Good morning, ladies and gentlemen. My name is Joanna Filipkowska, Investor Relations. Today we are presenting the results of mBank Group in Third Quarter of 2025. The speakers today are Mr. Pascal Ruhland, Chief Financial Officer, Mr. Marek Lusztyn, Chief Risk Officer, and Mr. Marcin Mazurek, Chief Economist. After the presentation, we will answer the questions that you can put into the chat box. Pascal, over to you.
Also, good morning from my side and welcome to our results presentation. And I'm really pleased to share that we continue to deliver strong volume momentum and a robust financial result. And let's begin with a few achievements we are especially proud of, and let's start with slide four. First, in the nine months of 2025, we generated revenues exceeding PLN 9.4 billion, a solid 5% increase year on year. Each quarter, revenues surpassed PLN 3 billion, despite a 100 basis points drop in interest rates between May and September. Second, we maintained our best-in-class efficiency with a normalized cost-to-income ratio of below 30%, and this despite a strong increase in contribution to the Bank Guarantee Fund. Third, our net profit reached PLN 2.5 billion, translating into a return on tangible equity of 20%.
So you see, we are firmly on track with our strategic priorities, so let's continue on slide five. Number four, our core gross loans, excluding reverse repo and FX mortgage loans, grew by 11% year on year, reaching nearly PLN 134 billion now by the end of September. Fifth, our active Swiss franc loan portfolio is further shrinking to 7,500. Legal risk costs related to FX mortgage loans dropped by over 50% year on year, totaling PLN 1.66 billion in the first three quarters. Both new court cases and pending lawsuits continue to decline. And sixth, thanks to our successful PLN 400 million Tier II capital in Q2 and our retained earnings, we have significantly bolstered our capital base, creating a solid buffer for our future growth expectations. Now moving to slide six.
As announced at our Capital Markets Day, our ambition is to exceed 10% market share in all our key products by 2030. Since January, we have gained shares in household loans, mortgage loans, household deposits, and enterprise loans, so we are growing faster than the market. In corporate deposits, we've already surpassed the 10% threshold. With a strong liquidity, we focus on client satisfaction and transactionality rather than price competition. Let's move now to slide seven, and here we share two mBank unique topics. Starting on the left side, we are very proud that we have been recognized by Forrester's Technology Strategy Impact Award 2025 for the EMEA region. This award acknowledges the scale and impact of our recent technology transformation, and please believe us, that is more than just a tech upgrade.
This is the foundation of our strategy, enabling us to scale, innovate, and deliver even greater value to our clients. Our second topic on the right hand of the chart is a world-first innovation. We introduced the first payment ring that combines payment functionality with health and activity tracking. This combination of finance and health fits also perfectly to our strategic ambition, and now I'm handing over to you, Marek, who will elaborate about our recently announced transition plan.
Yes, thank you, Pascal. Good morning, everyone. So as Pascal just highlighted, just this week, we have published our transition plan. This is the foundation of our resilient business model. It well combines our target to get to the net zero emissions with some business targets we have announced last month. And we are proud to announce that we are the first bank in Poland with the decarbonization targets validated by the Science Based Targets initiative that ensures alignment with the Paris Agreement on getting to 1.5 degrees Celsius pathway. The transition plan of mBank translates our climate ambitions into the concrete business actions, sector-specific initiatives, and measurable targets. And it is fully embedded into the business strategy for 2026-2030. What are our key milestones for 2030? First milestone is the absolute Scope 1 and 2 greenhouse gas emissions reduction by 42% by 2030 when compared with 2022 as a base year.
Sectoral decarbonization targets at sector level are set for commercial real estate, power generation, and residential real estate, as well as for our assets under management and leasing. On that, we would like also to recall how it is integrated with the business strategy that we have communicated last month. We assume that sales volume of mortgage loans for energy-efficient properties will double when compared to 2024, and 15% of corporate loan portfolio will be allocated to sustainable transition and impact finance. Pascal, over to you.
Thank you, Marek. So let's now turn to our Q3 financial performance on slide 10. Total income remained nearly flat quarter over quarter, with net interest income down 1.4% due to lower yields on loans and floating rate securities. The net interest margin declined by 23 basis points to 3.89, reflecting the impact of rate cuts. Fee income held to be steady, supported by strong payment card-related fees and a one-off in connection for payment card company in the magnitude of PLN 42 million. Net trading and other income rose nearly 17% quarter over quarter, driven by gains in hedge accounting and equity stake revaluation. For Q4, we expect revenues to decline, and I will be pressured by lower rates despite expected volume growth. Fee income will be impacted by year-end adjustments and the absence of any one-offs.
Going to the costs, our operating cost increased 3.3% quarter over quarter, mainly due to double marketing spend. Personal costs remained stable and depreciation normalized. For Q4, we expect a moderate quarter-on-quarter cost increase. It will mainly reflect planned regulatory and business project spending. Personal costs will rise due to higher salaries from increased headcounts. Cost of risk stood at 61 basis points below our full-year guidance and, as anticipated, higher than the very low previous quarters. Marek will go later into the details, but we expect the cost of risk to remain below 65 basis points for the full year 2025, and due to seasonal corporate write-offs, Q4 is likely to exceed Q3. Legal risk related to the FX loans continued to decline, reaching PLN 455 million, the lowest since Q4 2022, we saw now the seventh consecutive quarter dropping impact.
We clearly expect the trend to continue and guide that the next quarter is expected to be lower than Q3. As a result, net profit reached PLN 837 million, down 13% quarter on quarter, but up 46% year on year. The decline was driven by a higher effective tax rate, which rose nearly to 40%, and as you know, we calculate the tax according to IAS 34, and the driver of the high tax rate are the barely tax-deductible Swiss franc-related legal risk costs. Nevertheless, we show a strong result with an ROE of 16.4% and a ROTE of 18.9%. Let me skip the balance sheet slide and we jump directly to slide 12, our new lending business. In Q3, we continue to expand our lending volumes. Our mortgage loan sales reached a record PLN 4.6 billion, up 24% quarter on quarter and 37% year on year.
Over the first nine months, volumes were 35% higher than in the same period last year. Fixed rate loans dominated, over 80% of the new PLN-denominated mortgages in July and August, and 75% in September. These now represent 52% of our PLN mortgage loan portfolio. The new sales leads us to the top three in the country. News in September is our first stage of our digital mortgage, enabling active clients with mBank personal accounts to transfer mortgages from other banks. The record time to a positive decision on mortgage transfers is below seven minutes. Non-mortgage lending remained solid at PLN 3.4 billion in Q3, up 20% year on year. Sales over nine months were 22% higher than year on year. Turning now to the corporate loans, loan sales rose 5% quarter on quarter with a strong growth in structured finance, especially in renewable energy, construction, and district heating.
Overdrafts and trade finance also increased. Looking at the nine-month period, corporate loans rose 23% year on year, with the K1 segment, so our biggest customers, up over 60%. Structured finance accounted for 45% of the new sales, growing 34% year on year. The result of the sales efforts is reflected in the growth of the loan portfolio by 2.2% quarter on quarter and 9.6% year on year, visible on this slide 13. We are seeing strong activity across all client groups. The result is that we're gradually enhancing our market share across all key products, as presented on the right-hand side of the slide. These results demonstrate that the growth of our household and corporate loan portfolio is outpacing the broader market, which is and remains our strategic priority. Now let's have a look at the group's deposit developments on the next slide.
We recorded deposits growth of 4% quarter on quarter and 10.6% year on year. This was primarily driven by retail current and savings accounts. As you can see on the left side of the slide, we've managed to improve our market shares in household loan deposits, but in the segment of enterprises, we observed mBank's market shares fluctuating between 10%-11% over the past year. As I've guided the income already before, we skip the next slide and go directly to slide 16 and to our cost development. In Q3 2025, the group's operating cost rose by 3.3% quarter over quarter, primarily due to the 12% increase in material costs. The most significant driver was a marketing expense, which doubled compared to Q2, reflecting strategic initiatives such as the cybersecurity campaign and the promotion of investment products for our retail clients.
Personal expenses remained stable despite a net increase of 60 FTEs since June. This stability underscores effective cost containment amid strategic hiring. Depreciation declined, normalized after the elevated Q2 levels that had included accelerated amortization of IT systems. And this leads us to a cost-income ratio of below 30%. And with this, I'm again handing back to Marek for the risk result.
Thank you, Pascal. So on the following slide, we can see our risk results. You can see a normalization of the risk costs along with the rise of the credit provisions, in particular for the corporate exposures as compared with Q2 2025. When just as a reminder, Q2 results were positively impacted by a few one-offs in corporate book, so that was not a normalized cost of risk for ourselves. Overall, as Pascal alluded to earlier, we guide our cost of risk for 2025 at under 65 basis points for the entire year. So that is a bit higher than what you have seen in Q3. But on the following slide, we would also like to point out that cost of risk led to an improved coverage ratio, and the coverage ratio of mBank Group improved both quarter on quarter and year on year.
And overall, we have seen in Q3 improvement of the loan quality as demonstrated by decline in mBank Group impaired loan portfolio, decline in mBank Group non-performing loans ratio both year on year and quarter to quarter, both in corporate and retail segments. Also going forward, as it comes to legal risk of mBank going beyond credit risk, that risk is decreasing as well. We are happy to report that the number of settlements concluded by mBank increases quarter on quarter. We have concluded additional 2,000 settlements in Q3 and over 11,000 settlements between September 2024 and September 2025. And based on publicly available data of the peers, it shows that we have the highest share of settlements when compared to the total number of loans in the peer group. Also, looking at the new court cases, we see another quarter of a steady decline.
The number of new Swiss franc-related court cases went down by 15% to just over 600 in Q3, and that is a decline of the quarterly number of new cases by 52% when compared to the Q3 of a previous year, and that leads us also to a very significant decline of loan contracts in court. That is also the fastest drop when compared to the peer group, so the number of contracts in court declined by 62% year on year and 26% quarter on quarter, so overall, the number of court cases and the number of active not yet settled cases dropped below 10,000. You can see that on the following slide, and that's a massive decline compared to the starting point. Also, we are happy to report that outstanding balance sheet value of Swiss franc mortgage loans dropped almost to zero in September 2025.
So Pascal, back to you on our net results and profitability.
Yeah, thank you. So all that development we explained delivers us a net profit of PLN 837 million in Q3. And I just want to highlight that excluding the non-core segment, so excluding the Swiss franc impact, the net profit in Q3 reached PLN 1.44 billion. As you can see, we are highly profitable for the nine months on ROE of 17.3% and a ROTE of 20%. Let's now go to our capital position on the next slide. Starting on the left of the chart, at the end of Q3, consolidated own funds reached PLN 20.2 billion, so up PLN 2.3 billion versus Q2. The increase was driven by two factors. The first one is retrospective inclusion of our profit of Q2, so the PLN 960 million.
The second topic was the inclusion of our PLN 400 million subordinated bond issued in June, which was then Tier II capital, which we partly offset by a PLN 0.2 billion early repayment of other subordinated bonds and the Tier II amortization. Moving now to our risk total exposure in the middle of the slide, which rose by 1.8% quarter on quarter and 18.3% year to date. This growth resulted from strong business growth and regulatory changes, including our implementation of the CRR provisions. Consequently, we show comfortable buffers above the PFSA minimum requirements. Now forward-looking, in Q4, we expect CET1 ratio to remain relatively stable. RWA will increase due to further business expansion, and we might face an impact from operational risk RWA related to the Swiss franc as we're still analyzing the latest RTS.
This RWA growth would be significantly offset by our securitizations, which we just issued in October. We issued our fifth securitization based on a portfolio of PLN 3.8 billion. This was the largest project finance securitization from the CEE region with a 75% focus on wind and solar renewables. And this, plus a ramp-up of an existing portfolio, leads to an improved CET1 between 0.3 and 0.4 percentage points in Q4. Therefore, at the end of 2025, we expect to remain well above our strategic target of 2.5 percentage points above the CET1 requirements. Looking ahead to 2026, our new strategy, Full Speed Ahead, is expected to drive further RWA growth. The pace of this increase will depend on how quickly we can expand our market share.
Most of the growth will be volume-driven, while the remainder is linked to the implementation of the group definition of default and the calculation of this past year. The timing and impact of these changes will depend on the supervisory decision. The estimated impact is approximately 4% of today's RWA, and let me now close my part here before I'm handing over to Marcin for the economic side, and we jump to slide 28 for our outlook. What you see here, first, we expect total income for 2025 to be fairly above PLN 12 billion, driven by our excellent performance of the business model, which will reside in the best year of mBank's history. Second, we maintain our view that 2025 is going to be the last year with a significant cost of legal risk related to the FX mortgage loans.
Third, we definitely focus further on business expansion and growing market shares. And fourth, we continue also our effort to strengthen our capital and funding position. So before year-end, we plan to conduct an issuance of a non-preferred senior in green format and a benchmark size of EUR 500 million. And now, Marcin, the floor is yours for the economic view.
Thank you, Pascal. Good morning, everyone. So I have only good news today. So with regard to Polish growth, we are heading towards much higher numbers with a four ahead. So the next year is going to end at 4.2%. This is a significant acceleration from this year. What is driving this growth? So consumer stays strong. Consumer moods are high. Wages are running also quite high. And well, consumer behaves much better than we could have expected a year ago. Additionally, unemployment rate stays low. And well, what we are waiting for is mostly acceleration of investment activity. And it's going to happen due to the fact that we will have a huge inflow of EU funds in 2026. So we are also going to see double-digit growth in investment spending. So with this a bit higher growth, also inflation is going to be a bit higher.
What's most important, trajectory is going to be upward sloping. With the trough at around 2% in the first quarter of 2026, we expect inflation to slowly drift towards almost 4% in the end of 2026. It's not a big deal with respect to inflationary processes. Inflation is not going to be exactly at NBP targets, but it makes its effect on interest rates. We expect two more rate cuts from the MPC, and they are going to end the cycle at 4%. This is going to happen at the start of 2026. It is important to note because the markets are pricing in much lower rates at the moment, and also the consensus is lower.
So summing up the economic part, it seems that we are above the consensus with respect to GDP, a little above the consensus above inflation, and clearly above the consensus with regard to interest rates. When you look at monetary aggregates, it seems that everything is firing on all cylinders. So loans are slowly accelerating. Deposit growth is holding up. So we are seeing, I would say, standard activity given the phase of the cycle, and it's going to be continued at least through 2026. As far as financial markets are concerned, we see some decrease in bond yields recently, but overall, risk metrics like asset swap spread stay relatively high due to the prospects of relatively expansionary fiscal policy. As far as the zloty is concerned, Polish currency is stable recently.
It got appreciated towards the U.S. dollar, but it was not about the strength of the zloty, but rather the weakness of the dollar. Overall, it seems that we are having a quite rosy outlook ahead and good conditions for functioning of the banking system in 2026. Thank you very much.
Thank you very much, Marcin. Now we can start our Q&A session. The first question is regarding the tax line. Can you guide us through the tax line in the third quarter and the potential DTA effect in Q4?
Yeah. So the tax line, as I was alluding to, was elevated because we are calculating at the IAS 34. So what we do is we every time calculate the full year tax impact. And the normalized corporate income tax, or the tax you could expect from us, is around 25%. If you're not taking into account that we are heavily burdened from our Swiss franc-related legal provisions because they are, to the vast majority, not tax deductible. And why we have now a change between the two quarters is because some parts of the Swiss franc-related topics, for instance, settlements, are tax deductible. But as we also see that settlements are slowing down and also the rate of settlements are slightly changing, it was less favorable for us than in the previous quarter.
The second question toward a DTA effect or DTA revaluation in the Q4 with relation to the Swiss franc. We do not expect that there is a major change in that respect.
Thank you. Which portion of Q1 and Q3 2025 net profit has been recognized as CET1? Can you provide any guidance on the extraordinary effect on risk-weighted assets for Q4?
Yeah. So what we have already included in our capital is the Q1 and the Q2 net profits we have gained, and every time you just include it after you have the consent for including it from the regulator, so we also plan for Q4, obviously, that we include Q3, but in our figures, Q3 is not yet included. With respect to the RWAs, I've guided that we expect further volume growth, which will fuel our RWAs, plus that in Q4, we might face an increase of an RTS, which is related to the CRR and also would then impact our op risk, but this is not yet certain, and nevertheless, the bottom line is that we do not expect a big change of our capital position and therefore the buffers we would see from today's perspective in Q4.
Thank you, Pascal. What level of Swiss franc portfolio costs should we expect in 2026? What would you define as significant Swiss franc provisions?
First of all, we expect clearly the trend is going down. Every quarter to come is supposed to be lower than the quarter beforehand. We are very pleased that we are ending now, as Marek was saying it, with our active approach towards settlements, the incoming flows, because we are really reducing the leftover risk. In 2026, we expect that we less talk about the numbers, and therefore it is less significant.
You mentioned that NII would be under pressure despite balance sheet growth. Are you concerned NII would be declining going forward?
As Marcin was, from an economic point of view, saying it, we expect that interest rate further to decline. And obviously, as interest rates are declining, net interest income is under pressure. From today's perspective, we don't expect that 2026 will be a harsh increase of NII further as we have seen in the last years because the volume will partly compensate the negative impact from the interest rate environment.
Thank you, Pascal. What is the nature of PLN 43 million, actually a little bit less than PLN 33 million, PLN 41 million, Q3 2025 card one-off?
I mean, that's a structured commitment from one of the payment providers, yeah, which is one-time paid towards us while we engage with this payment provider. And as you said, it's 41-42 million Polish złoty, and it's not recurring.
Then we have two questions that are quite detailed about our volumes of mortgage loan sales. So the first one is, what was the volume of mortgages originated fully remotely? And the other one, what share of your mortgage origination is attributed to refinancing and what's the new mortgages?
So starting on the refinancing, I mean, we see this trend picking up in the Polish banking sector. I'm happy to say that the refinancing balance is favorable for mBank. mBank refinances more loans from the other banks than we lose to our competitors. And that positive net balance is in tens of millions in terms of the volume year-to-date. And more than 80% of clients refinancing externally were our affluent clients. What we actively monitor is to which banks our clients are moving to and also the key drivers of the mortgage prepayments.
And on that, we clearly see that rising wages that Marcin was alluding to, dropping interest rates, and the gap between the deposit interest rates and the higher loan mortgage rates, the lack of early repayment fees for fixed-rate loans, which is a Polish specificity, full repayment of loans after selling the previous property, are the key drivers.
Yes. And the last one, what share of your mortgage origination is attributed to refinancing? Sorry, what was the volume of mortgages originated fully remotely? This one was not covered yet.
That's something we're, I guess, not disclosing to the externals, as we are very proud that we especially started, and I said it, with a really fully digital refinancing as the first from A to Z, yeah, in-house, walked through in a digital manner to really get the mortgage done. Because I believe nowadays most of the banks giving you an online platform, which on the front end looks like that it's digital, but in the end, there are lots of manual work. And we wanted to go the route, as we are known for, that this is a fully digital process. And therefore, we are very proud that we have started, and we expect that this channel will grow fast.
Thank you, Pascal. It seems that we don't have any more questions. So thank you very much for your attention and for the questions. And have a nice day. Bye-bye.
Thank you very much. See you next year.