Good afternoon. Welcome to Bank Millennium 4Q25/2025 results call. As usual, with us we have João Brás Jorge , our CEO and Chairman of the Board, and Mr. Fernando Bicho, CFO and Deputy Chairman of the Board. My name is Dariusz Górski. I'm the Head of IR. I also have two more inferior functions. One is to manage the traffic. In this capacity, I would like to highlight that there is a button at the bottom of the webcast page, and you can click on it and send us a question. Secondly, I'm also, let's say, a caretaker of compliance, so to speak. I would like to remind everyone that we are presenting today preliminary non-audited results. We're still in the process of audit, so things can change. Obviously, not abruptly and not, let's say, revolutionary, but still, some numbers may be different.
Please note and take that into account. Thank you very much. Fernando, over to you.
Thank you. Good afternoon. Thank you very much for joining this call. We will go through a brief summary of our fourth quarter and full year 2025 results. We go directly to page number 5 of the presentation, where we present the main financial achievements of the year. We had a very positive year. We reached the highest in our history level of net profit at PLN 1,202,000,000, a growth of 67% year-over-year. If we exclude extraordinary items, the net profit grew by 1% versus one year ago. The return on equity on a reported basis stood already above 14% at 14.3%. The results were supported by a resilient level of the net interest income, despite the fact that we have been facing a gradually lower interest rate environment.
Overall, in the full year, NII grew 4% on a reported basis, or 2% if we exclude the 2024 impact of the credit holidays. The NIM for the full year was at 4.01%, and during the year we had a drop on average of the three-month WIBOR by 80 basis points, while the reference rate of the National Bank of Poland dropped by 175 basis points. The cost-to-income ratio reached 36.9% on a reported basis, or 35.8% on an adjusted basis. We had a very low cost of credit risk during the year at 30 basis points over total loans. For the first time, the non-performing loan ratio fell below 4% and stood at 3.8% at the end of the year, already meeting the target that we had set in our 2028 strategy. On the capital side, we continue to show very solid levels of the capital ratios.
We finished the year with a total capital ratio at 15.1% and Tier 1 at 13.7%. These ratios still do not include the second half 2025 net profit, which will be incorporated after the shareholders' meeting that is planned to take place before the end of March, and also does not include, of course, the issue of the AT1, PLN 1.5 billion that we have completed in January 2026 and where we are still waiting for regulatory approval in order to include the proceeds from such issue in our Tier 1 and total capital ratio. We also continue to show solid buffers over MREL requirements and also on target to meet the long-term funding ratio in its current format. The loan-to-deposit ratio continued to be very low. It was stable versus the previous quarter at 58%. So I switch now to page number 8.
As we are showing this page every quarter, we are tracking the achievement of our strategic targets for the year 2028, showing where we were when we announced the strategy in the fourth quarter of 2024 and where we are now. As it is possible to see, we are largely on track to meet the business and financial and risk goals that we have announced more than one year ago. In particular, the price of customer acquisition and growth of the retail customer base remains very strong, and we finished the year with 3.27 million active customers in retail, also a significant level of digitalization of our retail customer base with a share of retail digital active clients at 93.7% of our active retail customer base.
On the business and corporate side, visible signs of growth, especially shown by the growth of the corporate loan volume that grew by almost PLN 3 billion during the last 12 months, also followed by a growth of the number of business active clients. In terms of return on equity, we came back to double-digit level of return on equity at 14.3%. The cost-to-income, of course, worse than in the previous year as a consequence of the lower interest rate environment and still some cost pressure. The NPLs, again, showing the resilient quality of our loan portfolio and also supported by the sales of NPLs that were done during the year. Moving now to more details on the results, starting with page number 9. For the last three consecutive quarters, the level of net profit of the group has been above PLN 330 million.
This has allowed us to have return on equity on a quarterly basis between 14%-15% and helped us to reach this level of 14.3% ROE in 2025. At the same time, if we exclude extraordinary items, most of them related to FX mortgage, the level of the net profit would have reached PLN 3,222 million, which would mean a growth of 1% versus the previous year despite the lower interest rate environment. On page 10, we can see the evolution of the net interest income, which so far has been quite resilient to the gradual decrease of interest rates. So looking at the fourth quarter, the NII stood 1% below the third quarter. Looking at the full year, we had a growth excluding credit holidays impact of 2% year-on-year.
Of course, there is a contraction of the net interest margin that fell in the fourth quarter to 3.78%, but still for the full year, as we mentioned before, the NIM stood at 4.01%. On the fee and commission income, for the full year 2025, the net fee and commission income was flat as a consequence of still some downturn in bank assurance fees that offset the relevant growth, especially coming from payment cards and from investment products. On page 11, the picture about costs is more or less in line with the previous quarters. We finished the year with a cost growth of 13% year-on-year, or 10% if we exclude the contributions to the Bank Guarantee Fund.
Other admin costs grew already only single digit at 6% year-on-year, while staff costs grew 13%, partially driven also by some increase in the number of employees as we proceed with the deployment of the new strategy until 2028. On page 12, asset quality remained solid, and we managed to bring down the NPL ratio to a level below 4% as this was one of our strategic targets. So during this period of one year, the NPL ratio went down from 4.5%-3.8%, despite the fact that the loan portfolio overall did not grow much. It grew only by 2% year-on-year. And this was a consequence of, from one side, the resilient quality of the portfolio, both on the retail and corporate side, and also the positive result from the sale of NPLs, especially concentrated in the second and in the fourth quarter.
Overall, the cost of risk was at a very low level, at 30 basis points over total loans, so even lower than the 40 basis points that we had booked in 2024. This translated into a reduction in the nominal amount of provisions that was created during the year. But also we would like to highlight that even in this scenario of decrease of NPLs, we have further increased the level of coverage by NPLs, by total provisions, from 73%-79%. On page 13, we showed the evolution of the capital ratios. In the recent quarter, there was some additional consumption of capital, which is also partially driven by the growth of the different loan portfolios, and especially corporate. Anyway, we should stress that the capital ratios at the end of the year still do not include the results of the second half of the year.
If such results would be included, the Tier 1 and total capital ratio would be higher by 1.3 percentage points. Additionally, after we will get the approval for the AT1 issue, consideration in terms of our capital base, this will further increase the capital ratios, especially the Tier 1 and the total capital ratio, by further 2.7 percentage points. As a consequence, we will be prepared also to deal with additional capital requirements coming from the countercyclical capital buffer in September this year, also for the growth of the risk-weighted assets, and at the same time keeping a Tier 1 ratio clearly above the 15% target that we had in our strategy.
On page 14, a significant surplus of fulfillment of the MREL requirements and also very strong liquidity indicators, so loan-to-deposit ratio at 58%, so positioning us in a very comfortable way for the growing lending cycle that we are expecting in the next few years. Regarding FX mortgage, on page 15, the portfolio continues to be downsized at a quick pace, so overall a reduction of 40% year-on-year. The provisions in the fourth quarter were at PLN 487 million, as in line with the current report that we have disclosed four weeks ago. And it is visible on the bottom right side of this page the drop in the overall costs related to FX mortgage in 2025. They were lower by 34% pre-tax when compared with the year 2024, and that year 2024 had already shown some drop versus the peak that had been reached in 2023.
So this is a positive development in line with some of the expectations that we had already formulated in previous periods. It's supported by a lower inflow of new court cases, as it can be seen on page 16. The inflow of court cases dropped for the six consecutive quarters to 699 in the fourth quarter, while the number of settlements, especially the majority of them done during court proceedings, still stood above 1,000 in the fourth quarter. Now moving to the business development section and starting with the main highlights on page 18. It was a very positive year in terms of business development, especially translated into a high growth of customer funds, growing customer acquisition, and much stronger dynamics in terms of corporate lending. So all in all, we achieved double-digit growth of total deposits by 12% year-over-year.
Corporate portfolio, including leasing and factoring, grew by 20% year-on-year, investment funds by 40% year-on-year, and consumer loans by 4%. In terms of sales, the corporate loan sales more than doubled versus the previous year, while leasing was flat, factoring grew 11%, and cash loans grew by 4%. At the same time, we continued the solid pace of growth of the active retail customer base, reaching 3.27 million active customers in retail, of which 94% are digitally active. Seeing in more detail on page 19, we have clearly continuation of encouraging signs coming from the growth of the corporate business, with the already mentioned 20% overall growth of financing to companies, also consumer loan portfolio still growing 4% year-on-year, while mortgage year-on-year still contracted.
But when we look at the quarterly basis, it is visible that finally the mortgage loan portfolio has stabilized as a consequence of a significant rebound in the origination in the third and fourth quarter. The combination of these trends is leading to a gradual rebalancing of the structure of the loan portfolio of the group with a lower share of PLN mortgages, which are now at 45%, while we have gradually increased share of loans to companies, leasing, and factoring. Important also for the last year's performance was the growth of investment products by 40% year-over-year, especially driven by the growth in Millennium TFI funds, where we already crossed the level of PLN 11 billion of assets under management. On the deposit side, both deposits from retail and corporate have grown at a double-digit pace.
On page 20, we see, first of all, the rebound in the sales of mortgages in the third and fourth quarter, allowing a gradual recovery of the market share of origination and the stabilization, which will be followed by subsequent growth of the PLN mortgage portfolio. On the consumer loans, the origination year-on-year was higher by 4%, allowing us to reach a market share close to 11%. On page 21, we kept the strong pace of growth of our retail customer base, a growth of 36,000 net active customers in retail in the fourth quarter, an overall growth of 144,000 during the full year. At the same time, the strategy is also focused on the microbusiness segment, where during the last 12 months we increased the portfolio by 20,000 customers net.
This growth of the number of customers is followed by a significant growth in the number of current accounts and in the number of debit and credit cards by more than 200,000. The next pages show additional data, especially regarding the digital strength of the bank. On page 22, 78% of the customers log into the bank only via mobile app. We have more than 3 million active digital users, a growth of 6% year-on-year. We have 2.87 million active mobile users, a growth of 8% year-on-year. Very high ratings in the app stores of our mobile app. On page 23, we continue to show the very high share of digital channels in different sales and services processes of the bank, not only in terms of the sale of loans, but also important in terms of the acquisition of new current accounts.
On page 24, in the fourth quarter 2025, we have 2.23 million BLIK users. On page 25, a summary of the initiatives launched in the year 2025 that are further supporting our leading position in terms of digital banking, including several digital processes, but also a lot of focus on the security. Also a reference to the introduction of new insurance payments, including property insurance in our mobile app, and also payments with wearables and digital dispositions, as we are showing on page 25. The Goodie platform continues to grow at double-digit pace, with more than 20% increase in the number of transactions done with cashback. On page 28, moving now to the corporate side. We are living a very strong momentum in terms of financing of companies. It was one of the pillars of the strategy that we have announced more than one year ago.
We have, in terms of loans to companies only, a growth of 34% year-on-year, followed by a growth of 15% in factoring and 4% in leasing, and that's how the overall growth of 20% in financing to companies was reached during the year 2025. The origination of loans has accelerated further, an increase of 52% versus the previous quarter and 152% versus the homologous quarter of the previous year. The new sales in leasing are already picking up in the fourth quarter 2025. At the same time, deposits year-on-year were mainly supported by the growth of current accounts by 15%. Finally, on page 29, a word about the sales. As I mentioned, leasing sales in the full year were flat, although with a clear rebound in the fourth quarter of 2025, while factoring turnover grew by 11% year-on-year.
So these are the most important highlights of our fourth quarter and full-year results, and now we will go through your questions. Thank you.
Thank you very much, Fernando. In the meantime, questions have indeed arrived. Let me focus on do the bundling or the allocation of this. Why don't we start with a more general question on the competition, and then you have a look at questions in the meantime, and then we'll go through these. So a question to Joao. How do you see the competitive landscape, especially from UniCredit? Erste, there were also others.
So let's start with others because I believe that the landscape in Poland is always with a very competitive market, also because it's a fragmented market and all the operators are in. And so we see it as demanding but also positive.
So there is always a push for new products, a new approach, customer acquisition, new digitalization, and new tools. So we think that this is positive for the market. We are in the game . So Santander was an amazing bank. Erste is an amazing bank. UniCredit is an amazing bank. Was already a very strong corporate bank when it was the owner of Pekao SA. Now is back on the market and also more present on the corporate side, at least for now. We say they're welcome, and we are here to also make a lot of transactions together and sometimes, of course, competing to serving the customers. So for us, we believe that the new players bring value, valorize the market as well, but they will not create more competitiveness in the market because the market is already very competitive and very demanding.
Thank you very much. We have so far received only 2 questions specifically relating to the results, which means the results are very clear. It's a very nice development. So let me read those 2 out. What was the expected DTA in 4Q accounts? What is the level of provisions for SKD and unauthorized transactions?
So starting with the question about DTA. So due to the increase of the corporate income tax rate in 2026 to 30% and then followed by a decrease in subsequent years to 26% and 23%, we had to perform a reevaluation of the DTA in the fourth quarter of 2025. The result of such reevaluation had a positive impact, slightly above PLN 100 million, but on the other side was, to a large extent, or at least partially offset by a number of other items that increased the tax rate in the fourth quarter of 2025.
This included, namely, a higher share on non-tax deductible costs related to FX mortgage, also some NPLs write-offs that were not tax deductible, apart from the other typical items that are not tax deductible, such as the contributions to the Banking Guarantee Fund and the payment of the banking tax. So as a consequence, the tax rate in the fourth quarter was a little bit lower than what would be normally. It was at around 16%, and the overall effective tax rate for the full year was at 26%. So it's still high, relatively high, although it was a little bit lower due to this extraordinary DTA reassessment, reevaluation that had to be done at the end of 2025. So this is the answer regarding the tax. Regarding the provisions for free credit sanction, for the time being, we have not opened provisions for this topic.
We will be disclosing, as usual, detailed information in our annual report in the end of February about this, but what we still have is a regular flow of claims and court cases, which has not increased versus the previous periods. Also, the banks in general and ours in particular have been still winning in court around 85% of the court cases. So in this context, until now, we have not opened provisions for the free credit sanction. Regarding the unauthorized transactions topic that we also have been disclosing in our quarterly reports, we have created provisions in the second and third quarter in a total outstanding amount of PLN 82 million, if I'm not mistaken, and this amount was not changed during the fourth quarter, and these proceedings are still not finished. So we are still before the final conclusion regarding the proceedings that were opened by UOKiK.
I'm sorry. Apologies. I read it again. What is driving rising cost of accounts while revenues from this fee line are essentially flat?
I think we would say that we have different costs related to customer acquisition through different channels, and then the revenue coming from customers that are acquired through these channels are, how to say, shown in the future through different lines depending on the products that they will be using. So it's not possible just to look at a single line on the commission cost and commission income to take a conclusion regarding how these costs are translating into additional profitability for the bank because for us it doesn't matter. We are not, let's say, targeting just a specific product. What we are trying is each time that we acquire a customer that he will become a primary customer of the bank.
And so we are incurring costs in acquisition of customers as every other bank with different promotions and channels mix. And then we expect that there will be an interaction with different transactions and products that the customers are taking that will generate different fee and commission income or net interest income, doesn't matter, that will come through different lines.
Thank you very much. So we're moving away from 4Q specifically. Now, a set of questions. Actually, surprisingly large number of questions relating to PLN mortgages. And I think Joao will probably be willing to answer these. What growth rate should we expect in 2026 with regards to PLN mortgage portfolio?
So I would say, so roughly we had a decrease of the portfolio of 6%, so we would capture 50% of that. So we should have as a target to have now a growth of 3% around this number.
Thank you. There was also a more specific question. Despite high origination of PLN mortgages in 4Q, portfolio was flat quarter-over-quarter. What is driving the high amortization of the portfolio? Repayments? Refinancing?
So mainly also we need to remember that in our case, so every time that we have a year that we are a little bit less active, the natural repayments will be higher as the loan, as the time goes on a mortgage loan. Anyhow, of course, there is also some early repayments parties due to normal conditions of life, but others is, of course, also refinancing of mortgage. So when we have moments of decrease of interest rates, as we had this year, as Fernando said, we had during 2025 175 basis points of decrease of reference rate.
So it's natural that some of the consumers in the banking system would look for refinancing their rates, especially, of course, if they made loans in the top of the rate hike moments.
There's actually a very specific question on this subject. What percent of new origination of PLN mortgages is related to refinancing of existing loans at the bank?
So at the moment it's around 25%-30%. I don't know if this is a guidance for anything. Also, we are revamping the volumes. So with high probability, customers that had the biggest relation with us took the opportunity to bring the mortgage. So maybe it's a little bit higher than in a more stable environment. But at the moment, I would say that it's this 25%-30%. Thank you. There is a question on the outlook for loan growth in 2026.
We covered mortgages, but obviously the questions then on the other parts of our balance sheet.
So for everything?
Okay.
Per segment. Pretty much. Loan growth?
Okay, okay, okay. I would say that in consumer loans, it's obvious that we are in our natural production. We could consider to maintain the growth that we are having at the moment, and it would be difficult to be much higher than what we are doing at the moment. We have a natural amortization. Even if we keep fighting from the privacy of the customers, and as Fernando said, and this also just to complement also what he said, we need to remember that as a normal commercial bank, when we acquire customers, the more the customer is engaged with us, the more he will pay in terms of commissions and fees directly in the account.
So more active he is, the more waivers he get, more service he uses, so more cost sits for the bank. But of course, then it's also easier for us to make models to offer consumer finance, cards, and a lot of other products. But I would say that consumer loans, we would have a similar rate. Mortgages, as we said, so it's a recovery for 3% more or less in terms of the stock. And in terms of corporate, I think we should start to expect the volume of this growth, so not as a percentage because, of course, as the stock is getting bigger, also it's but if you pay attention for our targets as we announced for the strategy, so this would be more or less the volume that we should present as growth per year from now up to 2028.
So this should be embedded in the expectations of the analysts. Thank you. Speaking of corporate business, the next question is on the margins. How are the lending spreads developing in the sharply growing corporate business? So I would not like to give any guidance even because, as you asked me in the beginning about competitors, so it's never a good idea to say this. I would just give an information that maybe is relevant also to understand the business that we are doing. So if we would divide the business of small companies in Poland, which is below PLN 30 million of turnover, then medium companies in Poland, which is PLN 30 million-PLN 100 million, and then not big, but already bigger, let's call it bigger, higher than PLN 100 million, we have more or less one-third, one-third, one-third of the production.
So it means that if the question left behind, if we are making very large transactions with the squeeze margin, it's not true. So we are more or less with the pricing that we are having. We are splitting between small, mid, and already corporation size, although still in the SME criteria in European level, but at this level, one-third, one-third, one-third of the production. And we are not a price maker. We participate in the market, but also we do not differentiate ourselves by being the more aggressive in terms of spreads. So we are mainly applying what are the market rates today for the corporate business in Poland.
Thank you. And last question in this, let's say, topic, a bit philosophical. What is the reason for such a strong growth of deposits? They expect this trend to continue in 2026.
So we were a little bit surprised in the quarterly in terms of corporate current accounts, but there is also some seasonality on that because when we put together, it's 15% in current accounts in retail and in corporate. So it looks like there is a natural trend through customer acquisition, relations, and everything to have these dynamics. We always have an internal debate about being already so liquid and having some not difficulties, but some limitations from the market, also dynamics in terms of credit growth, if we should keep being competitive or not on the savings markets. However, we believe that as a big retail bank, this is what we should do. So we need to be a savings bank for the savings of our customers. This also then helps us to have the growth that we are presenting in terms of investment funds.
So our investment funds are more balanced funds, more regular contributions, mass market participation. And so we are presenting at the moment 40% growth year-on-year after some years of 30% year-on-year. So it's been very positive. So I would say that if the market will grow in total deposits in the system as have been growing in the recent times, we will also participate. So I don't think that we should expect the normal participation of our bank. So it's not anything specific. It's just more activity with the customers and also wants to be competitive. And also we want to be a bank that our customers consider to keep at their savings. So I would say that like that.
Thank you. Now it's time to bring Mr. Fernando Bicho into the action. Do you think the low cost of risk can repeat in 2026?
We still expect it to continue to be relatively low, but not so low as in 2025. We cannot assume that each time that we sell NPLs, we will continue to generate the same positive result. We are also growing the portfolio at a fast pace. So we are always prepared to come back to, let's say, more normalized level of cost of risk, which traditionally we always have put around 50 basis points over total loans. So we would not guide for repetition of what we managed in 2025. In 2024, we had 40 basis points over total loans, which was also below what we were expecting. So here we are, let's say, prudent. We are not, let's say, bringing the expectations too much down regarding the cost of risk.
We think that as time will pass, we tend to come back to a level of cost of risk that would be around 50 basis points over total loans.
Thank you. Next question is on FX mortgage-related costs and provisions. First of all, on provisions, what led to the increase of FX provisions quarter-over-quarter? So it relates to 4Q. And then a follow-up is how should we think about these in 2026? And also, could you give us a more tangible target for CHF mortgage costs in 2026? So overall.
So we are never guiding amounts of provisions on a quarterly basis. So we never promise that each quarter would be lower than the previous. Especially at year-end, we always have to make a reassessment about everything that happened during the year.
We have to make, again, the update of all parameters to incorporate all the available information. So here we are not committing to a straight-line downward trend in terms of the provisions that we will be doing. Having said that, as I stressed during the presentation on page 15, it is visible that last year we had a significant drop in the pre-tax costs connected with FX Mortgage by 34% year-on-year. Of course, the drop of provisions was 9%, while the drop of the other costs was 74%. But this was also partially related to the way we were accounting for the different costs and especially how we were accounting for the costs of the negotiations with the customers. But what matters is that the drop of the costs was 34% on a pre-tax basis. So what is our outlook for 2026?
We have been saying already for some time that we expect in 2026 costs to, again, drop significantly versus 2025. We cannot be very precise. We have a base scenario. Under that base scenario, the costs could fall even more than 50% versus the previous year. But of course, are based on the knowledge that we have about the current status of the different legal cases, jurisprudence, and court jurisprudence, and so on. So our expectation is that there will be a continuation of the significant decrease of the costs. Of course, we also highlighted that the decrease of the costs was also supported by the lower inflow of court cases. Of course, if the inflow matches our expectations, it means that we do not need to create additional provisions because of the inflow that is being received on an ongoing basis.
So we are not inflating the expectations, but if nothing extraordinary will happen, we should see a continuation of the significant drop in the costs related to FX Mortgage.
And we can say that we're hoping for a three-digit number.
So let's say more than 50% drop versus 2025.
I get that. Tangible guidance. Tax rate. Do you have a tax rate guidance for 2026?
It's not so much of a guidance, but it's just to give a reference.
So when we have an official tax rate of 30% this year, and we know that part of costs of banks are not tax-deductible, namely the banking tax, the contributions to the Banking Guarantee Fund, and in our case, also a significant part of costs related to FX mortgage, this means that excluding any other effects, the effective tax rate will tend to be close to 40% against 26% that I already mentioned that was the final result in 2025. What can change this, again, is the structure of the provisions and costs related to FX mortgage because it depends if there will be more or less tax-deductible. But let's say, in general, we should have a tax rate, effective tax rate, close to 40%.
Thank you. Time for NII and NIM. How should we think about NII in 2026 and its main drivers? Rates, volumes, hedging? I mean, volumes we probably covered. Rates to some extent too, but I can repeat.
So I would say that regarding references, it's the most important question, right? So there are many assumptions that we need to take into consideration when speaking about the levels of NII in 2026. So coming back just for a moment, in 2025, NII proved largely resilient. However, we need to take into consideration that there was an accumulation of interest rate cuts in the second half of 2025, which impacts are gradually flowing through the PNL, through a gradual repricing of the variable-rate loans, through a gradual repricing of the variable-rate bonds, and at the same time, with more limited space for the repricing of the deposits. So what we are currently expecting is that in the first quarter, there will be a drop of the NII versus the fourth quarter.
This is going to be inevitable. But as we don't like to just give very concrete guidance on a quarterly basis, our view for the full year is that, first, interest rates will still go down up to 3.5% and will remain flat thereafter. So this is an important assumption, and this should be reached until June, July. And second, that the volume growth will also gradually help to offset some margin compression that still can come from all the repricing that is taking place and from this lower interest rate environment. So looking for the full year, despite the drop that is going to happen in the first quarter, we still can expect quite resilient NII. We are not going to provide exact guidance about if it will be possible or not to repeat the level of the NII of 2025.
What we see is that the combination of hedging that we have done from the past and volume growth will help to offset, to a large extent, margin compression. This is our current belief. Of course, we will see in the next months how the NII will evolve. A bit of a question on the component of NII, namely NIM. Shall we expect the similar NIM erosion in relation to the expected base rate decline in 2026 or a bit more pronounced? You've got the answer, but. Yes. As we show in the presentation, in the fourth quarter, the NIM was at 3.78%. It still does not fully reflect all the cuts that have taken place during the fourth quarter because sometimes there is a lag in terms of the repricing. So we still can expect the NIM to go further down, at least to 3.5%.
This is possible to happen. But then, as I said, also the volume growth, especially from the lending side, can start playing a role in terms of offsetting further compression. This is our current view. Thank you very much. The final block, a set of questions. They are from a little bit different subjects. First is, what would be the level of the long-term funding ratio in the newest format? So I understand that this is a reference to the potential change of this ratio, which is still not approved. But if it would happen in the way that it was presented, we would be above the minimum 20%, the new 20% level. So this would imply that we would be already above the minimum required.
Thank you. Very comforting answer. How comfortable are you with the growing government bond portfolio? What are the limits to which you would accept the size of the bond portfolio?
We have a bond portfolio divided into, let's say, the biggest part, of course, invested in Polish government bonds, but also we have a sizable portfolio of euro sovereign debt where we are investing our excess of liquidity in euros. The portfolio grew substantially, as in the last 2, 3 years, the deposits have grown much faster than loans. We expect that gradually, with the loan growth, this growth of the excess of the liquidity will slow down. We don't have a specific limitation to the investment in Polish government bonds. But although we have limitations in terms of the tenors that we are buying due to the different risk limits, including regulatory limits that we are obliged to comply with.
So due to that fact, typically, the bond portfolio that we have has tenors up to 5-6-year maximum. So I understand that behind the question is the fact that there are additional needs of financing of the state budget. The rating of Poland has remained stable so far. So far, we do not have a concrete limitation regarding the investment, although we already started to diversify by having part of the excess of liquidity invested in euro sovereign debt.
Thank you.
Payouts?
Yes. Okay. Could you comment on payout targets? When will these be restated? Is leverage a limitation?
So we are speaking about the payout ratio, right, for dividends. I think before we restate the payouts, we should start to pay, right? Because I think to have this discussion before we still did not pay the dividend, I think it's a little bit too early.
As we have been stating through time, we envisage a payout ratio between 35%-50%, and we expect to be able to come back to normal dividend distribution in 2027 from the results of 2026. It's still too early to have now the discussion about whether this will still be the level of payout range that we will keep for the future. What we can say is that, of course, in order to ensure the possibility to pay dividends, of course, we will be closely managing all the requirements published by the regulator that usually are summarized in one letter at each year-end. And so we are always, let's say, monitoring that we will be able to fulfill the minimum requirements that will allow us to pay dividends in one year's time. This is what I can say for the moment.
It's probably worth reiterating that we committed to return to dividend payments from 2027 on. So 2026 profits will be the first base of, let's say, a profit that will be divided.
And of course, needless to say, of course, the issue of AT1, apart from improving the Tier 1 and total capital ratio, also improves the leverage ratio significantly. So just to be clear.
Even if this was a hurdle in the past, it should not be anymore going forward. Can you explain declines in capital ratios in 4Q?
I already mentioned partially it comes from risk-weighted assets growth that we have been observing. We will provide more details in our annual report when we will provide more detailed information about the structure, also about the own funds position at the end of the year. But as I said, most of it comes from the risk-weighted assets growth.
Thank you. On effective interest rate methodology change?
No. I think we will also of course be providing further explanation in our annual report. As time passes, we always need to look back at different assumptions and the way, from a technical point of view, that some calculations are being done. So we have also been looking especially at the way of applying effective interest rate to loan contracts where we have, let's say, a mixed rate, where we have a temporary fixed rate followed by variable rates. So that's why we have made also some update in the way we have the algorithm making the calculation of the effective interest rate.
Thank you. It's 3:00 P.M., so time for the last question. M&A? It's the question of Joao. M&A, are you willing to explore potential consolidation opportunities? And then there's another question on that. Do you prefer to act as an acquirer or a target?
So during these 20 years that I have been working in Bank Millennium, always the questions, okay, but usually the question is more if the bank is going to be sold and not so much if the bank is going to be an acquirer. So it's, of course, I think it's transaction, it deserves to be studied. But one of the things that I think everybody already learned, even by the process, is that we have been seeing around the world is that we can only buy what is for sale. And it was like that we did Euro Bank.
So when Société Générale decided to initiate a sales process, which means that if there is a sales transaction, if there is somebody that wants to sell and we think that there is a value added for our bank, we, of course, will study the operation and the transaction and we will recommend for the shareholders. What we can do is, of course, to well capitalize, to have a strong business model, also to have clean systems and process, and to be already an organized entity that can bring value to any transaction. And this, of course, we have been doing. But this is, of course, talking about the potential. Usually, in Poland, we talk a lot about consolidation, but what we see is change of shareholders, which is completely different. Consolidation is when two banks of the system merge or one acquires another.
When we changed shareholder, nothing changed in the system. Of course, it changed the owner, but the environment is the same. And this has been the normal environment here, and transactions are done usually with much smaller players. So anyhow, we will see whatever will be present to us. But for us, what is really, really important is to deliver the strategy. So we were very clear. Sometimes it looks like it was a long, long time ago, but it was just in October 2024. So it's not so long ago, even because in 2024, before the summer, it was the time that we also raised it, the recovery plan. We present a new strategy. The strategy was very clear, paying dividends in 2027 on the results of 2026 to keep the speed and the growth in retail. We are very happy that we are presenting this.
I know that is difficult to quantify, but for a franchise of the bank, the capability to grow every year active customers is extremely valuable. Every year, we have been growing. Not a long time ago, we were celebrating the 3 million customers. Now we are already with 3,270,000 customers. Every year, we put 120,000-150,000 customers that are active, and this is the net growth, and this is very valuable. We would like to have done even better in terms of the credit side in retail part, it was our own decisions how to cope with some of the limitations in terms of mortgage, in terms of long-term financing, and everything. We are already very happy from the signals of the last quarters in terms of revamp of that area, deposits doing very well, investment funds very well, cards very well.
It's clear that we are with a very strong growth and momentum in retail. Even more important was our capability to show that the bet in strategic terms to invest in corporate banking is successful and that although we were very strong in retail, we can be also strong in corporate. When we presented in 2024, we had a lot of questions about that, why we thought that we could do it, what would be the competitive advantage, what would be the strategy, how this is possible, that the market is already very crowded and very competitive. We explained that we would not do nothing strange, that we would leverage just the relations that we have, the capabilities that we have, the presence in the banking areas and in the locals and the proximity to the customers that we already have.
We are very happy that we can show the results that we are showing. We believe that, as I said, that this pace of the growth, it will continue. Also, of course, as we're financing, also we increase the relationships. So we will have also more transactional banking, more treasuries, more factoring. So all of this business would come along. And so we are confident, happy, and we believe that we could not forecast better at the end of the first year of the strategy. What Fernando said is very important also, that we need to there is always these seasonalities, ups and downs. The markets always have difficulties to understand how the banks gain a lot when the interest rates have the first times in going up, but also how difficult it is to adjust as the first times as the interest rates go down.
But there is always stock portfolio habits with the consumers. So it's to reduce the prices of time deposits takes time. The impact on current accounts that are not remunerated, of course, is immediate. So all the rebalancing of the system, it takes time, especially when the movements are so abrupt as the ones that we were having. So I think this is also prepared, but we could not be in a better position and also with less optimism or no, we could not be with more optimism for the year of 2026. So we really believe that we would have, again, another year of strong execution of the strategy and that we would be closer and closer to the targets that we present for 2028.
Thank you, João. Thank you, gentlemen, for your time and for your very insightful answers. Thank you, the audience. To remind, next data point is February 27 when we are to release our full-year accounts. You have all the notes and narrative there. The next event will be AGM, which we typically have in the end of March, and then Q1 results on April 28. Thank you very much for your time. Thank you very much for your question. See you soon, I hope. Thank you very much.