``Good afternoon. Thank you for joining our follow-up call for first quarter 2026 results. We have with us Krzysztof Dresler, CFO, Piotr Mazur, Chief Risk Officer, Jakub Niesłuchowski, Finance Director, and IR team. I already see Michał Konarski read y to ask the first question. Michał, floor is yours.
Thank you so much for the for the call. Congratulations on the results. Actually, I've got two questions maybe for the beginning. First one, I would like to ask about the M&A. Actually, we saw that one of the biggest Polish financial companies, PZU, recently announced that they are acquiring insurer in Ukraine. Of course, they've got business over there already. There is also, you know, like the some ambition of the state to acquire bank in Ukraine. You've got small bank in Ukraine, and the question is if you would consider an acquisition which would also be in line with expectation of the state and t his is the first question.
The second question may be about the fee income. I was wondering what should we expect in terms of the dynamics in the fee income this year, but maybe also in future. I was wondering, you've presented recently a lot of nice initiatives. I mean, Allegro, Żabka, Kropka. I was wondering, what do you expect from these initiatives? When they should contribute? What would be the impact, let's say, in two years' time on your net fee income dynamics? Those two questions. Thank you.
Let me answer the first question, and maybe Jakub will start with the second one. Actually, as you know, we have on board a team who is dedicated to M&A transactions and analysis. Being the largest bank in this part of Europe, we have to analyze different options from different perspectives. What if we acquire a financial institution, or what if such institution is acquired by our competitor? What does it mean? What is the change of the landscape? We named the strategy number one and full stop.
From this perspective, we also analyze different initiatives. That's a general view on M&A. As far as Ukraine is concerned, we have a bank there, the first and the most important step for us is the peace over there and the quality of peace, in fact, not the peace itself. If the quality of peace is accepted, we can participate in this rebuilding and reconstruction of Ukraine having what we have now. If we take into account the fact that all super nationals projects or flows could be provided by us here and settled and cleared by KredoBank in Ukraine, that's one aspect.
We can leverage our current position, we can scale this current position without M&A. Another aspect is connected with an appetite of our corporate clients here in Poland to take part in this rebuilding in Ukraine. We have limits, credit limits. We can assess properly the credit situation, and we can provide proceeds or limits here in Poland, even if they are going to extend abroad activity. Of course, the last probably perspective is Ukraine itself and potential consolidation. Of course, that's a close country in terms of relations, financial, trade, and we can promise that we will analyze everything but w e know what is the cumulative result of our presence in Ukraine is still negative.
From this perspective, we have to be cautious because in an organic way, we can add to the balance sheet PLN 60 billion, what we did last in last four quarters. From this perspective, the first option still for us is organic growth, and the capital adequacy or the capital surplus over the minimum, dividend minimum or let's say capital adequacy ratio, which is dedicated for us, is slowing down, what means that we can utilize or deploy the excess capital in the best way generating the value for shareholders in the best way we can. Still we can do this.
Going to the question number two concerning fee income. Indeed, we had a very good quarter, but please remember that the first quarter, especially on the capital market side, is usually strong. Resulting from on the one hand side, for example, the fee for accounts in our brokerage house, we are taking once in January. That's one point.
Second point, what was good from the business perspective, the trading volume was record high in the first quarter on our side. Looking ahead, we expect indeed to further increase especially our income on the side of the mutual funds and also capital markets on the one hand side. Also gradually increase the fee income connected with the customer activity. If I, for now, based on first quarter looking into ahead, I would say we are talking about mid-high single digit year-on-year for 2026.
If nothing will happen because as you perfectly know, for example, in March, despite the fact we actually gain our market share in the first quarter, year -on- year. On the mutual funds side, we as other market participants, we had outflows, which then translates to the fee which we have from mutual funds business. For now, I would comment in this way, in connection to the initiatives which we are taking, as you mentioned, for example, Allegro, please remember that we are on the initial stage.
As we said today, we are before launching the second phase of the project with Allegro, in which then we will be actually acquiring Allegro customers. The level and translation of our results will depend how effective we will be on the cross-sell side. Meaning how which products actually will be able to attract customer and then as, okay, current account is obvious one, but then you have consumer loans, mortgage loans, investment products.
For this year, please do not expect any pickup in resulting from the these co-operations. We have for now it's, I would say, negligible, but if you look on the offer, our cooperation with Allegro and the offer for the customer, we have the cashback for customers for purchasing on the Allegro and payment from our account. It's kind of, not kind of, but it's cost which we have for this.
Yeah.
...for this cash back.
What Kuba is mentioning, we have to first really check what is the client's behavior because we don't know whether our clients will go for this cashback or not. It's a very small fraction of the total amount. Probably partially, yes. Yeah, the test we will have in the summertime and the autumn.
Yeah.
...much more experienced than now.
This year we treat more as a kickoff and test on also on our side, what type of customers we'll be able to acquire and if we will be able to bank this customer.
Okay. Thank you so much.
Krishnendra, please.
Thanks for taking my questions. I have two. One on the NII. I guess just trying to understand the NII guide. I guess with Q4 results you talked about flattish or like flattish NII. When you talk about flattish NII, is it a range that you talk about, like - 1% to + 1%, or how should I look at it? Just on that, just on staying on the NII, I guess if I adjust for the days, NII for Q1 would be up slightly Q on Q. If I adjust for the 2 less days, I think it's up. In that regard, are we seeing the trough in the trough in your NIM margin? Just we have 1 rate cut which happened in March.
How should I think about margin going forward in the quarters? Should we expect NIM to broadly remain stable at this range or broadly closer to this range? That's the first question. Second is on cost, actually. I think your cost performance was pretty good this quarter. Just trying to understand on the personal expenses and the overhead, are you running any program which has led to any efficiency because I believe there was a increase in wages in Q in September, I believe. That should have led to some increase in the personal expenses, that seems to have doesn't have any impact, I guess, in this quarter. Is there any efficiency thing that we should look at, how should we think about cost guidance for the remainder of the year?
As far as net interest income is concerned, yeah, we declare to deliver, maybe not declare, but we that's our effort, and we will try to deliver net interest income flattish. What means, the scale increase shouldn't be too wide, 1 or 2 percentage points rather than 5 or 10. That's a plan to simply replace the lacking part of interest margin by interest income from new volumes, from hedging and from the balance sheet management from the interest rate perspective.
Interest margin, we will see because it's a function of the market situation, the structure of assets, repricing, long-term interest rates because we also have a bond portfolio and we replace partially. What we can do, we will continue this strategy to hedge our sensitivity of interest rates. That's not only due to stabilization of interest margin, but also to deliver and to be below the requirement which is called SOT NII, Supervisory Outlier Test. Simply the test to stabilize the sensitivity of interest rates. Yeah, flattish is flattish and the scanning range should be narrow rather than the wider one.
From the margin point of view, if you look, we margin will be still under pressure of the rate cuts which we had, because not whole portfolio has repriced already. That's one point. Looking from the whole year perspective, as I look from the margin which we have for 12 months, including first quarter of 2026, there is close to 4.6. However, for the whole year we expect that it will be lower. Still there will be pressure on the margin.
The cost side. Yeah, that's the personal expenses. Actually, we will have adjustments year-over-year. It's connected with inflation. We are just started the talks with unions again, I tried to explain during the conference that the first quarter is not a good proxy for the whole year. We have some part of costs which are connected with development initiatives due to the specificity of the projects running we run in bank. The second half of the year we will see higher dynamics on cost side. Yeah, adjustments we will see, but we created some reserves to cover extra bonuses. That's why the situation in the first quarter is more flattish than it should be without that.
Sorry, just two small follow-ups. I think it should be pretty smaller. Just on the NII part, just trying to understand, you talked about hedges and investments. But do you disclose how much of the hedges or the investment's gonna get replaced this year? Just trying to mechanically understand the NII on the moment. That's first.
Second is just staying on the cost. Like, have you kind of in past provided a breakup of how much is your initiative or spend or future-proofing kind of a cost versus the regular cost kind of growth? If you kind of split it and break it down, that would be just helpful in trying to understand that trend. I know Q1 might not be a good proxy, but just in sense of what is what last year and maybe could it be similar compared to last year and this year.
Let me start with the second question and then Jakub probably will explain better this hedging strategy. We prepared a breakdown of cost, the dynamic, how we see. If we have 50-50, this BAU cost connected and connected with development, that's more or less true.
Thank you.
Yeah, looking from the hedging perspective. If you look in the context of the hedges, still around PLN 20 billion of hedges will mature this year, and we will replace if needed with the new transactions. Krzysztof already mentioned we are also under regime of European risk measures as SOT NII. Any way we'll have to comply with this regulation, it also triggers hedging b ut predominantly it's our, I would say, strategy to minimize the impact of the interest rates. From the securities portfolio point of view, which is another important part of our balance sheet, in also in the context of stabilization and hedging of the interest rates risk, we still for the remaining part of the year expect around PLN 20 billion, slightly over PLN 20 billion of maturities of the securities.
Annual replacement.
Thank you. I just had one more, but I guess I'll just wait. If there's any other question, I'd rather I'll follow it up.
Go ahead.
Yeah, sure. Sorry, just one. On the cost of risk part, I guess cost of risk remains to be benign. Just want to understand the consumer cost of risk that is, I know it's not that big a part of your book. It tends to be going up and up. Is it because of the mix shift impact that you're seeing, or is it pretty normal of it going up over the period? I understand the inflation and other things and a lot of moving parts are around, just trying to understand what's the driving force behind that part of risk, cost of risk rather going up in the last few quarters, actually?
That was explained by Piotr during the conference, but if you need some more, Piotr or you, me or him.
I would say that, you know, we forecasting that in the coming quarters, the cost of risk on the consumer loans will be rather flat. This is what we see in the first quarter. This was extra PLN 30 million we provided due to the implementation of the new model. You will not see this in the next quarter. I rather predict that probably the second quarter we will see the lower number in this line.
Simply, you know, to be maybe more precise, cyclically, at least once a year, we have to revise the model for calculating provisions and based on refreshment on regulations, internal regulations, which are touching this segment of our business. We've made this adjustment of model that's a one-off, and then in next quarters we shouldn't see higher level of that.
Thank you.
Do we have any other questions? It looks like this would be one of the shortest. Oh, I see Michał, please.
Maybe just one follow-up question. Regarding the capital position and so looking at, maybe what you are seeing internally, the demand for the corporate loans, and capital needs, do you think you will be able to maintain payout ratio of the dividends in the upper range of the, let's say, requirements if they don't want to change, or rather you see it as more becoming cautious going forward? Yeah.
Jakub, answered this. Our ambition is simply to do our best in terms of providing proceeds to the economy, both families and corporates in Poland. We estimate the contribution from investment side to GDP double-digit, almost 11%, and we are ready to provide credits and to support our clients. This is the natural way of utilization or the, or deployment of the capital.
From this perspective, if we can keep the pace of development of the loans, we cannot promise the higher level of corridor. We should be within the corridor, 75- 50%. We started securitization transactions to optimize better. We have another instruments, and we will for sure optimize the capital structure. I can't, if we are happy on the dynamic on the loan book, I can't guarantee the highest possible level for the dividend because we can deliver better for to our shareholders from the credit channel. That's the feeling now.
Maybe I will add two points. Please remember that this year the countercyclical buffer will go up by another 1 percentage point. Which also means that if we take and look at the current Polish FSA dividend policy, then the minimum regulatory capital ratios will be equal to the dividend ones. We have some expectation that Polish FSA may increase the dividend payment criteria for TCR Tier 1 and CET1 ratio. Of course, the question mark is how much, if they will do it. Next to what Krzysztof mentioned concerning securitization, another tools are Tier 2 transactions. If you look back, we did 2 Tier 2 transactions last year and in 2024. We also plan another Tier 2 transaction for this year.
Still we have enough buffer for the lending. Please also take into account that if there will be a need in the context of volume development, business growth, and also dividend payment, we have also AT1 instruments in hand. Additionally, please remember we are not paying out 100% of our profit. 25% stays with our own funds.
Okay. Thank you. Maybe one follow-up questions. As we see from, I think, I don't know, like two or three years in a row, PKO BP is setting aside some capital to dividend capital. The question is, it doesn't seem like you plan to use it, or maybe I am wrong. Why to do so? Do you plan any extra dividends or is this some kind of strategy? Thank you.
I would say I don't know, Krzysztof, if you want Krzysztof, you are muted. Krzysztof, you're muted.
We can't hear you, Krzysztof.
If you're answering the question, you are muted.
I'm sorry, Kuba. We define the corridor in the strategy and we keep this. That's not our decision, that's a decision on the side of our shareholders and we are ready for different scenarios. If we have to re-engineer the capital structure, as Jakub mentioned, we are ready. We open new markets, we decrease the margins for MREL bonds, and we extend the geo and diversify geography to be ready for different options, and we will for sure continue that. Even if we have to place AT1 Tier 1 capital, we will be also ready for that. If you ask whether we have planned this year to do this, I do not have such a plan.
We like flexibility, let's put in this way. It's not the first time when we actually allocate part of the profit to this dividend capital. Please remember also that we have still PLN 9.4 billion on the solo level undivided or retained earnings. As a matter of fact, it's without any immediate intention to pay out. We pay out 75% now. We only paid advanced dividend once when we were not able to pay out dividends out of 2022 profit. We were able to use this dividend capital. It's more, I would say, in the context of flexibility, I would say not without immediate plan to utilize this capital.
Okay. Thank you so much.
The last chance for questions. I don't see you, so thank you for participating in the call, and hope to see you soon on one of the conferences.
Thank you.
Thank you and bye-bye.
Thank you very much.
Thank you.
Bye.
Bye.
Thank you.