Good afternoon, everyone. Welcome to the Bank Millennium SA call. We're very happy to be starting Polish Bank's 3Q earnings season at such a strong note. With us, we have, as usual, Mr. Joao Bras Jorge, our Chairman of the Board, and our CEO, Mr. Fernando Bicho, Deputy Chairman of the Board and CFO. Fernando, over to you.
Thank you. Good afternoon. Thank you for attending this meeting. As usual, we'll guide you through the presentation that we released today in the morning, highlighting the most important aspects from the financial and business performance of the bank and the Bank Millennium Group in this third quarter and first nine months of the year. Starting with page number five, we reported a net profit of PLN 855 million after the first nine months of the year, up 56% versus one year ago. In the third quarter, we had a net profit of PLN 345 million, which is higher by 82% than one year ago. The net profit of these first nine months, excluding FX mortgage-related costs, was at the level of PLN 2.34 billion, growing 2% year on year. These strong results translated into an ROE in the third quarter annualized of 15% and a nine-month ROE of 14.2%.
The results were supported by a resilient net interest income, despite the fact that we are having already lower interest rates. T he net interest income was up 7% year- on- year on a reported basis and 3% up year- on- year, excluding last year's impacts of the credit holidays. The nine-months NIM was at 4.1%, decreasing 26 basis points year- on- year, despite a decrease of the three-months WIBOR rate by 98 basis points. The adjusted cost of income was at 35%. The cost of credit risk continued to remain low, and in the first nine months, reached 32 basis points over total gross loans. The NPL ratio was stable at 4.2%, as in this quarter, there was no sale of NPLs.
The capital ratios improved in the quarter, mainly as a consequence of the incorporation in owned funds of the net profit of the first half of 2025, after receiving regulatory approval. Consolidated total capital ratio stood at 16%, and the core tier one ratio reached 14.4%. We are keeping significant buffers over the minimum regulatory requirements. The same is happening with MREL requirements, where we are also keeping a significant surplus over the minimum required levels. The long-term funding ratio is hovering between 33% and 34%, still clearly on track to the targeted level by the end of 2026. Last but not least, we continue to have a significant excess of liquidity, as the loan-to-deposit ratio at the end of September was at 58%. Moving now to more details. First, a quick look at page number eight.
As usually, every quarter we are showing the status of the achievement of the targets and objectives, both from a business perspective and from a financial and risk perspective that we have set, when announcing the strategy for the years 2025, 2028, value and growth strategy. This was announced around one year ago. As it can be seen from this page, we are on the track to achieve these goals. Of course, this is still the first year after the announcement of the new strategy, but it is visible that the business goals related to the increase of the number of active customers in retail are growing according to the plan. We have now more than 3.2 million active customers in retail. Also, the share of digital in the active retail customer base is over 93% now.
On the other side, already visible growth in the number of business- active clients and also corporate loan volumes, which is especially visible during the third quarter. On the financial side, the ROE is improving versus the last year, with nine months ROE annualized at 14.2%, while in terms of the NPL ratio, we are trending down in order to be below 4% in the near future. Moving to page nine, we are showing the evolution of the results since the fourth quarter 2023, so the last eight quarters and it is visible the improvement on the reported profitability in this quarter, PLN 345 million growth versus the previous quarter, and in terms of nine months, the growth of 56% that I already mentioned. The net profit, excluding extraordinary items was at PLN 743 million, which is still a relatively high figure.
Overall, when we compare the accumulated net profit without extraordinary items this year versus last year, we are growing 2%. Operating income was relatively stable in the quarter. Moving now to more details on page 10, we see that the net interest income is showing resilience despite the gradual decrease of the interest rates. I should remind you that the level of interest rates at the end of September, the intervention rate or the reference rate of the National Bank of Poland was at 4.75% and was further cut in the beginning of October to 4.5%, while one and a half years ago, we were at 6.75%. The NII was stable versus the previous quarter. When we compare the NII this year versus last year, we have a growth of 3%, excluding the effects of the credit holidays.
Of course, the net interest margin is trending down as interest rates are going down, and stood at 3.95% in the third quarter 2025, an average of 4.1% for the nine months of this year. It is visible that on one side, a lower remuneration from loans is a result of the fact that part of the loan portfolio is indexed to market rates, and so there is a natural decrease on the average yield of the loans, but at the same time, a relevant decrease in the average cost of the deposits in the third quarter by 14 basis points. Net fees and commission income performed better than in recent periods, actually the best since the first quarter 2024, growing 9% quarter- on- quarter, and in accumulated terms, being just 2% below one year ago as a consequence of still much lower fees from bancassurance compared with last year.
On page 11, operating costs are still growing double digits. Total operating costs grew 15% year- on- year, but just 11% if excluding the costs connected with the banking guarantee fund. In particular, other administrative costs were up just 7% year- on- year. We can say that most of the cost growth versus the first nine months of 2024 is attributable to higher regulatory costs. Moving to page 12, the quality of the loan portfolio remains solid. NPL ratio is stable at 4.2%. Cost of risk, 32 basis points over total loans in the first nine months of the year. Last but not least, another increase in the coverage ratio of NPLs by total provisions, from 72% one year ago to 78% at the end of September this year. As I mentioned before, no sales of NPLs in this quarter.
On the top right side, the evolution of the NPL ratios for different portfolios, showing either a decreasing trend or stability. Capital adequacy ratios at a comfortable surplus despite the new countercyclical capital buffer, which increased 1% in September and another 1% will increase in September next year. As it is seen, we have a surplus over 4 percentage points in terms of total capital ratio over the minimum requirements, and a surplus of 4.6 percentage points in terms of tier one. As I mentioned before, the capital ratios in the quarter improved versus the end of June, mainly as a consequence of the recognition in owned funds of the first half net profit.
The same picture for MREL on page 14, with still a very comfortable surplus over the minimum regulatory requirements, very strong LCR, a very high share of debt securities of liquid assets in total assets, due to the significant excess of liquidity that is measured by the loan-to-deposit ratio at 58% as of the end of September. Regarding FX mortgage, we continue to see a fast downward trend of the outstanding portfolio year- on- year in currency, so excluding FX variations. We have a decrease of the portfolio by 34%, and currently, FX mortgage gross exposure after deduction of the allocated risk provisions represents just 1% of the total gross loan portfolio.
The provisions against legal risk were lower in the third quarter versus previous periods, and stood at PLN 394 million for the Bank Millennium originated portfolio, in line with the announcement that we made two years ago in a dedicated current report. The outstanding balance of legal risk provisions as of the end of September was close to PLN 7 billion. In this quarter, we had two positive trends. From one side, a continuation of the lower inflow of new court cases, which for the first time in five years were below 1,000, more exactly 904 new court cases, while the number of settlements was above 1,200 and within this number, a relevant number of in-court settlements. All in all, we have already signed since the beginning of this process more than 29,000 amicable settlements with clients. Not much change in terms of the main assumptions regarding legal risks.
In fact, the provisions during the current year are being driven by other related costs and not so much by the inflow of the court cases, as until now, the inflow has been more or less in line with the original estimation. Moving now to the second part of the presentation regarding business development and with the main highlights on page 18, we would highlight, first of all, the high growth of customer funds, both deposits and investment funds, and the growing customer acquisition. Please remember that we are always reporting the customer acquisition on a net basis and not on a gross basis. We are adding on average, around 150,000 net growth of active customers in the retail. We also, in this third quarter, are showing strong dynamics in corporate lending, which is already translating in a double-digit growth of the loan portfolio.
On the other side, stable and relatively high origination of consumer loans and an inversion of the trend in mortgage origination, with a much higher already production in the third quarter compared with previous periods. These trends translated into a total deposit growth of 12% year- on- year, a consumer loan growth of portfolio of 3%, the loans to companies portfolio growing 12%, investment funds growing by 39% and the number of active customers reaching 3,234,000, of which 93.5% are customers that are digitally active. On page 19, despite this evolution, we still have year- on- year, a small decrease of the net loan portfolio by 1%. T his is due to the fast amortization or reduction of the FX mortgage portfolio, and also to some contraction of the PLN mortgage portfolio, due to lower origination from previous periods and also some higher early prepayment rates.
As I said, anyway the new origination is going to allow sooner or later to stabilize the size of the portfolio, and then to resume a growth also on this segment. The stronger growth of corporate loans that we expect to continue, of course will contribute to a gradual change in the structure of the loan portfolio, with a little bit decreasing share of PLN mortgages offset by a growing share of loans to companies leasing and factoring, while consumer loans should keep more or less this share that has currently. On the customer deposits, both retail and corporate grew at double digits during the last 12 months, and investment products, a significant growth over 30%, allowing also our asset management company, Millennium TFI to cross the level of PLN 10 billion under management.
On page 20, we can see that cash loan sales are stable year- on- year, but allowing us to reach a market share close to 11% in terms of the new sales, while there is a clear rebound in the sales of mortgage with origination in the quarter above PLN 1 billion. On page 21, in the last 12 months, we had a net growth of 136,000 active customers in retail, and particularly a growth of 41,000 just in the third quarter. At the same time, we see acceleration of the growth in the number of active customers from micro business or individual entrepreneurs, which grew by 5,000 versus the previous quarter. The growth of the number of customers is also followed by a growth of the payment cards by more than 200,000 in the last 12 months.
Page 22, the h igh quality of the digital customer experience is enabling the growth of the active user base. I already mentioned this threshold of 3 million active digital users that was reached in September. This means 3 million customers that log in to mobile app or to Millenet on a regular basis. From these active digital users, 70% are mobile-only users. We see the growth translating into a 6% growth of active digital users, and a 9% growth in active mobile users, which already reached over 2.8 million and a growth of 8% in mobile-only users. We believe that very soon we will be celebrating also another threshold of 3 million active mobile users. On page 23, we continue to promote convenience, mobility, and security as key drivers for our clients to adopt digital solutions, and we are here showing very strong numbers.
For example, 2 million e-commerce users in September making e-commerce transactions, 2.18 million BLIK users in the third quarter, more than 18 million P2P transfers, and 260,000 Good Start 300+ applications. Page 24, we show the share of digital channels in different sales processes, which continues to grow. For example, 56% digital share in current account acquisition in the third quarter of 2025, also 84% digital share in credit card sales, 88% in cash loan sales. Page 25, digitalization is also supporting the omnichannel approach. As examples, 30% of customer requests were handled by AI-based solutions. 586,000 orders were authorized at the branches via mobile app instead of physical paper in the third quarter of 2025. On page 26, we continue to develop our Goodie platform and intensifying promotional activities.
In this quarter, we would highlight the 29% increase year- on year on the transaction values made through the Goodie cashback, and the 25% increase in the number of transactions. Moving to corporate, page 27, so we have achieved a double-digit growth of loans to companies and gross loans to companies in the last 12 months, a growth of 12% year- on- year, fueled by 19% growth of loans to companies, 11% growth in factoring, and 4% growth in leasing. The origination of loans to companies accelerated to 15% quarter- on- quarter in the third quarter of 2025, with a share of investment loans at 42%. I would remind that one of our targets is to achieve a higher share of investment loans in our corporate loan portfolio, close to 25% by 2028. Companies' deposits have grown 5% quarter- on- quarter and 16% year- on- year.
In terms of transactional activity, we would highlight the stronger growth of factoring that can be seen on page 28, a growth in the factoring turnover by 11% year- on- year, w hile leasing sales were still slightly down when compared with last year by 2%. These are the most important highlights of our third quarter and nine- months' results. Now we will go through the Q&A session. Thank you.
Thank you very much, Fernando. Thank you very much for all the questions that we have received so far. We'll be reading them out shortly. To give you a bit of a breathing space, I think we'll start from Mr. Joao Jorge. There's a lot of questions about volumes on loan and on the deposit side. Fernando, you will go for questions and prepare for the other ones. Corporate loan book and corporate loan growth has attracted a lot of attention and a lot of praise, the questions suggest. I'll start from the first question, which is normal. Corporate loan growth was meaningful quarter- on- quarter. Was there any seasonal effect or one-off? How sustainable can this be going forward?
There is no seasonality here in this process. We believe that what we should be now expecting is around these levels in the next quarters to come. Sometimes we were seeing already this progress in terms of production in the previous. Even we said that although it was not yet visible in the increases of the volumes, we were already seeing the signals. Today we are already seeing the signals, we grow more or less 12% corporate credits. In terms of production year-o n- year, we are 100% higher than the previous year. Just also to give you a flavor, if we would divide these in terms of ticket size, we would have 1/3 b elow PLN 30 million, another 1/3 between PLN 30 million and PLN 100 million, and then another 1 /3 higher than PLN 100 million. It means that we are doing what we explain on the strategy.
We are working in the SME sector across all Poland, supporting 44% of the lending in corporate was done in investment loans. We are supporting modernization of factories, new warehouses, new technologies, new investments that our customers are doing, and across different regions and across also the sectors and the size, because it's very important to understand that since the beginning we were explaining that we will not be the bank of the huge transactions of the national projects, but we would be a bank exploring our close relations with the family business, with the mid-sized corporate in the different regions in Poland.
Thank you. Sticking to corporate business and corporate book, are you seeing any opportunities to grow your corporate loans portfolio inorganically? What is the plan of expanding activity in the corporate segment as announced earlier versus limited growth in the corporate sector generally in Poland?
We are capturing our size on our presence, let's call it like that. During the recovery plan, we were preserving capital. We were maintaining the relation, but reducing our credit exposure to our customers. Now we are taking it back. First of all, the sector is growing. We will see the other banks presenting as well, but there is some growth in the corporate sector. It' s natural that also we would be capturing our own space. Inorganic is a little bit difficult. Inorganic would be buying a portfolio or buying a bank specific in corporate. We are much a believer of cost synergies than revenue synergies. We don't see any space to make a good transaction. Our strategy is different.
We explained in the previous sessions also with the analysts and investors, that we were dedicating also the most talentful teams from IT to develop new workflows of credit, to improve the time to yes in the corporate side. T hat we were reinforcing the analysts and the writers to be able to have also faster time to yes, and also that we would improve the internet services and the payment systems that we have to companies. We would go more in this direction, so improving our skills, our tools, and exploring this proximity to the customers, instead of trying to buy positions in syndicates or to buy portfolios or even to buy something else.
Thank you very much. We're moving to mortgage business and mortgage book. In Q3, Millennium returned to quarterly mortgage sales above PLN 1 billion. Do you expect it to remain around this level? Last time, the CEO suggested that selling mortgages is not the most profitable business for the bank due to potential bigger risks.
There were some improvement in the environment, we believe, from one side, the decision of the European Court of Justice and also we see the progress in terms of the national group of the substitution of the [crosstalk]. I think we explain also that maybe in the previous quarters, we went a little bit too much in terms of the restrictions that we had. At the same time, lower interest rates, there is also more demand, so we are more comfortable now. We need to monitor still the situation in a proper way, but our risk assessment for the time being is a little bit more positive than it was in the previous quarters, in terms of potential of litigation for mortgage in zlotys. We are comfortable to this level.
It's between PLN 1 billion- PLN 1.5 billion, maybe even more than PLN 1.5 billion, it could be seen in the future. Of course, it's crucial also that the business to have healthy spreads and good risk criteria, but this is what we are seeing at the moment in the market. We are comfortable to do the level that we are doing, and even to do it in the future a little bit higher.
Thank you. Another question which relates to mortgages is on refinancing fixed-rate mortgages. Could you comment on customers' willingness to refinance fixed-rate mortgages? It seems that the process is speeding up.
The experience from the customer side, but unfortunately sometimes even from the authorities, about the importance of the mortgage products, but also the importance of the maintenance and respect of the rules and the laws in the long run to have a healthy mortgage business, sometimes is not the highest in Poland, and there is still a learning process. When we have fixed rates, it's very important for the customers because they have a known and stable installment to pay, but it's obvious that if the interest rates go up, they are protected, but if the interest rates go down, they have less advantage and they don't capture immediately at least the benefits of the interest rates going down. One possibility to do this is trying to refinance of course. With the falling of interest rates, there is more activity of the refinancing.
You know us, when we were starting a long time ago, the negotiations of the settlements in Swiss francs, a lot of times the analysts were asking, but what are the rules, what are the criterias, what are the discounts, what is the effects that you convert? We were always explaining that each customer is a customer, there is a life behind, though there is a discussion to find a solution that is good for both sides.
Here is exactly the same. If the customer wants to refinance and wants to discuss with us, and of course we have the systems and the people capable to do this, we're trying to find what could be a renegotiation that is good for both parties. T hat could be a reduction, but also a prolongation of the fixed period or can be another solution. It' s clear that there is an increase of this tendency, and we think it's natural because the interest rates, they decrease a lot. There is still some space. We see it as a terminal rate, 3.5% in the reference rate of NBP. Until we arrive to this level, probably we will see still raised negotiations or early repayments or something like that.
[crosstalk]
[Foreign language]. Sorry for this. Our translator apparently broke into our line. N ot philosophical, but a bit more strategic question on mortgages. Where are you in the digital mortgage process? Some banks announced progress here recently.
Keeping in the philosophical aspect, management is making choices. It's clear that we made a choice to allocate a lot of resources to the corporate side. It does not mean that we would not develop the digital mortgage process. I t means that in terms of the priority, it will not be our first priority. We believe that the digital solutions in terms of payments and daily services, it's crucial and brings a lot of advantage.
The digital mortgage process is positive, but as you know, there are a lot of limitations i f there is only one borrower. I f there are two, it's more complex. It's not a plain vanilla case that we can use for everything. We believe that we will have a solution in the near future, but I would not say that is our priority in terms of digital development for services for our customers at the moment.
Thank you. Now we're moving to the liability side. Is the 3Q level of corporate deposits sustainable, or do you expect some reduction in the next quarter or at the end of the year? What was driving the significant quarterly growth in deposits in 3Q, both retail and corporate? Have you increased prices? What is your deposit strategy for the next quarters?
We do not want to limit our development of the deposits business by the lending. The deposit business per se is a profitable business. It's a combination in the individual's more savings accounts and current accounts. In corporate, it's more current accounts and then deposits. D eposits sometimes are some institutions that have excess of liquidity on a regular basis, and so then they go more looking for coding for time deposits. We didn't change anything in our strategy. There is sometimes some seasonality also in terms of the summer moments, so there are some seasonalities in the market. Also, in terms of the corporate, the alpha year or the preparation of the alpha year, there was a little bit of more competition in the market. This quarter we saw it less, so corporate deposits were at cheaper prices, so we end up to have it more in a natural basis.
It's important also at the same time that we are not having a policy of increasing the time deposits just per se. It's natural, for example, we are growing in retail investment loans in the 30% year -on- year, and already for some time. It's natural that these customers that are also making their investments with us are also bringing some time deposits with us. On a regular basis, even this quarter, the growth was more healthy in terms of current accounts even than the normal time deposits. No change of strategy, just a natural growth and also with our intention of not limiting the growth of deposits by the loan portfolio, because the deposits are a strong revenue pool in the Polish banking system.
Thank you. I'm very sorry for keeping us staying in the subject of volumes, but we are very meticulous and devoted to answering each question, so I'm sorry for that. Last question about the volumes. Any signs of pressure on margins on corporate loans, since all banks want to grow in that segment?
Yes, we see a little bit year on year, I don't know if it is 15 basis points or if it is 20 basis points, but there is some pressure in terms of corporate lending. At least in our bank, we always prefer if it is to make an adjustment, to make it in price than to make it in risk. When we make it in price, we know that we will charge 15 basis points less and that's it.
When it is in risk terms, what we put in jeopardy is 100% of the loan, so it's much better to do it like that. We are not price makers as well, so we are just conquering our space. We try to differentiate ourselves by the closeness to the customer, understanding their business, to be fast. That's why we are so much in medium-sized tickets, but w e will operate in the margins of the market. It's true that we saw this year- on- year, a decrease of the margins of the market.
Thank you. It's now time to bring back Mr. Bicho into the game. For a change, let's talk a little bit about results. What kind of outlook should we expect for the NII in 4Q 2025? What is your view on the cost of deposits and loan yields?
First, we are still reporting a relatively low sensitivity of our NII in the next 12 months versus a decrease of the interest rates. We believe that our NII in the first quarter will still be resilient, despite the cut of the interest rates that took place in the beginning of October. Of course, there is still a risk of a further cut in November, which of course then can have some additional impact. As we already said, our forecast is that interest rates will go down to 3.5% by mid-next year. This is, let's say, our assumption, that this trend will continue. Our assumption is that the interest rates will stabilize at that level of 3.5%. What we expect is, in the fourth quarter, still for the NII to be resilient.
Regarding the evolution of deposits costs and loan yields, so starting with the loans, we have part of our loan portfolio at fixed rate, namely, more than 40% of the mortgage loan portfolio has a temporary fixed rate. Almost all the consumer loans have a fixed rate. This provides some temporary protection, of course with the exclusion of these early repayments of the mortgage that are at fixed rate . On the other side, we also have a large bond portfolio and part of the bond portfolio is also at fixed rate. This also provides some protection for some time against the cuts of the interest rates. Regarding the deposits, we are already showing an adjustment in the average cost of the deposits in the third quarter. It is already visible, a decrease of 14 basis points just quarter- on- quarter.
We know that our cost of deposits still compares a little bit higher than the average, which has the good side and the bad side. The bad side is that of course, it's what it is. We are paying a little bit on average. The average cost nominally seems a little bit higher than the average, but at the same time, it also means that we have more space to decrease going forward. The deposits, and especially the savings accounts promotions that we are doing, is also one important way of attracting new customers to the bank. We cannot see just isolated the pricing of the deposits, because this is part of let's say, a comprehensive strategy of increasing our presence, especially in the retail segment. All in all, NII, relatively resilient in the fourth quarter.
The NIM, the net interest margin tends to go slowly down, but there is going to be a moment where we expect that it will be visible. T hat this decrease of the interest rates will start to be offset by growing volumes, especially on the lending side. We cannot look at this only from a static perspective. We expect that the acceleration of the loan growth, which of course provides higher yields than the bond portfolio, will bring sustainability to the levels of the NII and will offset the reductions of the interest rates that we are still forecasting to take place.
Thank you. Now, interesting question. Higher origination of mortgages did not translate into a growth of portfolio. Amortization seems higher than in the past. What are the main reasons?
It's exactly connected with the previous comments. As interest rates go down, there is an increase in the early repayments by customers. One reason is refinancing. Another reason may be that in the meantime, they have the financial capacity to make early repayment of part or the whole loans. This is just something that could be expected when we enter into this cycle of downwards trend in terms of the interest rates.
Thank you. Consumer protection, i n the report, the provision for consumer protection is PLN 45 million. What exactly is included in the PLN 45 million amount?
This is the continuation of the creation of provisions for an open consumer protection-related topic, which was described in the previous report and it continues to be described in the current financial report, which is connected with so-called unauthorized transactions. This is a pending procedure from the Consumer Protection Authority against basically all the banks. The proceedings are being prolonged in time.
In June, we made an assessment of the potential consequences of, let's say, a decision and we booked a provision of PLN 37 million notice in the third quarter, as the process still was not finished and still may be prolonged until the end of the year or even to the beginning of the next year. We made another assessment. We took a more conservative view, and so we increased the provisions by this PLN 45 million. It' s connected with the same situation that was reported in the end of the second quarter.
Thank you. Were there any one-offs in other operating income to offset PLN 45 million consumer protection provision?
In other operating income?
Other operating items, cost income.
No, not that I remember out of the normal. In the second quarter there was, but not in the third quarter.
Probably the one hint from us is that this other operating cost line, remember, there's also residual FX mortgage-related costs. In 2Q, these costs were in high 60s. In 3Q, they were in low 20s. This is offsetting also somewhat this line. Would you comment about NPL ratio in the corporate segment, reasons for increasing 3Q and subsequent decline? What is the outlook for cost of risk in the corporate segment?
Increase in the third quarter last year, I don't remember. I think in the third quarter last year, there were two isolated cases in two non-related exposures, which increased the ratio at that time e xactly. We can say that in the last 12-24 months, what we have in terms of NPLs in corporate are isolated cases and not , let's say, very significant cases.
Of course, this also contributed to increase a little bit the cost of risk for corporate, but this is also a consequence of having a relatively smaller corporate business, right? If we have a smaller corporate business, if we have 1 NPL or 2 NPLs, it's immediately noticeable in terms of the cost of risk of the segment. As we will grow, of course each isolated case will not have such visibility as we have now. As I said, until now, isolated cases in different sectors and for completely different reasons, so we don't extrapolate a general deterioration on the corporate loan quality.
Thank you. Moving further down the question list, there's also questions about the NII and net interest margin outlook when rates stabilize, but I think you largely covered that, unless you want to elaborate. When interest rates stabilize, what sustainable NIM do you expect?
NIM, I think as I said, the NIM will still tend to go down, but this does not mean that the NII goes down, b ecause we have also the volume. For example, our situation, we have a loan-to-deposit ratio which has been decreasing through time. Now, at the end of September, we have a 58% loan-to-deposit ratio. It means that we have a lot of gathered deposits, which liquidity is being invested in bonds and NBP bills. Obviously, the margin that we are getting from these is smaller than the margin that we would get from loans. What we expect is that in the future, loan growth will accelerate and part of this excess of liquidity will be deployed to support lending growth. This change will be supportive for the NII.
Of course, it will consume capital, of course, no doubts about that, but will be supportive to stabilize the NIM. The NIM still has some space to go down. I would say it will be probably going down still 20, 30 basis points through time. T here will be a moment where, as soon as we will start to, let's say recycling this excess of the liquidity into lending, this volume effect will stabilize also the NIM. More important than the NIM, to be honest for us, is the level of the NII. This is where we are focused. It's our main revenue stream, and so far it's proving extremely resilient.
Thank you. Moving to the inevitable still subject of FX mortgages, but more so cost-related, I will not read all the questions. There aren't many, though. Do you expect FX mortgage provisions to reduce further in 4Q 2025? Any tangible guidance for 2026? Do you still expect 2025 to be the last year of CHF provisions? How much CHF provisions is ahead of us? These are the two, and we have four more.
Do we expect to use any positive tax effect to upfront FX mortgage [crosstalk] ?
[crosstalk] this is an interesting question , yes.
I would try to combine these. First, the trend continues to follow the guidance that we have done in previous periods. Namely, the overall costs related to FX mortgage are going down visibly year- on- year. If we look at the first nine months of this year and we compare with the first nine months of last year, we see that the total gross costs related to FX mortgage decreased by PLN 750 million or 32%. This includes provisions, related costs, legal office, court costs, and so on, so 32% decrease versus one year ago, of which provisions are lower by 12%, but also the provisions now are covering not only the existing court cases, they are also covering additional costs and also future settlements. There is a visible downward trend, especially when we look at these overall costs.
In terms of quarterly charges of provisions, the third quarter was below PLN 400 million, so it was lower than what we have been incurring so far. We do not give guidance on a quarter-by-quarter basis of the level of the provisions. W e did not promise that each quarter the provisions will be lower than the previous quarter, this for us is not important. For us, what is important is to show that when we will reach the end of 2025, we can say that we can observe that total costs continue in a downwards trend. This is one thing. Second, and I think more important, is the assessment, how much is still before us to cover in 2026? Based on the information that we have now, we still believe that 2025 is the last year with very significant financial impact on our P&L.
This does not mean that there will be no costs in 2026, but they should be clearly lower than the ones that we are still showing during the current year. Unless something extraordinary happens in terms of court jurisprudence or the law that is being, let's say debated to be applicable to Swiss franc mortgage loans, which according to the current text, that does not create something completely new. Excluding any unknown factor, this should be happening next year. In terms of the fourth quarter of this year, and on another side, of course we can say that we are interested in getting over this impact as soon as it is possible. What I can say for now is that the fourth quarter will still be relevant most likely. The fourth quarter is also the moment of truth, also with the audited accounts.
We are checking very detailed, every single driver and parameter of the methodology that is behind the creation of these provisions. The fourth quarter, we are not signaling lower provisions than in the third quarter, not at all. What we would like is to, in three months' time, when we will come to present the preliminary results of the year, to confirm that we still expect this significant decrease of the costs related to FX mortgage during the next year. It is true that in the fourth quarter, if the increase of the tax will be confirmed, which impact of course will be very negative for the next year. However, it implies a revaluation of the deferred tax assets until the end of this year.
The law is still not finally approved, and we need to make very detailed estimation about the time structure of the DTAs, in order to make a proper revaluation of these DTAs. We cannot provide now any guidance regarding the number. What we said is that in our financial report that we published today, we will carry out this assessment after the act is signed and the positive financial impact on the net result can be significant, right? Still, we cannot comment on concrete amounts. We are still, before more detailed calculations and also seeing the final shape of the law, which should be known until the end of November.
Yes, thank you. This covers the DTA-related questions. Sticking to CHF for a while, there's the question, what other costs related to CHF mortgages are there? I would direct you to our front part of the report. There's a lot of details there. They are all remunerated and there are numbers, so you can satisfy your thirst there.
Generally speaking, so the total costs broken down between provisions for legal risk, which includes existing court cases, future estimation of court cases, assumptions regarding how many settlements will be done with clients in the court and out of the court, includes additional costs connected with the verdicts that invalidate the loan agreements, including court-related costs, sometimes statutory interest and other costs, the costs of legal representation of the claimants and the costs of the counterclaims that we are obliged to file against the clients in order to protect the original capital and court-related costs.
Thank you. Now, a question, a strategic one. Could you update us on your inorganic ambitions? Can a buyout of minorities be possible or a combination with a corporate bank?
[crosstalk]. In our case, what I can say on this part is just that, if a potential transaction in a hypothetical scenario appears to us, we will study, with the focus of mainly on cost synergies. We believe in transactions and operations that bring cost synergies. Transactions just perceived a little bit more difficult to justify, especially because we as an institution are known by efficiency and digitalization, and process-oriented mindset. This is the value that we bring for the table. We don't see these kind of transactions in the horizon. Meanwhile, what we are focused on is our strategy, that so far, so good. It looks like it's working, at least in the results that we are bringing today. Through that, we pretend to keep bringing value to our shareholders. The strategy, the name is Value and Growth.
We bring the growth in terms of the business, that will be translated on the value for the shareholders and all the other stakeholders. Any kind of transaction, hypothetical, we don't see any space, even because the transactions that we saw up to now in the market were more a change of shareholders than a real M&A transaction. A lthough very positive, because they show the value that the Polish market has and also the high appreciation and the expectations for the Polish economy.
While you are holding the mic, what prevents Millennium from paying dividends already from 2025 earnings?
Keep this this hypothetical. What would hypothetically prevent could be the leverage ratio. Once again, we were very clear in our strategy that it's clear the plan to apply to the authorities to [priotize] to pay dividend in 2027 on the results of 2026. This, we are extremely committed. This is clear, our target. This is in everything that we do, t his is inside. B esides of course, the approval of the authorities, the KNF, the regulator, but l ooking for our capital position, different ratios, limitations, and everything in a hypothetical, when we put everything together, the leverage ratio maybe.
Very clear. Thank you very much. Of course, each year we need to wait for the guidelines of the supervisor, right?
Yes, you are right. Besides the direct authorization, case by case is also the guidelines of the supervisor for the sector in that year. You are completely right.
Gentlemen, the end is nearing. On e question, actually, about a very technical on RWA growth. Credit RWA was up 6% quarter- on- quarter, while net loans grew only 1%. What is driving the difference?
Yes, it's a fair question. We had an increase of risk-weighted assets over PLN 2 billion in the quarter. There are two main drivers. One is the lower benefit from securitization transactions done in the past, which are already in amortization period. As we have less loans covered by such securitizations, we have an increase of the risk-weighted assets related to the loans that were under those securitizations. This is immediately responsible for around PLN 1 billion growth of risk-weighted assets in the quarter.
The other part is connected mainly with the corporate portfolio, which also increased more than PLN 1 billion in terms of risk-weighted assets, mainly as a consequence of the growth of the loan portfolio itself, but also some saw changes in terms of the risk weights assigned to the consumption of capital assigned to our factoring business, due to a combination of changes that were done during this quarter. These were the two drivers for the relatively high increase of RWAs versus the growth of the loan exposure. Of course, the loan portfolio did not grow much, because we had still a contraction of the PLN mortgage, which has a much lower risk-weighted asset, risk weight.
The mix is changing simply to some extent.
Yes.
A very unusual question because it relates to Goodie. I think we need to ask this question. I'm going to read it and answer. Would you comment about the business case behind the cashback platform between Goodie and BLIK?
Yes, there is not much to comment, but the value-added services that we put in the bank systems are in general, connected with transactions and payments. Goodie was a startup that developed quite well in terms of some smart shopping, namely cashbacks and things like that, discounts, cashbacks, and these kinds of informations. It's an autonomous company. With the BLIK, any cooperation makes sense to us because it's connecting payments with advantage and discounts and cashbacks, so it makes sense. This is with the digital world, a lot of things. Our customers know that they can pay in our app, they can pay tolls in highways, parkings, top-up telephones, and things like that. This could be an interesting service if done with a proper customer experience.
I'm tempted to say that it was the last question, but there's one that arrived late. Return to dividends. Do you plan to return to paying dividends with a 30% payout ratio or another level?
35.
Yes. [crosstalk].
Our dividend policy is 35%- 50%. When we will be able to restart, I think we would start [crosstalk].
Probably with a lower interval.
Yes.
The business growth is developing quite well. By that, it's natural that things would go up, and so the usage of capital would be well used also in the development of the business.
Gentlemen, it looks like we covered a vast majority of questions.
There is a question about BLIK buy now, pay later.
True .
You don't want me to answer?
No, [crosstalk].
Okay. The question is if we are satisfied, and the answer is not yet. Sometimes it takes time, but the first impacts are not as positive as we thought. Also, I remember that the transfers P2P, when we started in BLIK, also didn't develop so much as, for example, the payments in e-commerce. Sometimes the rush moments or the initial moments are not as strong as we were forecasting. We were forecasting enthusiasm from our customers on that, and we are not seeing that yet.
I see. IR is being scrutinized by CEO and CFO, so that's Bank Millennium. It's not an easy job, as you say yourself.
Yes, there's a question about long-term outlook of cost of risk, bearing in mind acceleration in SME lending. I think this year we still see it very positively in terms of the cost of risk. After nine months, we have a cost of risk of 32 basis points over total loans. In the fourth quarter, it is possible that we will conclude another sale of NPLs. Usually, we do two transactions per year in the second and fourth quarter, so it's still possible to have another transaction in the fourth quarter. If that will happen, it can be supportive both for the NPL ratio and for the cost of risk.
We are assuming that this year, we will likely finish lower than 40 basis points over total loans. For the next years, of course we have a gradual change in the structure of the loan portfolio. We also do not expect forever that sales of NPLs will be so accretive. We are assuming that most likely we will come back to this usual guidance of 40 basis points- 50 basis points over total loans as time will pass. This is what we can say for now. When we will enter the new year, we will probably come back to this guidance.
Gentlemen, we extended the time of the call over one hour, so I think it's time for closing remarks from Joao.
Very well. Thank you for attending this conference and also for following the bank, and assessing our results and performance as we have been doing quarter by quarter. The results are positive on a year-on-year basis. At least we assess it as that. We are quite confident also for the future. We will have, in terms of tendency, as it is known, lower interest rates probably up to summer next year, stabilizing at 3.5%, with a very high probability of higher taxation. From another side, of course we will have lower costs or much lower costs of Swiss francs. Also, the volumes keep growing in retail deposits, customer acquisition, investment funds, recovering on lending, on cash loans, and mortgage.
Also, in terms of corporate, we believe that we will not only be able to maintain this pace, but in the next years to come, even be able to present higher growth than we are presenting at the moment. We are quite confident. In the end of 2024, when we were presenting the strategy in interactions with different analysts and even investors and everything, there was this discussion about, if the bank would be capable to have the skills and to have the know-how to explore the commercial banking in terms of SME and mid-corporate banking. We have been presenting quarter by quarter, also the progress that we are doing in this area, also explaining the different systems, recent developments, recruiting different people, also deploying the people that were already with us, but that were working with some constraints in terms of usage of capital. The results now presented are quite positive.
I think that we are in a moment that we are quite confident about the strategy and we are quite confident about delivering the results, and the view and the transformation even of the bank that we presented in our plans for 2028. We invite us for the end of the year, that will be end of January, yes, with high probability or first days of February, I don't know.
We're still due to announce.
Yes .
You'll hear from us on this matter hopefully shortly. Thank you very much, gentlemen. Thank you all for participating. Thank you for your interesting questions. Apologies for the morning issues with dispatching the results. Again, have a good weekend and speak to you soon. Thank you very much.