Good morning, ladies and gentlemen. I would like to greet everyone. This presentation of results of PKO Bank Polski after the first half of the year. Paweł Gruza, the President overseeing efforts of the board. Bartosz Drabikowski, the Vice President of the board and CFO, will be presenting results.
Thank you very much, ladies and gentlemen. On August 9th, the supervisory board of the bank has appointed me to oversee efforts of PKO Bank Polski, and I have the pleasure to welcome you to our performance conference for the first half of the year. My professional background that has given me this position involves both working for private companies and public administration, and I do hope that my expertise will enable me to efficiently manage efforts of the bank and follow up on its safe development. I hope that my experience will enable me to support the dialogue of the sector with administration in a wide sense. It gives me enormous pleasure to present results for the first six months of the year, which make us proud. The bank is a robust institution, profitable, demonstrating high cost efficiency, well managed and controlled risks.
The priority of the bank has always been transformation, digital transformation. Our remote channels used for communication with customers will be developed. We are a leader in this regard, and we are proud to have this position. Of course, what lies ahead are numerous challenges, and we have sound position for future growth. We have always also achievements in automatization of customer care. We are tapping into state-of-the-art algorithms, and I hope we'll be able to tell you more about it very soon. Our bank is socially responsible. We are well aware of our role in ensuring financial stability for the economy, and this is the role that we are fulfilling, and we will be obviously demonstrating responsibility in the market to support challenges that lie ahead for the Polish economy. We'll be supporting current issues and strategic ones such as energy transition.
The past six months brought many unforeseeable factors ranging from tragic developments that unfold in Ukraine to situation on the interest market, to turmoil in supply chains, changing raw material prices. All those factors bring uncertainty to the market, increase additional risk. Thanks to our robust capital position, thanks to the quality of our credit portfolio, our bank was able to achieve performance which make us proud. Let me now get on with large numbers. Our net profit is PLN 1.8 billion, which translates into 11.5% return on capital. This performance was achieved in circumstances where we were experiencing regulatory pressure, which decreased this performance by at least PLN 1 billion or PLN 2 billion.
This is the cost of risk of Swiss franc credits and PLN 900 million, because of voluntary deposit guarantee scheme. All those factors were mitigated by very positive core activities which went up by 36% year-to-year. I would like to thank to the bank and to all employees of the bank, because it's thanks to them that we managed to deliver such performance. As a result, we were able to compensate the cost pressure, which obviously is taking its toll on the bank, on the entire economy and on most parts of the world. I'm talking about the inflation pressure, but we have managed to keep up good cost parameters. Cost-to-income ratio stands at 140%. Our assets have gone up. The number of customers have exceeded 11.5 million. The cost of risk is in check, 58 basis points.
Capital base of the bank remains strong. Such parameters like Tier 1 stands at 16%. It's well above requirements for dividend payment. We have delivered such performance thanks to efforts, thanks to sales business operations. We are mainly talking here about very high increase in corporate credits, what is helpful, and, we are supporting the Polish economy and its development. Deposit growth totals 11%. These are key figures, which are key influence factors and have the biggest impact on our performance. This result would not be possible to achieve without our development, without our digital competence. Access to our services is provided by our leading app, which has the record-breaking number of installations, 6.8 million installation on mobile devices, what gives us the position of leader in the segment of mobile payment.
The tragedy in Ukraine has faced the bank with a whole new type of challenges and being a socially responsible institution, we have responded to this challenge with a range of available products, with amenities and facilitations for Ukrainian nationals who benefit from our hospitality. We are able to provide them with assistance, direct assistance, which involves our support for Ukrainian nationals in their country. Funds collected by our foundations are distributed in Ukraine, and we have raised significant amounts of money totaling around PLN 12 million. Challenges that lie ahead definitely include development of a brand-new strategy, midterm strategy, and efforts have started some time ago. Right now, under my leadership, I will be intensifying those efforts, and we look forward to contribution of our organizations. We are relying on expertise of our best employees in this area.
Obviously we are cooperating with celebrated consulting firms, which will deliver the knowledge of trends, development of the market, trends in Poland, Europe, and worldwide about niches that perhaps remain invisible to us, to tap into those opportunities thanks to scale that we have. Well, obviously, and I've said it before, digitization and digital progress, these are our priorities. It was in the past, and so it will be in the future. We have a great base to develop in this respect, especially if we take into consideration the efficiency of PKO Bank. We will be enhancing it to swiftly create new services and offer them to our customers. I think this is the key. It's the key for the bank to swiftly react to customer needs, to swiftly react to challenges posed by competitors, and we need to maintain our leadership position.
ESG, obviously, it's a major challenge on world markets. Of course, in Poland, we see it as an opportunity, a chance to develop the bank, especially the first letter of this acronym is, speaking volumes. Because a responsible bank like PKO Bank Polski could become, a repository of good practices. We could also demonstrate to enterprises, large and small, how to embrace energy transition, which is a huge challenge. Because of my previous role in a leading, international mining company, I know very well what regulatory financial problems, are covered by energy transition. I have expertise in this area, which I gained not only in Poland, but also in other jurisdictions in which we were operating. We are a bank which will be growing sustainably, embracing the interests of all stakeholders.
What it means that we'll be putting together a responsible offer for our customers, an offer which is beneficial for customers, what obviously translates into affection and the affluence of our customers and safety and the quality of credit portfolio that we generate. Which is why, being aware of all those issues, we are a responsible player, and we accept this role, for the years to come. I would like to thank you very much for being able to present this general overview of the current situation of PKO BP and its performance for the past six months. Of course, I'm sure you want to learn more, and right now, I would like to ask Mr. Drabikowski to tell you more about it.
Thank you very much. Good morning, ladies and gentlemen. Excuse me. It is always a great pleasure to present the performance of PKO Bank Polski. The CEO has outlined the strategic perspective and factors that affect the profitability of the bank very strongly, not only this quarter, but over previous quarters as well. Let me begin with a general comment. Were the regulators slightly less strict, the pressure associated with the performance and performance itself would have been greater and better. Nonetheless, there are many quarters ahead, so I do hope that the pressure and the scale of our performance will definitely improve. Let us now move to the details. The next slide presents the business performance that is detailed in retail banking.
Given the volumes, we have a very satisfactory dynamic, 2% year-on-year in terms of the loan portfolio with PLN 130 billion, 14% year-on-year now, 2.3% increase in deposits, very, very good solid growth. I would like to draw your attention to the two lower graphs. The current accounts, 6% year-on-year. 8.8 million accounts are now opened for our clients. I believe that the target of nine million accounts is definitely within our reach. That is a record-breaking performance, not to mention the fact that it is also a confirmation that our clients want to stay with us. We are now approaching digital transformation.
The IKO application, the IKO app, is really has really experienced great growth, double-digit, 20% year-on-year growth, year-on-year 6.8 million active apps. Now, we definitely want to reach seven, an exact seven million in apps over the next quarter. That is definitely something to be delivered. Keep your fingers crossed. Now, corporate banking and investment banking, the second most important segment, it goes without saying that our colleagues in that particular division really have a reason to be happy. Very strong growth in volumes, PLN 79 billion in volumes, translating into loans and derivatives or bonds, instruments that we are using to cover the needs of our customers. We also have a very high dynamic, double-digit dynamic, very rarely encountered over long-term periods.
The savings of corporate clients, 46% growth year-on-year, more than PLN 70 billion of assets collected with us. Now, the most important transactions were the leading role in terms of issues and activities on the equity market by our customers, where the PKO Bank Polski was in the lead. It has been shown on the slide, which does not necessarily exhaust our corporate banking activity or operations. Now, we also have a single slide that is a slight turbulence to the solid narrative. I would like to go back to what the CEO said. The banking sector is now experiencing a number of challenges. Now, those challenges are tying in with the new nature of a risk factor, the legislative risk. Until now, we have developed our credit risk management system, financial risk management systems.
Whereas now we are facing a new risk factor, in-house regulatory risk factor. Now we have the four fundamental issues. Definitely the credit holiday or vacation in terms of what we are experiencing, that is PLN 3 billion. Assuming that clients will be participating at a level of 63% in the program, that is definitely a factor of huge importance. We have assumed, well, that is a one-off effect. In all probability, it will be limited to just a few quarters. Be it short-term, it is still an important one. It affects our performance. Now, we have the legal risk associated with mortgages, specifically currency, foreign currency loans. Having verified with the auditor and consultants, we have ended up with a number of PLN 1.2 billion, thanks to which our situation is very comfortable.
We have covered our loan portfolio with write-offs, with waivers, so we do have a great consolidation and good performance. We are very active in managing that particular factor. Last but not least, we have two other regulatory factors, i.e., the support, the IPS in PLN 872 million in IPS and an estimated fund of borrower support, approximately PLN 340 million. We have a number of factors that are now affecting us. We are assuming that those are but one-off factors. Nonetheless, they are definitely going to affect the profitability of our bank. Nonetheless, I believe there will not really be any great turbulence in terms of delivering our strategy. This is something that Paweł also pointed to. We are definitely determined. We have decided to deliver value for all stakeholders.
Now, that is all in terms of factors themselves. I believe that we should now move to the very positive trends we have noticed. The net income, this is definitely the overall outcome of our efforts. Following three quarters of PLN 1.2 billion, record-breaking first quarter, PLN 1.4 billion. We have further factors that have, well, let's say, affected this very positive part, PLN 422 million. I believe that geopolitical and regulatory factors might explain the issue. Now let us take it a step further. We should definitely also consider our operational performance, a very strong growth, over 31% improvement year-on-year.
In terms of the banking performance and over 10% quarter-on-quarter, a similar trend has been observed for the dynamics of basic operations in terms of interest and commissions year-on-year, nearly 42% in dynamics, and nearly 12% quarter-on-quarter, respectively. Now, a deeper look at the interest performance, that is definitely a base for us. We are the largest bank in Poland and in the region in a number of dimensions in terms of loans, deposits, and interest performance. We have not yet recorded a volume effect or the increase of interest rates outcome. In fact, they are there. Definitely, the interest rate increase outcome is a thing of the future. It's still a thing of the future. We have recorded a 20% improvement in interest rate-related performance.
Now, I believe that we are slowly going to see an evening out of that particular curve. Nonetheless, since Q2 2021, we have overcome the interest rate performance drop. Nonetheless, last year, we are basing on volume, whereas now we are basing on volume and interest rate performance. Now, with regard to commission performance, that is yet another slide and the absolute star of our performance, a great source of satisfaction. I cannot help but smile taking a look at the double-digit dynamic performances in terms of quarter-on-quarter and year-on-year with no price changes, price risk changes. We have actually delivered this particular performance to supply our customers, not through price increases. It is not just any one-off single time peak performance given due to seasonality or a single transactions.
We have leasing and credit insurance and portfolio dynamics. Nonetheless, yes, the macroeconomic factors have been cooling down, but also brokerage. Actually, brokerage is the only line that is definitely under pressure of seasonality and fund outflows. Nonetheless, it is a very specific and solid performance. I believe that this is the ultimate confirmation of quality and of the offer of PKO Bank Polski in terms of sales as well, and also the response to what our clients are doing. We're going to do whatever we can in order to continue the trend over the next quarters. Now, last but not least, the final slide to close the presentation of our profit and loss account. Now, inflation pressure, we have all experienced that as managers and as consumers. This challenge will definitely stay with us.
Now, with regard to the dynamic of cost, cleansed of any regulatory effects, 8.3%, with no regulatory cost in operational cost only, I believe is apt confirmation that we are definitely sticking to our cost discipline. The D&A, our D&A is definitely ties in with the performance in terms of our cost. Yes, once we consider the inflation-related costs, the dynamic is different. I would like to showcase, I would like to emphasize that we have been quite efficient in managing the inflation challenge. Nonetheless, yes, we are bleeding. Nonetheless, we have to face the immediate future of an inflation pressure. That is all I would like to say at this point. Now I will hand over to Piotr Mazur, and then I will ask our CEO to summarize.
Good morning, ladies and gentlemen. In line with what we had promised last year, we said that Q4 last year would be carrying the burden of extra write-offs waivers, and this is exactly what happened, given the overall estimates, operational estimates. The third and fourth quarters had definitely carried the burden of these write-offs. We hoped that following the first quarter, we would be able to boast a good risk performance, but war in Ukraine meant that we had to spend PLN 200 million and PLN 100 million on KredoBank and our performance respectively, the latter with regard to commissions we had to set up, excuse me, provisions we had to set up for purposes of our clients associated with Ukraine. Nonetheless, in the second quarter of this year, we did not expect any additional turbulence.
Firstly, we had to sell our portfolio of inoperational assets for more than PLN 400 million, with a net performance of PLN 60 million in the black. Moreover, we set up provisions for Swiss francs, Swiss franc loans, which means that we could dissolve a number of provisions associated with the issue that brought another PLN 60 million. The good quality, the sound quality of the loan portfolio and the two effect factors led to the good performance in the second quarter of this year. Now let me move to the next slide. We have definitely confirmed the quality of PKO Bank Polski portfolio. We are continuing to experience excellent quality of inoperational loan portfolios, which means that our overall portfolio has been prepared very well for purposes of stress-related situations and circumstances. Our customers are not in default.
Nonetheless, I would like to emphasize that we have improved the share of our Stage 2 performance, operational performance with regard to hospital and CHP divisions, respectively. Given the macroeconomics, we have decided to set up extra portfolio provisions and re-qualify them to Stage 2. The key information on this slide is the quality of the portfolio is good, but the level of coverage with provisions is growing, and we are continuously getting ready to make sure the bank is ready to face stressful situations in the future. It's a comfortable situation for you as investors to have a peace of mind that the bank is ready to embrace the future. Right now, a couple of words about the exposure of PKO to KredoBank.
I have to admit that I've been impressed by what our colleagues have managed to do at this subsidiary, and I dare to say that amidst such challenging circumstances, like in Ukraine, the level of write-offs in Poland would be definitely higher. You can see that KredoBank has mastered managing the cost of risk and client selection is excellent. Let me just remind you that recent years saw perfect quality of portfolio and the number of contracts at KredoBank. Following the war in Ukraine, we had to recognize more than PLN 200 million as our exposure in Ukraine.
Today, looking at our competitors in Ukraine, this level seems to be adequate, but on July 1st, with new regulations, the overdue counters, new counters and new measures for write-offs are being introduced, so definitely write-offs will be increasing in the future. The war will be taking its toll on our performance, so there are write-offs to be made in the future. We'll see what happens when the counter is launched. Right now we are talking to customers, and our employees in Ukraine have reviewed the portfolio. They have contacted all corporate clients, and right now our feedback is positive, but I'm afraid what the future may hold. Let's focus now on our capital situation, which is robust. We have excessive capital.
In the first six months, the valuation of assets, the increased operating risk related to Swiss franc loans, were downsides, but our capital indicators were also improving. The last item, settlements. Settlements continue in line with our assumptions. We have 28,000 applications for mediations. Every day, we get several dozen new applications. Our model assumed that the settlement model would lead to decline in the number of litigations. That was the trend, but in the past two quarters, this trend has become flat and right now is slightly growing. Amid growing interest rates, there is a smaller group of customers who want to accept this settlement. Right now loans are increasing. I hope that the settlement ratio will be increasing in the future and will be able to diminish the credit risk.
The rise in the number of litigations has made us revise our write-off model, and that's why we've decided, in a very American way, to set up a single provision to put this topic to an end. To recap, we are in for turbulent times. PKO Bank Polski is ready to embrace challenges and stormy weather.
Thank you very much, Piotr. Traditionally, before Q&A session, I would like to recap our results. Net profit, PLN 1.8 billion. ROE totaling 11.5%. The driving force of such growth is high dynamics of profits from our core activities. We are demonstrating cost effectiveness. Cost to revenue ratio stands at 36%. BFG IPS challenges have reduced this figure to 37%. We are efficiently managing risk. The cost of risk is totaling 58 basis points.
Capital adequacy, Tier 1 stands at more than 16%. I would like to thank employees of the bank once again for the past six months, and we are hopefully looking into the future until the end of the year and the next year. Thank you very much. We can get on with our Q&A session.
Yes, we have a handful of questions from investors and analysts, and I'll try to bundle them thematically. I think the most relevant issue is the cost of risk. What's the expected cost of risk next year split by retail and corporate segments? And how would it look like if gas supplies to Europe were clamped?
Okay, perhaps the deputy president will comment on gas, and let me reply to the question about the cost of risk. When I'm talking to Piotr Bujak every quarter, everyone is changing the forecast, and everyone is forgetting what happened the past quarter. When the head of risk is talking about the cost of risk for the following year, everyone is listening attentively whether the situation has changed or not. On a serious note, everything depends on how deep this downturn will be and whether it will take its toll on the retail segments. I'm not afraid about GDP.
I'm more concerned about rising unemployment. If that happens in case of PKO Bank Polski, which is largely a retail bank, I'm afraid that it's going to take its toll on our retail portfolio, and write-offs will be increasing. Right now, the temperature is rather stable. We've seen some areas, slight increases, but it's still a pre-COVID level.
We were pretty open about that for many years. We were bracing the bank for such stressful situations. All models we were developing were meant to effectively select client and grow in many other segments. We are growing indeed recently in the corporate segment. This is something very positive. When we look at the profile of new sales, it's even better than the current portfolio. We are acquiring high-quality clients. I'm slightly optimistic about the future if unemployment doesn't go up and if GDP slump will be temporary. I think we will have higher provisions, but it's not going to be a dramatic event.
Right now, the impact of clamped gas supply, we have made a review of our corporate exposures, and it seems that from PLN 600 million to PLN 800 million worth of provisions provided, that gas supplies are ultimately clamped from Russia, then yes, it would have an impact on our corporate portfolio.
Another group of questions concerns the mortgage loans portfolio. There was a decline in Q2 versus Q1. The question is why. Is it related to early repayment? What can we expect in the next quarter?
Well, thank you very much. It's a very relevant question. When we analyze net interest income and the dynamics of net interest income, we need to take into account volume and interest rates. Rise in volumes has a positive contribution, but in several past quarters, the credit market has been cooled down, especially the mortgage loan market and new sales in the sector, also at our bank, is not able to supplement repayments of loans and foster repayments.
This is the new factor which has always been around, and at our bank, it accounted for PLN 200 million a month. Not a lot compared to the value of our portfolio. It's a very low percentage. Right now, I think it has increased three or four-fold. It's PLN 400 million-PLN 600 million. Loans are repaid faster. It is somewhat a challenge because it's more difficult to build volumes. All in all, it seems to be a rather positive factor considering challenges we are currently facing.
Because the previous question concerned the quality of portfolio, and this is a veritable proof that clients have major reserves if many of them are able to pay in advance, pay earlier. Compared to the scale of this phenomenon, it's a lot. Credit holidays, this trend may be increased, and it seems to be a one-off event which will be disappearing in the future. The baseline will be slightly lower. This shows that clients are aware, which is good because they are going to opt for good offers, for good deals. They understand that it may be effective for them to prepay a loan. That means they are considering alternatives, and they are wisely managing their loans. I think I wouldn't overappreciate the impact of these factors.
One of our competitors, which was growing dynamically in recent years, right now it's no longer growing because the volume makes it very difficult and interest rates are low. In our case, it's much more diversified because we see the volume and the interest rate effect. There is significant cooling in the mortgage loans. Temporarily, the same is happening in retail, but we are mildly optimistic about our business performance, and I think, our net inte rest income should be growing.
Another series of questions about net interest income. What's the guidance and what will be the net interest income in the next quarters?
We are positively hoping for positive trajectory. In the previous quarter, it was nearly 20%, 19.9%. Right now, it's 13.7%, so it's a positive trend. This positive trend in net interest income and higher margin will be maintained at least until the end of the year. Those questions are obvious. This is the after effect of the structure of the balance sheet, safeguarding strategies, interest rates, and the reaction of our balance to change in this parameter, which is moderate, which is gradual and is working both ways. We are gradually increasing net interest income, and it should be stressed that interest costs new deposits which are offered, and this is reflected by the dynamics, which is much higher than net interest income.
We are still driven by interest rates and the dynamics of net interest income will be gradually declining, but it will be up for several quarters.
The next question concerns the use of funds from the borrower support fund.
It is quite low. We are counting on its growth. We believe that this is an instrument that may actually reach out to persons with problems with actual financial issues. It seems that we have been quite rational in determining parameters for a client, for customer eligibility. I believe that all banks have been very responsible in their willingness to fund the instrument. Today, we have, maybe, well, less than 2,000 applications so far. Nonetheless, we assume that this instrument may be used in a, well, much more broadly.
Used to a limited extent only. That would be ample proof for the absence of actual well subsistence, if you will, problems in families. Because if people do have sufficient money to cover their loans, they are not eligible. I believe that as of today, the use of the instrument has not been extensive. Low amount of applications, that goes without saying. Nevertheless, let us wait and see. The banks are ready to preserve, maintain, and fund the instrument in the nearest future. Since we are very responsible, and we want to be absolutely responsible in terms of corporate social responsibility, which is why we definitely intend to use the instrument to support clients. Now, we also have a question concerning the issue of MREL instruments. We intend to meet all required eligibility requirements.
Indices. So far, regulators have been extremely reasonable in terms of their approach to banks. We have been experiencing the war and others, and not to mention other factors. Now, Paweł is definitely nodding. What has been going on in the public and commercial sectors is a good lead to reasonable conversations and collaboration in the future. Nothing is cast in stone. Nothing has been chiseled in stone. I believe that the future will tell. I would like to point out that the current market conditions for issuance are not necessarily favorable. That comes as no surprise. The war for one and the overall condition of the economy, and the other, is another. Nonetheless, both our bank and the banking sector are well-capitalized, so we are not yet ready to do that.
Now, another question concerns the strategy, specifically when will the bank, or can we reasonably expect the bank to announce its new strategy?
As I said before, we have reached the initial analytical stage. We are now going to be working very intensely with our analyst, with our consultant, and I believe that the strategy will be announced at the turn of the year.
The question is, what is our approach to M&A?
It is our policy not to comment.
Last but not least, question for the CEO. Do you intend to join the discussion concerning the rationalization of the sector burdens? That is a dialogue between the banking sector and the government.
I think that this is something of a leading question. I think that our experience will allow us to join the dialogue. It goes without saying that the governmental policy with regard to the banking and other sectors ought to be reactive and proactive. I believe that there are certain regulatory areas which may well be altered, be modified, and thus support the Polish economy to the purpose of developing it further. Hence, I also believe that the areas of dialogue are hugely diverse and will be part of the development. Thank you very much. No further questions. I would like to thank the board members for their presence today, and we will see you next quarter. Thank you.