Good afternoon, ladies and gentlemen. A warm welcome to Bank Millennium First Quarter 2025 Results Call. With us, as usual, we have Mr. Joao Bras Jorge, our Chairman of the Board and CEO, and Mr. Fernando Bicho, Deputy Chairman of the Board and our CFO. My name is Dariusz Górski. I'm head of IR. I'll be hosting, or actually managing, the traffic here today, as usual. We will start with the presentation, which will hopefully be relatively short, and then we will have more time for questions. Over to you, Fernando.
Thank you. Good afternoon. Dzień dobry. Thank you very much for attending our next results conference. We will go through the main points of the financial and business performance of the first quarter. I go directly to page number five with a summary of the main achievements in this first quarter. We had a net profit of PLN 179 million, a growth of 40% versus one year ago, despite the relatively high regulatory costs and the high base from last year in the sense that, just to remind, in the first quarter of last year we had not paid the banking tax. The net profit, excluding extraordinary items and also correcting for these differences in terms of banking tax, reached PLN 718 million, which means a 7% growth year on year.
The net interest income was up by 5% year on year, and the net interest margin was at the level of 4.23%. Total costs grew 12% on a reported basis, but if adjusted by the higher regulatory costs, they grew 7%. The cost-to-income ratio adjusted was at 34.5%, while reported at 41%. The cost of credit risk remained relatively low, at 45 basis points over total loans, and the NPL ratio was stable at 4.5%. We continue to show very good capital position. In fact, the capital ratios went up despite the initial impact of CRR3. The consolidated total capital ratio was at 17.3% at the end of March, while the core tier one and tier one were at 15.2%. This means a very significant capital surplus over the new minimum requirements, over 6 percentage points.
During the recent months, we had the cancellation of the P2R buffer, while in December we had already had the annulment of the P2G buffer. We also kept solid buffers over the MREL requirements. Last but not least, in terms of the long-term funding ratio, at the end of March it was at the level of 33% and on track to reach the target over 40% by December 2026. For this improvement contributed another issue of covered bonds in the amount of PLN 800 million that was done in the first quarter by our mortgage bank. On page eight, we have a snapshot of what are the main indicators and targets for the strategy that we started now to implement, the strategy Millennium 2028, value and growth.
We will be reporting on a regular basis about the progress in terms of different business and financial and risk indicators towards the levels that we targeted for the year 2028. On page nine, going now in more detail to the results. We continue to show a solid improvement of the underlying results and also of the reported results as the costs connected with FX mortgage legal risk went down versus previous quarters. The net profit without extraordinary items grew, as I mentioned, 7% year on year, supported by a growth of operating income without extraordinary items by 3% year on year. The level of return on equity reported stood at 9.1%, or 12.3% if we would consider the linear recognition of the contributions to the resolution fund that were done in the first quarter 2025.
On page 10, we can see the evolution of the net interest income that went up by 5% year on year, although it decreased 5% versus the previous quarter. This is a very good evolution when we compare with one year ago. To a large extent, the decrease of the first quarter is due to the fact that in the fourth quarter 2024 we had booked the release of part of the provision for credit holidays, which had been created in the second quarter of 2024. Only this impact of the release of that provision in the fourth quarter, if eliminated, means that actually the NII just fell 2.5% versus the fourth quarter of 2024.
Of course, also we need to take into consideration that the first quarter has less two days than the fourth quarter, which also contributes, in general, to have a weaker first quarter than it would be normally happening if the number of days would be the same. In terms of net fee and commission income, there was a drop of 9% year on year, largely due to the fees from bank assurance, which are being temporarily affected also by changes in terms of the business model and also deriving from the long-term agreement that we signed some time ago in terms of distribution of insurance. Actually, this was to a large extent offset by growth in other fee lines such as cards and investment products.
We also must, of course, underline that the loan fee line is not helping still significantly the fee and commission structure due to the fact that we are still in the beginning of a cycle that we expect to be stronger in terms of loan growth in future periods. Moving to costs on page 12, total costs on a reported basis were up by 12% year on year, or up 7% without contributions to the banking guarantee fund. Actually, the good news is that excluding these additional contributions to the banking guarantee fund, the other admin costs were up just 1% year on year. At the same time, staff costs also showed some signs of deceleration with a year-on-year growth of 11% in a situation where the number of employees has been relatively stable. Also, there was a slight drop in the number of branches year on year.
The cost-to-income ratio on an adjusted basis stood at 34.5% in the first quarter of the year. On page 12, asset quality remains strong and, in fact, is supporting the continuation of a relatively low cost of credit risk. Total provisions in the quarter reached PLN 87 million, so 28% lower than one year ago. This represents 45 basis points over total loans. In this quarter, the level of provisions was not supported by the sale of NPLs. The NPL ratio was stable at 4.5%, and the level of coverage of NPLs by total provisions further improved to 74%. On page 13, the evolution of capital ratios shows that we managed to achieve a very sound and much above the minimum requirements capital position. Once again, core tier one at 15.2%, total capital ratio at 17.3%.
The improvement in the quarter was mainly due to the incorporation in own funds of the second half result of last year and also some additional positive impacts coming from securitization performed in December last year and from the revaluation of the bond portfolio. This was more than enough to offset the initial estimated impact of the implementation of CRR3. On page 14, the liquidity position of the bank is very strong. Loan-to-deposit ratio even dropped additionally to 62% in the first quarter. At the same time, the surplus of MREL over the minimum requirements is also very significant. Also in this page, we also illustrate the evolution of the long-term funding ratio, which is well on track to reach the target as I already mentioned before. Moving now to FX mortgage on page 15.
We continue with a fast pace of reduction of the FX mortgage portfolio, which accelerated to 29% year on year, with a 9% drop just in the quarter. We created during this quarter PLN 411 million of provisions for legal risk for the Bank Millennium originated portfolio, which is a little bit lower than the average of the previous quarters. The total amount of provisions outstanding reached PLN 7.3 billion, which represented 132% of the gross outstanding amount. In terms of dynamics of court cases and negotiations, on page 16, we had another quarter where the number of settlements exceeded the inflow of the court cases, which is important. Also, the inflow of court cases continued on a downward trend and was below 1,100, more exactly 1,083 new court cases against 1,103 settlements with clients, both in court and out of court.
This continues the trends that come already from the previous quarters. As we already disclosed in the end of the year, the already materialized risk reflected in the provisions and in the losses that were booked in the past through the P&L already accounts for 73% of the originally disbursed capital. Moving now to the second part of the presentation in terms of the main business indicators and starting with page 18. We had a total growth of deposits of 6% year on year, a growth of consumer loans by 7%, a growth of corporate loans by 4%, a significant growth of investment funds by 32%, a high liquidity surplus over PLN 45 billion, and a loan-to-deposit ratio at very low 62%. We continue the solid pace of customer acquisition, and we reached a number of active retail clients of 3,163,000.
94% of the customers are digitally active. In terms of sales, we would highlight on the most positive side the significant increase of cash loan sales by 19% year on year, reaching PLN 1.8 billion. On the other side, a significant decrease in the sales of mortgage loans in this first quarter to PLN 800 million, which is almost half of what we originated one year ago. In terms of leasing and factoring, minor changes versus the sales of the previous year. Going into more detail, we see on page 19 that the evolution of the loan portfolio overall had a growth of 1% year on year, or 2% if we would exclude the FX mortgage loans. The growth is driven by the growth of consumer loans and loans to companies, while the portfolio of PLN mortgage loans remained flat.
This is contributing to some dilution of the share of PLN mortgage in total loan portfolio, as you can see on the bottom left pie chart. This is in line exactly with the strategy which is being implemented. In terms of customer deposits, the growth is driven by the growth of retail deposits, which show the double-digit growth of 11% year on year, while corporate deposits decrease year on year, namely due to tighter pricing of time deposits. Investment products continue to grow at a fast pace. Overall, year on year, we had a growth of 32%, reaching assets under management close to PLN 12 billion. On page 20, some more details about retail.
Once again, visible the driver of the growth of the retail loan portfolio by consumer loans and also the very good level of sales during this first quarter, reaching almost PLN 1.8 billion, a growth of 19% year on year, which gave us a market share in terms of new sales of cash loans of around 12.8%. Also important in terms of the structure of the growth of the deposits is the fact that current accounts and savings accounts had a faster growth year on year than term deposits. On page 21, we continue the solid and regular pace of customer acquisition. On a net basis, we added 28,000 retail clients to our customer base during the first quarter and 5,000 active micro-business clients. Year on year, we have a growth of 180,000 current accounts and a growth of 50,000 cards.
In terms of further figures about digital, they are shown on page 22, where we can see a growth between 6% and 7% in terms of active digital users and active mobile app users. In this latest case, we had already 2.72 million active users. On page 23, the significant share and increasing share of digital in current account acquisition, which keeps also trends coming from the previous quarters. Convenience and security continue to be developed, as it is highlighted on page 24. If now we move to the corporate side on page 26, we continue to be positive about the perspectives of loan growth in the corporate segment. Year on year, we have a growth of 4%, a growth of 2% versus the previous quarter.
In terms of deposits, we had a contraction of 9%, but actually, this is the result of a growth of 10% in current accounts, which is very positive, while we had a contraction of 30% in time deposits due to the tight management that we have been applying to the pricing of time deposits and also due to the fact that we have a significant excess and growing excess of liquidity. On page 27, also some numbers about leasing and factoring, minor changes versus the previous, the homologous quarter of last year in leasing a small drop of 2% in factoring, a growth of 1%. In the next pages, also further illustration of the developments that we are introducing to the corporate line and for corporates and to micro and small businesses in order to support the ambitious strategy that we have presented for the next four years.
These are the most important highlights of the first quarter. Now we will go through the questions. Thank you.
Thank you very much, Fernando. What I did is I have just, I am sending you the questions from the audience, which are grouped into topics that will be easier for you to answer. I subjectively decided to group them by topic. This time, I think most of interest is on NII and NIM. So I do n't miss that from these questions. The first question is, why deposits costs are growing in the quarter amid rate cuts?
There was a small increase in the average cost of deposits in the first quarter, but in the first quarter, there were no rate cuts, right? The rate cuts came now in May. The expectations for rate cuts actually started to materialize in April.
Apart from that, the small increase was still the result of promotions that came from the end of last year, which still had the impact throughout the first quarter of the year. It was something that was somehow already internally expected. It is not something that jeopardizes the objective to decrease the average cost of the deposits in the next periods as a consequence of the now materialized cut of interest rates, the first one now in May and probably the next one that will follow in June or July. Joao, do you want to add something?
No, just, of course, we are growing in a very positive way in deposits. It 's not always possible to manage the pricing as we would like. Sometimes it is exactly what you said.
We have some seasonalities that there is also a lot of competition, especially end of the year, some more campaigns. The reactions also can have slightly improvement in terms of the costs. Also, I think the only thing that, especially on the analyst side, people should remind is that the adjustments on the rate cuts are not linear. Usually, when the rates are going up, the banks benefit a lot because there is an increase on the credit side and a very slow change on the deposits side. When the rates are cut, it's a little bit the opposite. We have immediate impact in a lot of parts of the lending part. There is some of our production is fixed, but there is a lot of parts like in overdrafts, cards, and everything. There are rates attached to some market rates.
They are reacting faster. The deposits sometimes lagging a little bit to absorb all of these changes. Even in recent times, we saw a lot of promotions from several banks with 6% and even 7%, even in this environment of already rate cuts. I think we need to wait a little bit to see this decrease of interest rates coming also from the deposit side costs.
Remaining in the subject, there is a bit more specific question here on deposits. What is the current margin on new deposits? Is it mostly reinvested in bonds?
As it is shown on page 10 of the presentation, our average cost of deposits in the first quarter was 2.24% against an average, let's say, reference rate of 5.75% of NBP and WIBORs were at the level of around 5.7%-5.8%.
This gives an idea about what is the margin versus the level of NBP rate from one side on the deposits. We cannot provide our new production on deposits is a combination of production of origination of new savings accounts and new time deposits. We are not going to say exactly what is current average production interest rate, but what we can say is that we already have done the first reduction on the remuneration of time deposits several weeks ago. It will be materializing through time. We also have already decreased the promotional rate for our savings account. Also, the new promotion has a new has a promotional rate lower than the one that was applied in the second half of last year and during the first quarter of this year.
This means that we already started to reflect in the interest rates of the new deposits these cuts of interest rates expected or that already materialized. This will have effects through time in terms of the reduction of the deposits costs. Another point is also that, as we already mentioned, even in the previous quarter, we started, first of all, to lower the remuneration for time deposits, especially on the corporate side, because usually they are shorter term. Also, we are sitting on a huge excess of liquidity. Overall, we expect that gradually average cost of the deposits will go down. Of course, the question that we also have is if we will be able to reflect one-to-one the cut of interest rates in the average cost of the deposits.
I think the answer is not black and white because, of course, in time deposits, it 's easier to fully reflect the impact of a cut of interest rates. We have a lag in terms of materializing this cut, which depends on the average maturity of the deposits, so let's say between three and six months. This is one comment. But then we have other parts such as, of course, current accounts are not remunerated, so nothing to do there. We have savings accounts where also the passing through is not exactly one-to-one because it depends on the average level of the deposits that are sitting on the savings account. In our case, we still see the space to accommodate to a large extent the first impacts of 100 basis points cut.
We know from experience that as interest rates will continue to go down, there is always a limit to how much can be absorbed in the average cost of the deposits versus the cuts of the reference rate from the NBP.
Thank you very much. This is a very detailed explanation. I hope Yovan is happy because we did not ask his question, but the answer was given. Sticking to NII NIM, what is the current NII sensitivity?
In our quarterly financial report that we today have published, we have stated that actually the sensitivity is very close to zero for a scenario of one-shot 100 basis points cut parallel in the yield curve. Of course, having said that, we must remember that this is just one way of measuring the sensitivity because it is based on a static balance sheet.
It's based on one-off parallel move of the yield curve. And so also reflects assumptions to which extent we can reprice, especially the deposits, as I just explained, because in terms of the credit, it's more straightforward because most of the credit that is at variable rate has a direct reference rate. It's relatively straightforward. We have the other part, which is at fixed rate, both in terms of loans and in terms of bonds. We cannot forget that banks in Poland are exposed to interest rate risk in more than one currency. Because of course, our main currency is Polish złoty, but in our case, we also have a relevant excess of liquidity in euros. In euros, the interest rates already started to come down already in previous quarters.
Because we have a surplus of liquidity in euros, it's obvious that also some impact from lower remuneration of our assets in euros will also be reflected in terms of the final result on NII. The last thing is that in real life, of course, we will not have a situation where the balance sheet is static. We will have volume growth, hopefully. On the other side, we will have also all the measures in terms of active pricing and also in terms of the structure , especially of the loans from one side, in which the difference between having more loans at fixed rate or not makes it important, but also on the deposit side because the structure of the deposits will not be static.
We also may have some support in terms we will be able to manage also the structure of the deposits. Last but not least, we cannot forget that we still have some hedges from the past that are expiring throughout this year. Probably this is valid also for other banks, but speaking about ourselves, we also have some items from the past that were somehow depressing our NII, which will expire. As a consequence, this also will help to partially offset the impact of the lower interest rates. I think we are also asked the question about what is the prospect for the NII for the full year. I think this will depend to a large extent to the size of the cuts and the speed of the cuts by NBP.
In our base scenario, we were expecting this year a cut of interest rates by around 100- 125 basis points. If we go back to the beginning of March, the market was not expecting this at all, right? There was a significant change of expectations during the recent weeks. If we consider, if we will have a situation where interest rates will fall by this around 100 basis points, we think that to a large extent, we will offset the decreases as a combination of price management, volume growth, and so on and so on. We are still positive for the overall level of NII versus the previous year.
I think it's also just important to say what you said that it's impossible to match one by one because even if the interest rates go from 5.75%- 4.75% and the remunerated part is at 3%, maybe you can move to 2%. We should always keep in mind that one-third at least is not remunerated. Even if you do 1% in both sides, the impact, it's not total. Besides that, as you go down then from 4.75%- 3.75%, it starts to be more difficult from 2%- 1%. Of course, there is a lot of changes also in the consumer side, which is at a certain level we see a huge growth in the current account because the exercise of time deposits starts to be much lower. I think it's always a combination.
What we, besides the hedging strategy that Fernando said, what has been very supporting for our side as well is the growth in time deposits, especially the retail growth of time deposits. This is very healthy.
Savings.
Yes, total deposits. Yes, total deposits. Savings accounts, current accounts, and normal time deposits. Even the differential is still very big. The revenue pool of total deposits, it 's still the biggest revenue pool in the banking system in Poland. It 's still very interesting, even if at the end we would invest that in bonds.
I promise this is going to be the final question on NII NIM. The question is very simple. What is sought NII? I think it was 3.3%, right? 3.3%. 3.3%. Gentlemen, shall we move now to results or Swiss francs/interest-free loan? You have a choice.
You decide.
Okay.
Let's do the Swiss's because there are only a few questions. FX results run rate for the rest of 2025. This relates, okay. This relates more to our FX business than FX mortgages in that it was impacted by settlement costs, right?
It 's visible that the FX results improved versus one year ago. The reason is that during this quarter, a large part of the costs of negotiations with customers, which have been booked in the lines of FX result and in the lines of result on modification, they were, as I said, a large part of the cost of negotiations were covered by provisions for legal risk, which already existed at the end of the last year. One of the components of the provisions for the legal risk that we had included a component dedicated to costs of negotiations.
As a consequence, in the first quarter, part of those costs were booked against such provisions. That is the reason why there was much less impact on the FX results line.
Have there been any surprises in the CHF mortgage saga in the first quarter 2025? How do you see change to book last material CHF provisions in the next four to six quarters?
I think surprises. I think not, as far as I remember. There were no significant legal developments as well. Also, there are no news for the time being about this new legislation that we are still waiting for. We still believe that unless something extraordinary happens, 2025 should be the last year with a very significant impact of costs connected with FX mortgage legal issues. I mean, provisions and related costs. We still keep the same view.
The impacts this year are still going to be important and material, although we expect that overall they will be lower than in the previous year. Continuing the downward trend from the peak that was reached in 2023.
Maybe saying that we still are making negotiations, which is still very positive. Even after making 27,000, we still, in a regular basis, are able to make amicable settlements with the clients before and in the court.
Also, although it has been a huge effort in terms of the organization and in terms of operational work, we have been able also to offset making compensation agreements with the customers and everything, but close all the court decisions or the majority of the court decisions in order not to have further operational risk later on besides the financial risk that the provisions of the Swiss francs have been impacting the banks. So far, a lot of work, but no negative surprises.
Along these lines, what are the expectations for further FX mortgage provisioning in coming years? You mentioned you have now provisioned for 73% of total disbursed capital. Is the idea to get to 100%?
No. I think we are just stating that number just to try to explain that a large part of the risk has materialized. This is the first.
But also believe that, as we are stating in our presentation, in our quarterly report, we are not in a situation where 100% of the risk materializes because of different reasons, including that the gains are not relevant. Of course, this is something that we need to monitor on an ongoing basis. That is why we still cannot say that it is finished and all the assumptions are exactly as the reality will be in the future. What we think is that our assumptions are getting closer and closer to the probable final outcome. The good news is that we have a downward trend in terms of overall costs. We are not saying that the trend is only down.
We always need to reassess on a regular basis what are the levels of the costs and provisions that should be created. As I said, overall, not making projections for quarter on quarter because this we don't do. I think the year overall should be better than in the previous year, although still material in terms of impact on our accounts, leaving residual things to do for the subsequent years.
Last question from the legal risk this time, consumer loans. Can you update us on the legal risk related to consumer lending? Were there any costs related to this in first Q25?
The answer is no. Until now, we did not book any provisions for this risk. The reason is that first, in terms of verdicts, the proportions of cases won versus cases lost is still 85% won, 15% lost.
Also the number of pending lawsuits is still relatively small. At the end of March, as we disclosed today in our report, we had 1,622 lawsuits. Of course, this is something that we continue to monitor very closely and taking all the mitigation possible actions. Until now, we did not consider that it would make sense to create provisions based on the statistics that we have so far. It is something that we will need, of course, we will continue to monitor very closely in the next several quarters.
Now moving to questions which are more specifically about first quarter results. Let's start from volumes. We have an interesting dichotomy of views. One analyst is asking, "Consumer loans started weakish. What is the reason? Pre-credit loans." The other one says, "What is the reason you accelerated growth in new cash loan origination?
Have you changed your underwriting strategy?" Joao, how are you going to answer these two?
We maintain our underwriting rules and models and strategy even. Maybe due to these models and due to also a lot of our digital offer, we have a lot of internal consolidation. We have a lot of top-ups and everything like that. Sometimes we have seasonalities that we have more production than visible growth of the stock. This happens by more seasonality of the consumers and sometimes the offers then other things. Of course, the offer of today that, we, the bank is offering in the short term can be more interesting because we, as you know, just offer fixed interest rates, even now without commission and with a monthly insurance payment. When you top up an old loan, it can be an interesting offer for the consumer.
Also for the bank, it's not bad because the bank is fixing a new rate for a longer period. It's also interesting for the bank in these periods. A long time ago, I learned that the consumer loans is not a decision by the bank, but a decision by the consumer about his life. People do this not because the bank changed the offer or the model or something, but because they decided to renovate their house, to buy a car, to start a business. It's not our decision, but it's the consumer decision and life. And so we have the offer there and we try to have as well done as possible in the risk terms, but also as friendly and as convenient as possible for the consumer side. There was this combination this quarter. I don't believe that is going to be visible.
In the next quarters, I believe that in the next quarters, if we still stay at this level of production, we will see a visible growth. Not a double-digit growth as we have the ambitions for corporate, but high single-digit growth for sure.
Thank you. A few questions on mortgages. Yeah, broadly similarly structured. Why are you so conservative with new mortgage origination? Is the 3.3% market share in mortgages disbursement satisfactory from Bank Millennium? Should we assume a similar market share in coming quarters? What led to mortgage market share loss? These are the questions pretty much.
Let's start to saying that, yes, maybe we went too low. It is this combination of disputing of WIBOR, of these difficulties also to establish how it is going to change WIBOR. For us, it puts us in a more defensive place as well.
As you know, we only offer the fixed interest rate in mortgage for the time being. With these, maybe also our offer was a little bit more expensive than the competitors. We believe that also there was also a very low production in the market as a whole. Maybe there is also a feeling that the real estate are at the high-level prices. We do n't know. For sure, we went a little bit too much. We see the changes in the process of the changes, the process to change the WIBOR as positive, these more recent changes and the information and the index that was selected and even the steps that are pointed. We see it as a positive. I would say that we will not go to levels of productions that we had already in the past that was also excessive for our bank.
It is clear that we will have higher production in the rest of the year.
If I can add on top of this more business and risks-related part, we also have to fulfill this long-term funding ratio. Some temporary decline in the growth of the portfolio has also been expected by us because this also would contribute to a safe reach of this long-term funding ratio at the end of 2026. Now, with the steps that we have taken, including the issuance of covered bonds, and we have already PLN 1.6 billion of outstanding covered bonds, it is visible that we have the tools and the capacity to reach the level envisaged without any risk. We know that we are going to achieve this 40% level in end of 2026.
But also, we cannot forget that this introduced another level of cost of origination of mortgage that did not exist before because we have to pay a spread for the issuance of these covered bonds, which is somewhere between 70 and 90 basis points. Of course, it also changed a little also the economics of the new market just to add this point.
Thank you. Sticking to the balance sheet, what were the reasons for corporate deposit outflows in Q1?
Price management, just price management. The current accounts is full transactionality with the bank and they went very well. There is always some seasonalities also because of payment of dividends and things like that, but it's fine. In terms of the prices of the time deposits of corporate, there was some stronger competition and we just managed it in a more tighted way.
LCR has ballooned over 400% as deposits keep going up. Could you please share with us the boundaries of your long-growth strategy? How long do you expect to grow less than the sector on PLN mortgages, which we partly answered?
I think there was a time that also we had to accept ourselves that we should not limit the development of the deposits part, especially on the pure mass market retail due to the growth of the lending portfolio. We are on that direction now. If it is well-managed, diversified, pure mass retail, so which they will become very stable deposit basis, it's fine to grow whatever it takes, even if the lending is not able to grow at the same pace. Anyhow, we already said that this is true in terms of the mortgage. We are very committed in the corporate side and SME side.
We present a strategy. We said that we are going to double the portfolio in four years. It means that one quarter in a way or two or three quarters in a way, we need to start to come presenting double-digit growth on this portfolio. This is clear. We are committed to that. We see a lot of activity. We see a lot of customer dynamics. We are committed to come in two quarters away or something, but to come with double-digit growth in terms of SME portfolio.
Thank you. Now, a set of harsh questions on our fee income or fee business. What is the reason for poor bank assurance fees? Is this a one-off or a new benchmark?
I would say to a large extent is one-off. We expect to recover in future periods.
It is a combination of change to the business model, also some rotation of portfolio. We made changes to the product during the last year as well, as was already mentioned. This all together translated into this decline that affected the overall fee and commission income. We think that in future periods, we will be able to gradually recover versus the levels that we were showing during the first quarter.
More general question on fees. What is the net commission income outlook after muted Q1?
I think we need to say that, of course, it is a little bit worse than what we were initially forecasting. In our case, it does not destroy the prospect for the overall revenues because although it 's a decline, actually when we compare year on year, it is a decline of PLN 17 million in a quarter.
It is not something that by itself jeopardizes the results and the revenues that we expect for the full year. I think that also when we presented the strategy and when we presented the year-end results, we did not create any expectations about significant growth of NCI for the current year. Even I think we said that we should be rather flattish, already partially anticipating some impact on the bank assurance fees. Once again, here in the first quarter, we had some concentration of impacts that makes the picture a little bit worse. We think that going forward, we are going to recover. We will have other lines that also will be contributing to the improvement.
Okay. Moving to a fresh subject. Asset quality continues to be very strong, thanks also to a strong labor market.
Could cost of risk remain in the 40- 45 basis points this year?
I think looking at the beginning of the year, there is a higher chance of being, I would say, in the range between 40-50 basis points just to put it a little bit wider. As I said, in the first quarter, we did not have the support from the sales of NPLs. Traditionally, sales of NPLs are generating some positive results. Last year, we made two in the second and in the fourth quarter with positive contribution to the cost of risk. This year we also intend to make further sales of NPLs, not only because for P&L reasons, but also because of contributing to the continuation of the trend of decreasing NPL ratio. We have a target to be below 4% in the future.
The sales of NPLs also contribute to achieve that target. I would say with this beginning of the year, we are a little bit more positive regarding the cost of risk during the current year.
Now, a bit more strategic/philosophical questions. Could you share your thoughts on recent M&A development in Poland? Could Millennium play a role here?
Usually in this topic, I always say that in 2006, when I moved to Poland, the question was done in a regular way. And a lot of transactions were done, a lot of international investors left the country. We have been staying and developing the bank and creating value.
Of course, I need to say something that two weeks ago, I was in Katowice in the Economic Congress and I said that it was very bad that all the recent transactions in the sector in Poland were done by the public sector, direct or indirect. It is very positive that we have now a transaction that is done by an international investor. It is a clear demonstration of confidence in the country, in the economy of the country, and in the sector, in the banking sector of the country. I see it as very, very positive.
One question about capital. Tier two refreshment. Any specific amount targeted?
No. This is an open topic. We have two subordinated bond issues that mature in 2027 and 2029.
We will consider in due time what is the optimal structure of capital that is appropriate for the requirements that we have now and that we will have in the future. We do n't rule out the possibility of issuing tier two in the future. It is something that for now, as you see with the surplus that we have, is not something that we feel the urgency to do. Of course, it 's an open topic for the future.
Joao, you want to enter into?
It 's a very difficult question to answer, but let me try. Do you think a change in control in one of your peers can help accelerating growth? I think it relates to our growth, not to the growth of the peer or the market, right?
This is always a topic that excites a lot.
The consultant companies that visit the banks in that time explaining the huge opportunity that we can have in exploring the departure of the customers of the other banks. Usually, nothing happens. I would say that it's an outstanding bank and shareholder that leaves, an outstanding bank and shareholder that comes. We don't expect nothing else than healthy competition. Our fate is in our hands and not in what happens around.
Have you noticed any impact of recent rate cut on loan demand? I think it's too early, simply.
It's too early. It will happen. These cases are sometimes more a perception than a real impact. We reacted. We decided to make changes in the consumer loans and in business loans after the rate cut. We adjusted to be more competitive. I would not expect suddenly a huge change immediately.
Later on, maybe it's not just needed more cuts, but it's a perception. It's moving from the perception that it's expensive to it's not expensive. Sometimes it's 1% more or less. It's not just material. It's just this perception.
We have two final questions, both factual. What is the long-term funding ratio? What was the long-term funding ratio? It was 33%. The last question is, what is the share of fixed-rate mortgages in your book at the end of March in PLN only?
It's close to 40%. In recent times, our origination has been driven by temporary fixed rate for five years. As a consequence, the structure of the portfolio has a higher share of temporary fixed-rate loans.
Gentlemen, it looks to me that we have already answered all, hopefully. If not, obviously the blame is on us. I mean, on me.
Joao, time for closing remarks then. Thank you.
We finished the results quite confident. We delivered reversed results, a growth of 40% year on year, 7% recurrent results, which allow us to understand that as soon as the impact of the Swiss francs is lower, the bank will have a capacity of generating capital that will be very strong. Also, we are quite happy that the customer acquisition is still very strong. We deliver another year on year, 150,000 new customers. Digital agenda also is being delivered. We see the growth in terms of digital customers, in terms of mobile customers, in terms of payments, mobile payments. This is, of course, crucial from primacy and from there to have the delivery of the revenues per customer that we expect. Also very healthy growth in deposits, extremely good in terms of asset management year on year.
We think that this has been very positive. We also were very clear about our rules, let's call it, for the strategy next four years. A lot of prudence and preparing the bank for more challenging times. It's NPLs at 4%, core tier one at 15%, around 15%. It's to always be capitalized and to be always in the safe side. As I already said, we are very confident about the delivered corporate growth in the next quarters. We explained in September last year, October last year, what was our plan and what were the drivers to do that. We are already seeing this in the interactions with the customers and in the discussions that we are having with the customers and the prospects of customers. We believe that sooner or later, this will be very visible for everybody.
It will be a new driver for the revenues of the bank that will complement a lot the already very strong retail banking that we have.
Gentlemen, thank you very much for your time, for your, as usual, insightful answers. To the audience and viewers, thank you very much for your interest and time. Next data point is 29th of July. As usual, the IR department is at your service. Thank you very much. Happy holidays if you plan to do or to have those before end of July. Thank you very much.