to any political issues. I can only say that.
Our new shareholder. Has. The experience. They've experienced some political. Turmoil, but what is most important for us is economics. Economy. And our forecasts are really optimistic going forward. And we will come back to that in a minute. To the growth.
But there is one more question, maybe, Wojciech, you could answer. With regard to the consolidation of Santander Consumer Bank.
What effects can we expect, anything special, in the second half of the year when it comes to. Santander Consumer Bank's consolidation?
We actually commented on that quite a lot in our current report, as our CEO mentioned. I don't know what was the question driving it, asking about special effects, but. Referring to the information we published on the 16th June, just to remind you. We still have to recognize income on that transaction. If all conditions precedent are met, and that's PLN 3.1 billion gross.
And the consequence there is of the deferred tax assets will have to be recognized, and that's in the order of PLN 180 million gross. And that's consistent in what we put into the appendix to the current report of the 16th June. There are more questions about volumes. And in reference to our earnings calls the quarter before, when we were talking about the outlook for growth. In corporate loans in the upcoming quarters.
What would be the supporting factors and what are the specific sectors?
The first quarter was. When we had this growth at a smaller level, but. Starting from quarter three to 2024, we cannot complain about the growth. Of course, the second quarter was a bit untypical and compared to. Year on year. And you had that on slide 15 for continued and discontinued operations.
And you have some details there that confirm that both in SME investment, corporate banking, the growth are going to be continued in quarter three. And our CEO has mentioned that before. I would say the growth. In all segments of the bank, and. They're also seen across the sector. The demand that's been building for corporate lending. I don't know whether we could pick any specific sector because it happens across different sectors. In quarters to come, looking beyond 2025 to 2026, definitely, the sectors related to energy will be important. In 2026, we expect the solid growth in loans by 7% year overall. The economic growth will be driven primarily by investments. It's already happening now. This will be conducive to loans. The lower rates will also support lending. We are optimistic. Let me just mention the loans for individual clients.
The acceleration mentioned by the CEO in new sales, slide 25. Really good performance when it comes to cash loans. It bodes well for us for the second half of the year.
Moving on, there is a question, of course, about NII and NIM. The question starts with the reference rate at the end of this year in 2026 and the implications. What is the sensitivity of NII and NIM, and so on.
Starting with the reference rate, we expect two more cuts in September and November by 25 basis points. As we all know, the inflation was better than expected. We will see that we will be close to the inflation target. This will actually support further cuts. At the end of 2026, we expect interest rates in the order of 4%. Our sensitivity, we gave you information quarter on quarter this year.
It is mentioning what part of the sensitivity results from discontinued operations. We were saying that it's in the order of PLN 300 million. In the half year, this is PLN 282 million for the group, and 10% of that is accounted by SCB. On continued operations, the sensitivity is PLN 250 million. I'm talking about the sensitivity to a cut of 100 basis points. That's the effect for 12 months, assuming the fixed balance sheet. This sensitivity was reduced in previous quarter. Every quarter, I provide you the share of adjustable fixed rates in our portfolio. What I have in mind are those sanctioned at the fixed rate and those hedged by swaps. That's more than 53%. That's more than 50% at the half year. That's really it.
We have a question now about the capital.
We have a question, can you explain the negative effect on the capital in Q2?
If you look at the ratios as of the 30th June, Q1, 13.51, and TCR 18.06. There is a slight decline. This is due to the increased level of the risk-weighted asset, quarter over quarter, that is around PLN 3.6 billion. Total funds went out. Went up by PLN 150 million. We grew our business. We've changed the level of the risk-weighted assets, and we look at the retail and the business segments. The risk-weighted assets were also pushed by the growth of business and corporate banking. It was also impacted by the synthetic securitization transaction. The minimum levels are still met. We still have, we still go much beyond the required TCR at the bank level. That PLN 10.3 billion above. So we're totally secure.
The decline was down to the increased level of the risk-weighted assets. That was related to our ongoing business across customer segments. Talking about the capital, something that's important mentioned by Wojciech, when we released the current report, we were talking about the pro forma impact on the data. As of the end of 2024, what the consolidation would mean. We were talking PLN 137 million on consolidated data. We're showing you on slide eight what it would look like as of the end of the year, and we're showing you the difference. Now, the last question that we received, that's the bank plan, a provision on unauthorized transactions of customers as seen yesterday in the Legal case, and also provisions for the free loan sanction. You should read the note to the financial statement where we discuss the risk.
We have about 25 lawsuits where the bank is defendant relating to the free loan sanction. We're monitoring this at the level of the entire market. We're also looking at the situation in our bank. The verdicts so far have been favorable to us, so we haven't made any portfolio provisions in that respect. We look into each individual case. The bank has PLN 2 million worth of provisions for individual cases. For us, this is adequate for this type of risk. I don't see any more questions. Did we get anything in the meantime?
Yes, I have a question from Philippe Monet.
We have a question. Can we comment the trend underlying lost loan provisions, excluding discontinued operations? The credit provisions look low for this point in the cycle. It would be interesting to know whether you think that this level is adequate.
Generally, what do you think about loan availability and the default rate in the portfolio? Do you see any negative changes when it comes to the outlook for the credit portfolio? Sorry, this was my simultaneous translation of that question.
I will take that. We're very happy with the good quality of the credit portfolio. We have an excellent—our customers enjoy an excellent standing. They do very well with the economic landscape at the moment, and they prove resilient to the development. We see improving financial performance, improving flows of our customers. We continue to review and update our models. Our models are regularly reviewed by our auditors. Those models are also resilient, and they've proved adequate in classifying customers. Our assumptions are positive when it comes to economic development. No one-off. We're not expecting any major one-off in the following quarter.
We will continue this good level, and this, of course, impacts the level of provision.
We have one more question. 53% of portfolio is hedged. What is the timing of that hedging?
We're talking about interest rate hedging. About two and three years.
That's all the questions we've received.
Thank you very much. We don't have anything else to add. Thank you very much, and have a good day and have a good summer. Goodbye.