Hi, ladies and gentlemen. My name is Agnieszka Dowżycka. I am in charge of investor relations at Erste Bank Polska. Welcome to the earnings call of Erste Bank Polska for the first three quarters of 2026. This presentation will be led by the CEO, Michał Gajewski, Maciej Reluga, Vice President of the Board, and Bernhard Leder, CFO and board member. Before we start, let me remind you that throughout the presentation, you can ask your questions through the link available online. You can also send your questions directly to my email address. The presentation is available on the bank's website. We are opening the call. We are opening the conference now over to the CEO.
Good morning, ladies and gentlemen, and welcome to the Erste Bank Polska press conference. This is an exceptional year for us. In April, we went through a rebrand.
Before we move on to the third quarter results, I would like to say a few words about how we are building the Erste brand in Poland. Just before the rebrand, spontaneous awareness of the Erste brand stood at around 3%. By September, it reached already 35%, and this shows that in a very short time, we have managed to lay solid foundations. Erste is now far more visible in the media and public space, and brand awareness is growing steadily. For us, this is only the first step. We want to build a brand that our customers genuinely like and choose. Our ambition is to build the first banking love brand in Poland. This ambition rests on solid foundations. We have a reputation as a stable and responsible bank, which we have spent years earning.
We have a new, interesting brand on the Polish market, and we have more than 200 years of experience with Erste Group. We have our own methodology based on consumer science, which we are further strengthening with technology. All of this to even better understand our customers and create exceptional experiences for them. We are currently working on a new strategy. I do not want to give too much away just yet. I can say that customer experience and the ambition to build a love brand will play an important role in it. Like Erste Group, we want to become more involved in financial education and in building good financial habits of our customers. We believe that a bank's role is not only about providing financial products. We want to help people make better decisions about their money and build their financial confidence.
All of this has a very specific business dimension. We believe that a stronger brand, a better customer experience, and greater trust will boost our acquisition potential and the bank's further growth. We see that already in the results of the first quarter. Our ambition is not only about customers. We want to be the best bank also for our shareholders. At the end of the third quarter, in terms of market cap, we ranked first among private banks, second among all banks listed on the stock exchange, and third among all companies in the WIG20 index. This valuation reflects recognition of our business model. We are building our position, like I said, on solid foundation.
It has been recently noticed by our audience. Forbes awarded us for the best service for affluent clients. Our net profit is PLN 3,361,000,000 , and that was, of course, burdened by the tax that grew by 51%. In quarter three alone, that was PLN 1 ,490,000,000 . Let's move to slide four. There are a few pieces of information. We've been actually servicing 6.2 million clients. Now we have 4.2 million digital clients. The majority of them use the mobile application, and we have here a growth by 10% year-on-year. After three quarters, we won 481,000 new customers. At the end of September, the deposits of customers totaled PLN 252 billion, and thus they grew by 14% year-on-year. Customer funds totaled PLN 287 billion and grew by 15%, while the loan portfolio in gross terms was PLN 183 billion and grew by 11%.
Total assets grew by 4% year-on-year to reach PLN 340 billion. Slide five, key financial results. As I've mentioned, after nine months, the net profit was PLN 3 , 691 ,000,000, while in quarter three, it was PLN 1 , 490 ,000,000. The net interest income totaled PLN 9 , 468 ,000,000, while in quarter three alone, it was PLN 3.3 billion. While in quarter three, it grew by 6.5% quarter-on-quarter. The net fee income after nine months was PLN 2 , 182 ,000,000, while in quarter three alone, it was PLN 643 million. That was driven primarily by our intensive efforts in the acquisition. I will tell you more about it when we will be discussing the net fee income. Total income for three quarters was PLN 12 , 113 ,000,000 and grew slightly.
In quarter three alone, it was PLN 3 ,0 61,000,000 and remained stable and comparable to what we saw in the previous quarter. Our capital position remains strong. Our Tier 1 was 18.53%, while the total capital ratio stood at 18.75%. These ratios reduced by 54 basis points and 68 basis points respectively compared to the previous quarter. This was driven by the quick growth in business and the growth in risk-weighted assets. Let me highlight that the KNF agreed to exclude from the ratio the operational risk related to Santander Consumer Bank, which impacted our risk-weighted assets about PLN 1.6 billion. This gives an attractive return to our customers.
We remain among the most efficient banks in the entire sector. We have excellent liquidity, LCR at 187.3% as of the end of September. Slides six and seven, this is selected business data. After the first three quarters in the retail segment, the number of digital payments rose by 17% year-on-year. Very important information about acquisition. The number of customers acquired increased by 13% year-on-year, 15% year-on-year. That's the growth of our Platinum customer portfolio, and also to the same extent, our affluent customer portfolio. So, two most active and most profitable groups in the retail segment. We maintain PLN 4.9 million personal accounts. We have opened 377,000 new accounts. We granted PLN 12.1 billion in cash loans. In quarter three alone, we granted PLN 4 billion in cash loans. That's 20% up year-on-year. New mortgage origination, PLN 11.7 billion.
In quarter three alone, that was PLN 4.9 billion. Investment funds, well, here we have already reached almost PLN 35 billion, and our market share is 10%. The SME segment, a strategic, very important segment. SME customer acquisition rose by 97% thanks to our promotional offer, among others. Over three quarters, we opened more than 115,000 business accounts, and this is twice as many as a year ago. In quarter three alone, this was 56,000. We now have more than 657,000 SME customers. According to a ranking by one of the leading business media outlets, we are now second in volume by number of SME customers, and we are closing the gap to the leader. This is, of course, the effect of the acquisition campaign and our special offer that we will be talking more in detail about on the following slides.
We granted PLN 4.8 billion in loans to customers in this segment. That is 22% more than a year ago. In quarter three alone, that was PLN 1.6 billion, so an increase of 23%. We continue to develop digital processes for SME. Volume of loans granted end-to-end online through retail service process has more than quadrupled. So, financing sold online already accounts for almost 1/3 of the total number. That is in the SME segment. We have had a very good quarter in corporate banking. We have seen a 15% growth in loan volumes and credit limits for this segment. Customer activity in remote channels is growing. Also, what is also growing is the number of customers using the mobile app. 26% of customers in the corporate segment now use mobile banking. In corporate and investment banking, very good performance.
For many quarters, we have been the leaders in treasury transactions, number one, top one for a number of quarters now. Income from M&A rose by 48%, and income from market sales to financial institutions increased by 34% year-on-year. So, very good quarter for corporate and investment banking. Slide nine, gross loans. As I mentioned just a moment ago, when going through activity across all segments, we are seeing strong loan growth everywhere. You see the details on the slide. The portfolio structure remains diversified. I want to emphasize that, as always, the growth must be profitable. This is our top priority. Customer funds, slide 10. The deposit base up 14% year-on-year, 3% quarter-on-quarter.
In quarter three, we are growing individual customers' current account deposits much faster than the market, almost twice as much as the market grew by 1.6%, while we grew by as much as 2.7%. Individual customer deposits amounted to PLN 131 billion, business customers, PLN 121 billion. That is up 24% year-on-year and 5% quarter-on-quarter. Investment funds up 21% year-on-year. We now manage PLN 35 billion. Good result here. So, total customer funds, PLN 287 billion, 15% more than a year ago, and 3% more quarter-on-quarter.
Now, profit and loss account. For three quarters, the net interest income totaled PLN 9.5 billion, and that actually is the same what we generated last year. In quarter three alone, the net interest income grew by 6.5% quarter-on-quarter, and by 3% compared to quarter three 2025. That was despite lower interest rates. We can boast better net interest income than a year ago. This is the follow-up of the quick growth in the balance sheet, both on the credit and the deposit side. What we are happy with, on the deposit side, we saw the growth in current deposits. Over the period of three quarters, interest income declined by 6%, while interest expense reduced by 22% year-on-year. As a result, the net interest margin in quarter three totaled 4.42%. Okay, let's move to net fee income, slide 12.
Now, net fee income for three quarters totaled PLN 2,182,000,000. In quarter three alone, it was PLN 643 million. I've already mentioned that I will tell you more about what happened in this area. This was related to the acquisition proposal for SME customers. The effect of this investment that we made in quarter three, that was the cost of PLN 129 million. This, if we were to compare it to the previous quarters, we didn't have this acquisition and the special offer before. Of course, the return on this investment is expected in the longer run, but we've been analyzing the first results, and I can comment on that. We are happy with the effects. We acquired prospective customers in this segment. More than 2/3 of the newly acquired customers meet the activity requirements because they are active when it comes to transactions.
The level of balances in the case of the newly acquired customers is close to the average for the whole SME base. The share of taking out loans in this segment is as much as 10%, which is consistent with our business case. Given that this was a short period of us being active, this is really satisfactory. As much as half of these customers have opened their personal accounts with us. There is a cross-sell potential, and we are actually leveraging it. Once again, let me say we have 657,000 customers in the SME segment, and that's the growth of 17% year-on-year. Let me preempt the questions after the previous call.
In the quarter four, we can expect a little bit higher cost under the fee line, but we believe that this investment will be the driver of our further dynamic growth, not only when it comes to the number of customers, but also when it comes to our profits. Our ambition to become number one in this area in Poland is sustained. We keep investing in it. It's a good year to make investments, and you know why. On a year-to-date basis, we saw really good results when it comes to asset management fees. They grew by 31%. We saw good fees when it comes to guarantees, up 29%, credit fees up 18%. As a result of that, the gains from capital markets increased by 22%, while on loans and insurance by 12% year-on-year. Let me wrap up on total income.
It's the ninth quarter in a row when we generated PLN 4 billion in total income. We are happy with maintaining this outturn despite the interest rate cuts. The total income of the group over three quarters exceeded PLN 12 billion. This is a little bit higher year-on-year and stable quarter-on-quarter. Year-on-year, the income from other operations was really good. The cost grew by 76%. In quarter three, we didn't have a dividend as we used to have it in quarter two, so it was lower. Net trading and revaluation at PLN 317 million, and major growth here in this line. In quarter three alone, we had a reduction in this item driven by the lower gains from the sales of debt financial assets and lower income from FX operations. Operating costs, slide number 14.
After nine months, the costs were PLN 4.4 billion, and there is a growth year-on-year, driven primarily by rebranding and integration. This is also driven by the high contributions to the Bank Guarantee Fund. The rebranding costs after nine months totaled PLN 226 million, of which PLN 51 million was spent in quarter three. Integration costs over nine months were PLN 158 million, of which PLN 51 million is us. Our estimates when it comes to the cost of integration and rebranding indicate that in 2026, our expense in this area will be lower by roughly PLN 16 million than what we budgeted. Yet the process in this area will be continued in the next year, so we will have the deferral of PLN 16 million from 2026 to 2027. So, 2027 will be the year of continued investments into the future.
Our focus when it comes to costs for 2027 is that the growth in costs in accordance with the growth in inflation, or maybe at a bit slower pace, despite moving that PLN 16 million to that year. The cost-to-income ratio for the group was 36.1% after nine months. The comparable cost-to-income ratio, that is excluding integration, rebranding, and Bank Guarantee Fund costs, was 29.3%. Loan loss provisions and the quality of the loan portfolio. That's slide number 15. On the consolidated basis, the net balance of provisions for expected credit losses was PLN 367 million, and in quarter three, PLN 117 million. The average cost of risk was 30 basis points, which is slightly better than what we saw in the recent quarters. The quality of loan portfolios remain sound and resilient to changing economic landscape.
This is confirmed by our regular stress tests, and we run these stress tests on regular basis. The non-performing loans ratio was 3.4%, and it improved compared to the previous quarter. So, we've been consistently executing our NPL management strategy. In quarter three alone, we sold NPL receivables worth PLN 177 million, which generated PLN 57 million in gross profit for us. In quarter three, we did not introduce any major changes to the methodology and models used to calculate the expected credit losses. The last slide to summarize it. I think that we record the solid results, and we consistently are taking efforts to grow our business. We actually continue integration and rebranding, we continue investment, but we keep focusing on our clients. We continue investments into our further development, maintaining cost discipline and maintaining high business activity levels.
Then gross profit was PLN 6 billion, and the net profit was PLN 3.7 billion. The key driver here was the corporate income tax. In the last year, we paid corporate income tax of PLN 1.5 billion. This year, it is PLN 2.2 billion, and the effective tax rate is growing, unfortunately. We try to manage it in the best way we can. As you know, we are one of the biggest corporate income tax payers in our country, not only in the banking sector, but when it comes to the economy overall. Total income was higher than a year ago, thanks to good interest and non-interest income. The costs were driven primarily by the cost of integration and rebranding. As I mentioned at the beginning, and let me highlight this again, our ambition is to be the best bank for clients, employees, and shareholders.
We want to invest, grow, and become a loved brand. We've been strongly growing our balance sheet. Our acquisition activities and the fact that we are increasing so much the number of new customers, this actually reflects our determination to grow profitably further. In our growth, we are focusing on affluent customers, Platinum, and in those segments, we grew by 15%, and we also focus on the SME segment, where we recorded the growth of 17% year-on-year. That's been driven by this promotional activity. Thank you very much for your attention, and the floor is yours.
Thank you, Michał. We have received many questions, and some of them were probably asked before our actual presentation. This particularly relates to the SME special offer. Let me start with some, if I understood the macroeconomic questions, growth in loans in 2027 and whether our loan growth can be continued at the same rate. Short answer, yes, we're optimistic when it comes to loan growth. The bank is growing, so the question is, in 2027, will it be a double-digit growth or a high single digit? But we'll be focusing particularly on the segments we did before, so we can expect growth particularly in individual customers, consumer loans, and loans on the segment we're focusing on, as Michał has put it, that is SME. That's where you can expect growth. In 2027, we're optimistic, like I said.
Slight slowdown in loans overall, just reflecting what is happening in the economy overall. Next question was to refer to the cost of risk. We expect continued positive macroeconomic environment in 2027, so forecasted cost of risk in 2026 and 2027, and questions about our guidance, where we can say, if we look at the previous quarters, cost of risk between 0.3, 0.4, 30, 40 basis points, that is the guidance for the next quarter. Now we have questions about net interest income and net interest margin. The first question is about the slight decrease in net interest margin. Apparently, the competition shows something else. What is the outlook for the next quarter and the sensitivity of the income to higher interest rates? Bernhard, could you take this question?
Okay. Thank you for the question. Actually, we saw quarter-on-quarter quite positive development of NII with a quarter-on-quarter increase of 6.5%. You observed rightly that the main driver of the increase was a rather strong volume growth on customer loans, as well on customer deposits, which was also funding base for funding customer loans and also the portfolio. On the interest rate side, we see a very positive reversal of the trend due to the increase of the rates. So, rates and customer loans increased stronger than rates on customer deposits. I think what we are seeing here is a bottoming out of the trend of the previous quarters, so I rather look positively on this.
Right.
With regards to the second question, it was with regards to the sensitivity. This hasn't changed much, so we are exposed to a sensitivity in rates. So if rates would decrease by 1%, we would have a sensitivity in NII over the next four quarters of around PLN 300 million. No big change expected in terms of our interest rate positioning here. What we've done recently is slightly increased the duration of our investment book, which would lead to a further stabilization of the margins.
Thank you, Bernhard. We'll continue with questions to Bernhard. We have some questions about costs.
First of all, why the costs, excluding the cost of integration and rebranding, are growing by 8%? What is the reason for the growth in staff costs? Were there any salary rises? If so, what was the increase in salary costs and the outlook for costs in 2027 and 2026? In the meantime, there is another question related to costs, whether the expected growth in operating costs will be below inflation as per CEO offset. This is related to the reported cost of the cost reported excluding the integration and rebranding. So, this is the cost including integration. Bernhard, if you could answer the previous questions, please.
Yeah. I think I will answer first the question with regards to the PersEx, the personnel expense. I think you see two effects. One is rather technical, which is in respect of the quarter-on-quarter in this increase. Basically, you see this effect for our performance bonus accrual. You see actually in the third quarter. This is the quarter-on-quarter delta you can see. On the year-on-year delta, it is basically the full effect you see now from the salary increases that came actually in 2025. You have not the full year effect in the third quarter. When it comes to the outlook, what was mentioned before is, and also what Michał now shortly answered, we see a moderate cost increase also in 2027 due to several factors.
First, there is basically an overspill of cost we did not spend on rebranding and integration in 2026 into 2027. We face, and I think this is to be seen by us, an increase or updrift of IT service provider cost, which is above wage costs. As we said before, as Michał said before, 2027 will also be a continued year of investment. Having said that, I think we are looking at a very modest cost updrift below inflation, including all side effects on integration and rebranding, as Michał mentioned.
Thank you, Bernhard. Let us move on. Now, let us go back to SME for a moment. There are a few questions, and I think a few of them have already been answered. It is worth saying it again. How many customers we acquired during this special offer? Can you see any attrition? There are other special offers for customers from the segments in other banks. The first question is quite general. What was this special offer about? How long it will last, and what are the total costs? Will it have a similar impact on Q4? That has already been answered by our CEO, that the scale of these costs might be similar or a bit higher. Then there is another question. Will this return come back to the levels prior to the special offer?
Yes, so this finishes, we will come back to regular levels. What is the outlook for fees? How temporary is this when it comes to SME campaign? Overall, the global fees is quite solid. Let us come back to the figures and details related to the special offer and the competition.
Thank you, Maciej. You have already gave quite a few answers. What is this special offer?
5,000 inflows to the account, but parents have to be active. Five card transactions are billed for minimum PLN 1,000. Plus, they have to make payments to social security or tax office through our account. All the three conditions have to be met for the customers to get the money back of PLN 1,500 for maximum three months. They have to give us marketing consent. This is really a well-thought-over exercise.
This is also related to our data-driven approach when it comes to understanding and the profitability of individual segments. After three quarters, as I have said, we won 115,000 accounts, which is quite more than a year ago. In quarter three alone, that was 56,000 accounts. We have 657,000 of these customers. Taking into account the results, I have already mentioned that briefly, it turns out that our assumptions in business case are met. We can see now that the average inflows to the accounts and the balances in the accounts are like the average for the whole SME base. We can see that as many as 10% of these accounts are the accounts with loans taken out. That finally, these customers opened personal accounts with us. That was not a condition on the special offer to get this money back bonus.
We are happy with the results. We will also see the impact of that investment on cost in the next quarter. We can see that these customers stay with us. We cannot see attrition. Getting ready for acquisition and investing into digital processes for the segment, the whole credit process is digital for the segment. This is all about these customers seeing and experiencing our bank with regard to all individual services. We think that this experience, and not the initial promotion, will actually be the determinant of customers staying with us. There is a deep economic sense to invest in this part of the market and customer segments. We are determined to be bank number one for SME. Okay. I assume that everybody believes, just like us, that this is a good investment. There is another question referring to the cost of risk.
Is it sustainable at this low level?
Well, it depends on the macroeconomy. We know how much uncertainty is there. Given our current forecast for 2027, 30 basis points, 40 basis points is something that will be sustainable. The risk is declining when it comes to the economic growth. If the question marks disappear, the situation will be stable. We have to emphasize that in none of our portfolio sub-portfolios, we have not seen any concerning phenomena that could actually suggest any deterioration, and that is what we mentioned the quarter before. Now, there will be a question to Bernhard or two referring to capital. The first one is, at the end of quarter three, 2026, what was the impact of securitization transactions on capital ratios, and what are the plans in this area? The second, has KNF actually imposed a P2G additional add-on capital requirement on the bank?
Thank you, Michał.
Are there any changes in this area?
Let me explain you the risk-weighted asset change in general, because there were quite some changes in risk-weighted asset base [crosstalk]
Securitization was one smaller effect in the whole picture. [crosstalk]
PLN 5 billion increase in risk-weighted assets, including CCR and CVA and securitization, partly offset by the operational risk-weighted asset reduction by the discontinued operation of the Santander Consumer Bank, which Michał already mentioned, PLN 1.6 billion. Market risk-weighted assets increased slightly by PLN 0.2 billion. The biggest change was within actually the credit risk-weighted asset, as you can imagine, due to our quite significant loan increase in our books. The credit risk-weighted assets increased by PLN 7.2 billion. This was then partly offset by the CCR and CVA effect in total of PLN 1.9 billion. Securitization, a small effect, reduction of PLN 0.3 billion of the risk-weighted assets. Securitization will continue to be an actively used steering tool of our risk-weighted asset base in order to optimize our capital usage also going forward.
Second question, you may have seen that we put a current report out yesterday with exactly the topic of the Pillar Two, and there was a zero add-on from the KNF, so no change there.
I can see that. There is one more question. There is no good conference if the AI issue is not tackled. But seriously, there is one question, because there are no more question, and Michał, could you answer it? Can you see any tangible effects of using AI in the bank?
Let me start that we have very pragmatic approach in this area. First of all, we are reviewing our business model processes, and we simplify them. Only then, based on user case, we decide whether we can actually apply artificial intelligence solutions or not. Of course, we are actually making analysis in this area, and of course, we use AI in some areas. The tangible effect is that despite the significant growth in the business, balance sheet, and transactions, we do not hire additional people.
We think that AI will give us more benefits when it comes to making our proposition more tailored for our customers, and this will facilitate further growth in business and in the balance sheet. Undoubtedly, the new strategy will include the element related to using AI. We have very pragmatic, hands-on approach in this area. We always need to see a return from that, and it will always have to involve simplification of processes.
Thank you, Michał.
Agnieszka, I can see that we do not have any more questions. We actually exhausted all questions asked, so thank you very much. Have a great Friday and a good weekend. Thank you.