Good morning. Very warm welcome at the wrap-up of Q1 for ING Bank Śląski. I would like to present our panelists today, Michał Bolesławski, CEO, Bożena Graczyk, vice president, CEO in charge of finance, Iza Rokicka in charge of investor relations. My name is Piotr Utrata. I'm the spokesperson for the bank. Over to you, Michał.
Good morning, ladies and gentlemen. I will shed light on the key indicators for Q1 and hand over to Bożena for more details and more financial results. Starting from the number of clients in Q1, we have hit 4.7 million of individual clients serviced by the bank, which is 133,000 growth year-on-year. Let me also mention that we will also mention this in the light of, i n the Beat of Life strategy rolled out for the next decade, how we need to acquire volumes to meet the targets.
In terms of individual clients, we'll need to increase the growth on to 200,000 net per year to get to 6.7 million in 2035. Gross growth of our clients was 88,000, which is comparable to Q1 of 2025, and was higher than the average quarterly growth of 77,000 of clients last year. In the strategy, we have assumed 350,000 average growth. If we go on with 88,000 each quarter, we'll certainly meet the assumed volume. The number on the corporate side was 599,000, which is 5,1 00 growth Q-on-Q and 24,000 year-on-year.
Here, in this respect, we don't need to speed up in order to achieve the level assumed in our strategy, and by 2035, we want to service 800,000 of corporate clients. As for volumes, the growth of mortgage lending was 12% year-over-year. That is PLN 9 billion more, reaching PLN 71 billion in total. The share of the market share on mortgage market was 14.26% higher, and this was possible thanks to record-breaking sales of mortgage products to the tune of PLN 6 billion in volume, which is 27% growth year-over-year. 18.1% was our market share in terms of mortgage products, which gives us the second highest position on the market.
The volume of consumer lending grew 15% year-on-year by PLN 1.3 billion, and the market share was 4.94%, growing from 4.8% in Q1 2025. The new volume of sales grew by 25% year-on-year to the tune of PLN 1.8 billion. The volume of retail deposit was 10% higher, reaching PLN 13.3 billion, and our market share increased by 10.4% as compared to 10.3% in Q1 2025, and 10.15% at the end of 2025. We are on a very good level to be reaching strategic targets on mortgage products and consumer lending as well as the retail deposits.
Aspiring to the goals for 2035, assets in investment products grew by 33% to the tune of PLN 2.25 billion, as a result of which the market share grew to 7.2% as compared with 7% in Q1 2025. This accounts for 12% to target before integration with TFI Goldman Sachs.
As for loans, our private clients lending slightly underperformed at the tune of 11.7%, but corporate lending grew by 5.7% and PLN 3.9 billion year-over-year was achieved, reaching PLN 63 billion for SMEs and PLN 40 billion for strategic clients. Here I want to highlight to you that the entire corporate lending portfolio is in excess of PLN 100 billion. It is PLN 101.3 billion in particular. Private sector investments are insufficient. They are on an insufficient level. That's why the lending is not growing as it would be desired.
Also for investment loans and refinancing loans or loans for renewal of machinery park and other fixed assets are offered at very low provision and commission and not always makes it any sense. 0.4% for 10-year lending is by far insufficient. There are only two banks on the market who would go that down. However, our approach is that it needs to make sense. If they are underperforming, we will only participate in this business only in a very limited scale. Given that treasury bonds offer higher return on investment than such loans, we see no reasons why we should be exposed to this market on a massive scale. This is it for the highest numbers and keynote points. Let me hand it over to Bożena Graczyk, our CFO.
Thank you. Good morning. Finalization of acquisition of 100% of shares in Goldman Sachs TFI. As you know from our reporting, this transaction has been closed last Friday. The total final value of acquisition was PLN 4 million or PLN 5 million, which has an impact on our Tier 1 capital, 32 p.p. We shall roll out the full consolidation of financial result in our consolidated financial statements in the next quarter. Our statement will be heavily impacted by the transaction. Please be warned in advance. The first acquisition, the takeover and the new assets will translate into recognition of Purchase Price Allocation and intangibles that will be related to the pricing of the customer relations and will consolidate everything, including commission and fee revenues.
Cost of operation will be subject to consolidation. The structure of bottom line will be different because of this transaction. There will be also additional result that will reflect the change in the value of our shares. Before transaction, we held 45%. Now we'll be holding 100% of shares. There will be revaluation of assets through acquisition stages, as we put it. This will be really reflected in our bottom line in the light of full consolidation of Goldman Sachs TFI. In the last five years, from the first acquisition, TFI from the fifth position was now on the second position in terms of their market share in capital markets. We are taking over the second-largest entity of a kind from the market, and it is part of our strategy In the Beat of Life.
Now coming to Q1 and our performance in Q1. Our net interest income was PLN 823 million. As we know from the market expectation, this is very close to what the market expects as the gross profit grew by 3% year-over-year, which is a result of the growth of our commercial activity. The result before costs grew by 3%. Given the declining interest rates, this is interesting. We have also stable risk costs. I must provide you a comment of the impact of effective tax rate. As you will know, nominal tax rate will be 30% this year, and the effective one that is reported here was 39%, as we see on a quarterly basis.
From what we know, from the market consensus, you expected lower tax rate. This is a result of a number of factors. The higher nominal effective rate contributed to the result, as well as regulatory costs, which are not tax deductible. As you can see how they impact year on year, our f inal result. If we assumed they were the same as in the previous year, their impact on the effective tax rate would be 2%, so it would be felt. You expected 34%, we've got 39%, but 2% are beyond our reasonable control because these are higher regulatory costs.
The other factor that contributed by 2% to the final result was the influence of various differences of that we can see in our financial results. If we increase the rate to 30%, there will be a negative bearing on the effective tax rate. It will be felt most acutely this year, but it will be declining in the next two years to come, which of course, calls for the quarterly calculation of deferred tax.
At present, we see the declining nominal rates, which as a result, given the net impact of deferred tax will have a bearing on the effective tax rate. Given market volatility and the impact of fair value on fair value and how they are all settled, this will have a bearing on the effective tax rate. I am telling you this in order to alert you to the changes from quarter to quarter in the tax rate, in spite of all the smoothing and all the application of accountant rules. 39% or even 40%-ish rate on the basis of Q1 performance should not be a surprise. Speaking of ROE, after Q1, ROE, adjusted by macro cash flow hedge, amounts to 19.6% against 20.2% same time last year.
About our net interest income, in the first quarter it amounted to PLN 2.3 billion, which means improvement by 6% year-on-year and by 2% quarter-on-quarter. Our quarterly interest margin lowered by 6 bps quarter-on-quarter amounting to 3.24%. In the latter case, you should note that the first quarter was two days shorter than the preceding one, which has a real bearing on the level of the interest income as well as on the margin. If we adjust the margin by the difference in the count of days and the quarter, our margin would have improved by 1 or 2 bps quarter-on-quarter.
Clearly, we are working against dropping interest rates last year and the first quarter of this one, which exerts pressure on the asset profitability, which naturally enough is compensated by lower financing costs resulting from changing interest rates as well as from commercial activity in the area of effective interest on liabilities. When it comes to LTV ratio, in the first quarter it lowered down to 75.3% against 76.3% last quarter. As you could see in the commercial values, it's due to the fact that in this quarter, the deposit value was growing faster than the one of the loans. Although this ratio, as the market shows, is still one of the highest on the Polish banking market, with the average for the industry being 66% only.
As for fees and commissions, in this quarter it's, the ratio stayed the same as last quarter. Year-on-year, we recorded 3% increase in that line. There were several contributors to this growth, mainly 36% growth in the commissions related to capital markets, in particular as much as 46% growth in the area of commissions on investment funds. As we said before, it's a result of the steadily growing assets volume in the area of investment funds. Last but not least, our clients have PLN 25 billion in funds at present. Another growth contributor is the insurance commission growing 6% year-on-year. It correlates heavily with the growth of our mortgages portfolio.
We also had 4% growth in commissions on bank accounts. On the other hand, there was a slight drop in FX fees of 10% year-on-year and 6% quarter-on-quarter. The trend is a bit similar as in the rest of the industry related to lower activity in FX transactions. We also recorded a drop in commissions on cards. With the main driver being growing costs of card operations. Our operational costs, along with the banking tax, of course Q1 has the heaviest burden of the tax, amounted to PLN 1.5 billion, marking 6% year-on-year growth. Although speaking of banks overheads, they grew 4% year-on-year, and the regulatory cost grew 12% year-on-year.
In particular, the banking guarantee fund cost. Within our overheads, they grew 5% year-on-year. As per usual, Q1 cost has a burden of the annual contribution towards the compulsory reconstruction of the bank amounting to PLN 246 million this year, marking 41% growth year-on-year. In the first quarter, we also bear the cost of the KNF, PLN 32 million. The cost is slightly lower than last year, where it amounted to PLN 35 million. Also, please note that as per the BFG's decision, the banks, ours included, shall not bear a deposit guarantee fund costs. Last year, the cost amounted to PLN 25 million for us.
Within our overheads, the dominant position is the personnel cost growing 10% year-on-year. As we informed throughout 2025, it's also a cumulative effect of growing wages in April. As per usual, this year in April too, we increased the wages of our people. As for the risk costs, they amounted to PLN 211 million, comparable to the level of last year. Here, please note that the write-offs are strongly correlated to macroeconomic data, which in this quarter grew by PLN 54 million, out of which PLN 49 for the corporate segment. Let me take this opportunity to remind you that our models and macro data contributing to the general provisioning level is to be observed.
What happened last March in the Middle East also had a negative bearing on the estimated cost of risk. The oil price is a factor for provisions within our models and in the macro data. Its impact is clearly visible. In the corporate segment, it's been very stable year-on-year. In Q1, the cost was PLN 192 million . In the retail segment, on the other hand, we have a very good quality of our portfolio with a quarterly cost of PLN 19 million . Against the scale of our retail portfolio, the cost is a negligible burden. As a result, our quarterly cost of risk is 46 basis points, which is comparable to the past quarters.
Speaking of the portfolio quality, the share of loans in Stage 3 amounted to 3.9%, which is still below the industry average, which as of February this year amounted to 4.4%. The retail portfolio quality, now the NPL ratio is stable at a low level, with a very good, remarkably good quality of the mortgage portfolio and a very low rate of irregular loans in Stage 3, at 0.4% only. Speaking of provisioning ratio and Stage 3, it lowered by 0.7%. It's a natural element, resulting from a very good quality of collaterals. All new defaults have a remarkably lower provisioning level. Last but not least, about our capital adequacy.
What happened in the first quarter was, including in the capital and retrospective inclusion of the outstanding profit after the profit share for 2025. The adjustment was 25 bps at the opening balance. Following the okay from the KNF, we could include a subordinated loan contributing nearly 86 bps to our capital adequacy ratio. There are some negative effects, though, related to the increase in risk-weighted assets in Q1. In Tier 1, it's because of several factors. First and foremost, the end of the period for regulatory adjustment for revaluation provision, which ended at the end of 2025. It's no longer there, it lowers the ratio.
There are also some temporary adjustments related to the difference between IFRS provisions and the expected loss ratio and IRB models. It's a temporary phenomenon eliminated in the next reviews. Which would be the end of my presentation and results. Please ask your questions, ladies and gentlemen.
Please ask your questions online. We already have a few questions. Following what the CEO said about margins and corporate loans, what do we think about the mortgage market? Looking at the high share of the bank and new sales, are we to understand that profitability is attractive to you?
Yes, indeed. We do believe that the profitability is at the level guaranteeing the right return for us, and in general, it is acceptable. Although the margin level has dropped as well, it is also because of the part of the cycle of lowering interest rates. It is to be stabilized now because we cannot, we do not see any further lowering of the interest rates. The margins in the area of mortgages in the bank will stay as they are. Thank you.
Continuing about mortgages, what part of mortgages is due to refinancing? Is the bank still a beneficiary of the refinancing wave?
As you could see in the financial results, in Q1, sales amounted to PLN 5,900,000,000 . It's a record figure in the sales of our mortgage loans. Yes, I can confirm indeed that we are still a beneficiary of refinancing our loans in the banking sector.
It's a dozen or so percent of the total sales value in a quarter. Mainly it's due to the needs of clients related to the first or next mortgage loan with no relationship with refinancing whatsoever.
There are some questions about the first quarter. What was the contribution of macro cash flow hedge in the result of the first quarter?
As you could see quarter-over-quarter, the impact of it has been ever lower. Although there were some market developments contributing to the value of the revaluation reserve. In Q1, we are talking about roughly PLN 200 million of impact on our net interest margin, and it's been dropping quarter-over-quarter.
However, as you can see as well, the revaluation reserve in Q1 following the interest rates movement related to the Middle East situation and the macro data impacting the interest rates, resulted in the increase of the revaluation reserve. Of course, we can see a major volatility in the market expectations. Like Michał mentioned, there is no expectation to see any further lowering of interest rates. Macroeconomists are not on the same page when it comes to possible growth of interest rates. We could see the curves. Time will tell. The Middle East developments will clearly have a major impact on the revaluation reserve in the quarters to come.
Yes. There is also a question concerning the result in terms of our total revenues. Bożena, I think that you have preempted on this question, so thank you. Two more questions to come. How we evaluate the impact of the war in the Middle East on the cost of risks in Q1? Was it seen in the model provisions and reserves?
Well, I think that I also preempted on this question in my statement. Macro data are felt extremely quickly from quarter to quarter, and they have a bearing on the evaluation of expected loss. This is part of parameters built into our corporate banking models and macro models that will have bearing on the cost of provisions and reserves from quarter to quarter.
The volatile situation has changed trajectories of many macroeconomic indices in March, and this is reflected now in the market policies, and this is also reflected in our Q1 financial result. PLN 23 million of result in the other basic operation, what is it about? Well, I do not recall more precisely, but this is about conciliation and settlement of various items, which might have been presented in the final result because of certain client settlements being fully mature.
No other questions are visible, which brings us to the close of our conference today, and see you in the next end of quarter to present Q2 results.