Good afternoon. Let me welcome you at the follow-up call with CFO after our third quarter results. Without hesitation, I would suggest simply to go to Q&A, because I believe you have an opportunity to get familiar with our results. David, you are the first one, please.
Hi, thank you. During the meeting this morning, I think you mentioned NII sensitivity of around PLN 320 million for 100 basis points move. Could you confirm this figure, please? I ask because the sensitivity disclosed in the financial report appears somewhat higher at around PLN 1.2 billion for 200 basis points move. It would be helpful to understand what drives the difference. Thank you.
Kuba, if you want to take it.
Yes. Indeed, we confirm that for 100 basis points move, the sensitivity went down because it was higher in the second quarter. It is due to the fact that we had increase of interest rates, and we also, in our calculation of the sensitivity, include forward rates. They simply are higher. Due to this fact, the sensitivity in the 12 months went down. Yes, I can confirm that number. The static calculation based on balance sheet at the end of third quarter for 100 basis points move, PLN 320 million.
Thank you.
In fact, we can find two numbers. One, as Kuba mentioned, by 100 basis points shift of the yield curve, and another one, 250 basis points. You should simply know which one is this number describes which scenario to avoid a situation that we replace the final result, having in mind the shift, for instance, 100 basis points and taking the number for 250 basis points as a scenario of the shift.
Please remember that it is a move by 100 basis points, so that it does not take into account that we can adjust our deposits later or farther, et cetera. So that is for a different magnitude than 100 basis points.
Thank you.
Okay, we are waiting for another questions. Jovan, please.
Yes, good afternoon. Maybe if you could just clarify once again on these legal risks, right? You booked, I do not know, around PLN 300 million each quarter. Where do you see the run rate going forward? And I think you mentioned that the quarterly level of claims is below PLN 300 million, or was this total? I do not know. If you maybe just clarify where do we stand now and what do you see over the next couple of quarters on that front, please?
I believe you, but just to clarify, do you refer to the free credit sanction?
Yeah, all. I mean, yes, you can explain free credit sanction and consumer protection issues.
Okay.
Not the biggest.
Oh, okay. The number which you see also in our financial statement is, for the third quarter, PLN 328 million of general provisioning connected with consumer issues. This is, I would say, overall more conservative provisioning, which we created also in previous quarters. What was also stated during our conference, we also are planning to make it in the next quarters also to be on the safe side. If you look, I would say, for example, free sanction loans, in the context of cases which we have currently, the level of loans under dispute is around PLN 300 million. It is lower
than the provisioning which we created. The total dispute amount, more precisely, at the end of third quarter is PLN 286 million for free sanction. We do see increase because the amount under dispute was PLN 180 million at the end of December 2025. If you look from the perspective of our results or balance sheet, it is still relatively low.
You cannot say today what is. You mentioned the call, I think that, of course, you reduced, you did a lot in order to reduce the upcoming risks.
Yes.
But roughly, what's the share of portfolio which might be affected?
Currently, the situation is that active portfolio, share of active portfolio, which was granted before July 1st, 2024, is around 10%, which means that for this portfolio, we charge fees, and this can be basis for the customer to go to the court. However, please remember that the portfolio at risk is higher, taking into account that we have 12 months of cancellation period, meaning that after repayment of the loan, customers still have 12 months to sue. Yes. Still part of the portfolio is repaid, but it's in 12-month period.
Also what is, I would say, positive for the banks, based on the projected new legislation of Consumer Credit Act, which now is in hands of the Minister of Justice, the free credit sanction clauses are one of the most important part, and it seems that the direction which they will go, the Ministry of Finance, is that the free credit sanction will be well-defined and will be connected to serious breaches of law, not, I would say, and not leaving too much room for interpretation. It might, for us, be positive because it will be then clear which contracts are at risk, and it might limit, definitely limit the number of cases going further. But of course, we are still not in place where this draft or law is final and binding.
Super. Great. Thanks a lot, Jakub. Maybe another one on costs. I think you front-loaded a bit of bonus accruals, right, in Q3? We should normally see the seasonality in Q4, right? But maybe at a lower pace, or is it a wrong assumption?
On the cost side, yes, you still should see seasonality in Q4, so higher costs. Indeed, we actually did some in the third quarter. However, in the fourth quarter, you should still see the highest quarterly costs in the year. On the one hand side, resulting from the, as we already mentioned, verification of remuneration of our employees, which in Q3 was only for one month because it was done in September. In the fourth quarter, it will be for the full month, full quarter, sorry. But also on the other costs, you will have seasonality as we are finishing the project, et cetera. You will have an increase in costs in, for example, this line of cost items.
Okay, great. Appreciate. Thank you.
Mehmet, please.
Hello. Good afternoon. Thanks very much for your time. These calls are really very helpful. If I may ask just on fees, could you please clarify the softness this quarter? I know you mentioned it already, it is within guidance, but lending especially, given it was another very strong quarter for lending, and then card fees seem to be a bit softer too, and then what your views would be into the year end. If you could please repeat your messaging on dividends. I know you talked about it on the call, but it was a bit not very clear on the call. Just the 75% payout and the sustainability of it, given the very strong loan momentum. Thanks very much.
Referring to the fees first, on the one hand side, they were impacted what was also overall fee, commission line, as it was also explained during call. It was impact from the operational release as we verified the residual values of vehicles as they are impacted by the lower market prices, and verified the amortization, which is in line, included in the provisioning. That is why quarter-to-quarter, the impact is of PLN 30 million in this line. That is one point. You also asked about the loans. From the loan business itself, we have increase of the provisioning. However, we have settlement with the Credit Bureau Office from which we are connected, gather data. It was technical effect of the settlement. That is why the overall fees from the lending was down quarter-to-quarter. Otherwise, without this one-off settlement which we had, the result would be positive.
In the card business, in the second quarter, we have one-off settlement with Visa and Mastercard. Fewer business in the first quarter, the result was higher than in the second quarter. It is again, in the card business, in the third quarter, comparing to second quarter, it was result of one-off, so positive impact around PLN 26 million in second quarter. However, again, fewer business, so turnover, the result was higher in the third quarter. Eliminated this, of course, one-off, and comparing these two quarters.
As far as dividend is concerned, we keep the assumption 75%-50%, this corridor, due to visible reduction of the surplus on the capital side and the capital adequacy ratio went down, we consume, we take plenty of different actions to compensate that. But also, we start talking with the Supervisory Board that we should start thinking about reduction of payout ratio toward 50% from the level 75%. But as a management board, even if we start this talking, we have to be ready that the general meeting will accept 75% of the dividend payout. That is probably why it is not clear that we, even if we can, as a management board, only recommend an approach, but having in mind that taking into account the needs, for instance, of the state assets and so on, we should take into account an appetite for 75% payout.
That is very helpful. Thank you, Krzysztof. If I may ask just on the dividend. Do I understand it correctly that your recommendation to the board would be 50%?
No, no. Not this year. Not this year.
Not this year, yeah? Yeah.
Not this year. Not this year. I am sorry if it was not clear enough. We have a corridor, and we should step by step probably adjust the payout to be in line with the capital consumption and buffers we should keep. It is not the situation that now, but we simply started already talks internally and also outside that in the longer run, we cannot keep 75% such dynamic of the lending activity and keeping the buffer for evaluation of this mark-to-market portfolio of bonds. And yeah, that is why we started the discussion, but it not means that we will recommend 50% this year. That is for sure not.
Okay. That is very helpful.
And just to add to that, we are still ahead of Polish FSA dividend policy. Although what Krzysztof , our CFO, said that our P2G set by our regulator is at 0%. However, we cannot rule out that the regulator will decide to add some add-on to the dividend levels of capital ratios. As for now, the dividend levels are the same as minimum regulatory levels after increase of countercyclical buffers. So, of course, it also will have an impact, may have an impact on our internal discussions and decisions concerning recommendation or level of the dividend payments recommendation.
That's super helpful. Thank you very much.
Łukasz, please.
Yes, thank you very much. The third quarter was, I think, eighth consecutive month with net releases of the credit risk provision in the mortgage portfolio, PLN mortgage portfolio. I think I already asked this question before, but in your opinion, how long can it last in the next, I don't know, couple of years or quarters? What do you think?
I would say for now, it's hard to say. However, it seems that we may end this even this year with this, I would say, release and have then starting in 2027, starting to have slightly higher provisioning. But for now, I would say, it's hard to say because it also will depend on the behavior of the mortgage portfolio, which for now, I would say, is performing good.
What I can add, it is highly correlated with macro outlook, especially on the retail side, wages growth, inflation, and GDP growth. That's why having this positive cycle still in Poland, that's why we probably do not observe this negative impact on the quality of mortgage book. And of course, it's a data-driven calculation. We do not take decisions discretionally. That's why, as Kuba said, it's hard to say. But as far as the macro picture is good, we shouldn't assume a huge negative impact because we don't really see the source of that.
All right. [Krishnendra], please.
Hi. Thanks for taking my question. I have two just on capital. I think on the call earlier, in the afternoon, I guess you were referring to use of IRB method or model for the mortgages. Just trying to understand, as just on the call, I think it's just trying to understand, have you made any quantification or timing around those or how much of benefit that could come in from that? Second, thanks a lot for your comments on dividend payout, like broad arrangement to 75%. If I understand correctly, your requirement on MDA sat on tier one capital as of now. Would kind of issuing AT1 or trying to build up that stack would help you benefit on that requirement? Also on the call, you talked about securitisation.
I believe there is a 29 basis point positive impact that you had. Did you further quantify any impact that could come up? I was not able to catch that in the morning call, so if you can discuss that also, that would be great.
Sorry. The last question concerning securitization, if you can clarify what is exactly the question.
The last question was my understanding is that the question is what is the appetite for this-
Yeah.
improvement from the securitization side. We shared this during the call that Jakub's team made an analysis and research of peer banks from Europe. Generally speaking, we can fairly say that if it is 50 basis points maybe plus improvement of capital adequacy ratio, the total capital ratio is fair to say that is our appetite, in line with our appetite. It is up to 50 basis points, I am sorry.
Yeah.
Yes?
For just small clarification, I guess, you already have a 29 basis point of positive benefit baked in your CET1, right, already. You are saying you could further-
Altogether.
even further.
Altogether. Altogether, yeah.
Yeah.
Not an increment. Altogether.
Understood. Is there any, like, sorry, just, I think there should be a small follow-up. I guess you can answer the other questions. Is there any P&L impact that you kind of have from this? I know your loan book grows, loan book and the name has like far more bigger drive. Just trying to understand if there is a small delta or thing that we should think about it once you are going to go on the securitization, like you are going to go do more. Is there a P&L impact as well?
Yeah. Unfortunately, it is connected with the cost. So, of course, you will see. We are including this in fee and commission income. So the fee which we are paying for the guarantee, because as a matter of fact, the synthetic securitisation which we did, so the protection is in form of the guarantee. So yes, you can expect. We already have these costs. Of course, after the transaction, which we second transaction, which we close end of July, the cost will be higher. We already see increase in this line. So, I just came from Prague. Again, for now, we are including these costs in the fee and commission line. You also ask about, if I understood correctly, MDA requirements. Is that right?
Yeah, I guess just MDA requirement. I guess it is how it is moving. I guess would adding CET1 kind of help in lowering it or kind of giving you a buffer in the tier one rather?
I would say we are not constrained by the MDA requirements currently. For now, and in the base case for 2027, although we are still in the process of planning of 2027, it will not be constrained for us. However, we also are, on the one hand side, prepared, on the other hand side, elastic in the context of need. If there will be a need for AT1 actually to improve it, then we will be ready to issue AT1. But for now, AT1 is not base case for 2027. However, what is good for us is that a few other banks already did AT1 on the Polish market, which means that our regulator also already is familiar with this instrument. Then it is always, I would say, easier for us to do such transaction.
Also, international investors and Polish investors are already familiar with such instruments out of Poland, and we have a lot of questions from the investors about AT1. Placement should be rather straightforward.
Sorry for that. Jakub is a little bit maybe humble here. We have made a huge step forward simply to extend geography and investigate the appetite. Even if we do not have in the base case plan, I think that, yeah, we can say that the team is ready. If there is a need, we will do this.
In the context by IRB, you also asked this questions. We do not give the number. We are still in the project with also external consultants, IRB, but what I can only say that mortgages are the biggest portfolio in our loan book. Indeed, even reduction of 5-10 percentage points of risk weight might have significant impact, sorry, on our capital plans.
But what is important, decision is already made and taken here in the bank, approved by the Supervisory Board. It is not the project on early stage that we still are discussing. It is fully approved internally and started.
Thanks for that. I mean, there are already two reasons. I had one small follow-up. I will come at the end of the-
All right. Łukasz, please.
Yes, thank you very much. Just one more question from my side on capital, because last quarter you highlighted the fact that given that the countercyclical buffer already reached its target 2% level, the dividend requirements right now are the same as minimum requirements, meaning that this may trigger regulator to somehow alter the dividend guidelines this year. The question is whether do you have more clarity after the quarter or we should wait simply till December for the-
We have one positive development, which is the fact that regulator did not impose pillar two guidance on us. So, we actually issued also current report saying that the pillar two guidance, which historically taken was positive in some years for us, and then the regulator required us to add pillar two guidance for the dividend levels. Now it is set to zero. It is a fresh, I would say, position of Polish regulator. So it is positive. So for now, I would say that that is, let us say, my assessment that regulator will add something which decreased, because if they would like to do it, then most probably they will actually set pillar two guidance at the non-zero, but some plus level. However, of course, we cannot exclude that they will do something. But I would say it is positive development.
We cannot say for sure they will not add anything, but I would say the probability of adding something is now lower than it was before we received the information after pillar two guidance.
Perfect. Thank you very much.
Robert, please.
Yes. Hi, it's Robert Maj from Kepler Cheuvreux. Two points from my side. I noticed that your fair value through other comprehensive income securities portfolio declined by around PLN 9.5 billion during the third quarter, while the amortized cost portfolio remained broadly stable. Was this a deliberate ALM decision aimed at reducing the volatility and protecting the capital against the potential increases in bond yields, or was it primarily driven by portfolio maturities and liquidity management? If you could give some color on that.
I would say already some time ago, at least if you will look on the share of securities included in or valued through other comprehensive income and their share in our portfolio, it's decreasing. Already, if you, for example, take five years horizon, it's decreasing.
Yeah.
That's, I would say, clear decision. The decision was driven to limit the premium, limit the impact of changes of yields on the capital. Even, but still in this quarter, what was also presented by us is 31 basis points. Currently, part of the portfolio which is maturing, in the wider extent, we are classified as a held to collect, and then we have valuation through amortized costs. That's the reason why you see the shift of the portfolio in the context of accounting classification. What I also can say that we will continue this trend. We cannot do, I would say, one-off exercise and switch the portfolio. It's not allowed from one accounting category to another. It's not allowed during accounting rules.
Again, what we are doing when the portfolio or securities are maturing, larger part of these securities are then classified held to collect and value through amortized cost. As a result, the portion of the securities in the held to collect and sell and value through other comprehensive income is decreasing.
Okay, that is very helpful. Do you have a target allocation between the FVOCI and amortized cost securities, going forward?
I tried to explain this during the conference, because we deeply discussed the SOT NII requirements from EBA, which is connected with the sensitivity of interest margin rather than the economic value of the balance sheet items or end of balance sheet. There is another one, the upper one, this bar, which is connected with economic value sensitivity, and we have to comply with the 50% threshold, which is a stress test for the shift of the yield, and then we have to check the sensitivity of economic value. From this perspective, one aspect is the classification from the perspective of the stability of interest margin, from the perspective from the achieving or being below the threshold connected with SOT NII, but also is the third one, which is connected with economic value of the balance sheet items, which is connected with mark-to-market sensitivity.
Our ALM processes is a quite complex issue, and we as a finance team together prepare tools and suggestions and recommendations, and then ALCO team, which is a asset liability committee, discusses what should be the benchmark portfolio and approves finally that. Again, there is an area of flexibility, but this is not fully flexible for the bank. Bank is not fully flexible in terms of defining the appetite for maturity or duration or fixed rate bonds amounts. We have some limits and thresholds internal.
Maybe to add something. We do not have, I would say, fixed target for the relationship of fair value OCI and held to maturity, because it also depends on the, for example, structure of our financing, so how much of deposits which we have and how much liquidity we need. The level of liquidity which we need, and it is also based on models. I would say direction for now is that we still see room to limit the share of fair value OCI, that instrument in our balance sheet, and in the context of share of this instrument.
Okay. Okay, that's helpful. One last from my side. Around 75% of your deposit base consists of current and overnight balances. Could you provide some guidance on the effective deposit beta you would expect under, let's say, a 100 basis point shock increase in market interest rates? Specifically, how much of that increase would you expect to pass through to your average cost of deposits over, let's say, the following 12 months, give or take?
I would say if you take a whole retail base, as you already mentioned, predominantly we have current deposits which are at zero, so there is no sensitivity here, or there will be no any increase here. We have savings accounts, which partially they are based on the formula of the rates. So here we have some impact, and we have term deposits, which are the most, I would say, sensitive. For current accounts, I would say the transition of the rate increase, there will be no any transition. On the savings accounts, I would say will be 20%-30% of the change. On the term deposits, it definitely depends on how the competition will behave.
On average, let's say, 10% on average is too optimistic, I guess, right? It's probably more than that.
For the term deposits, yes, it will be more than 10%.
Okay.
But again, it will depend on the needs which we have and the behavior of the competition.
Yeah, that is important what Kuba said, that we can artificially try to calculate what is the space to keep, for instance, interest margin stable, but it is not true because the first step is always to verify our market position and this competitive position. Next year, as you know, we have this OKI program which starts. That is why we have to be ready for different scenarios. We cannot exclude situation that newcomers will fight for deposits even, as we are quite conservative in terms of sharing different guidances for next year. We have plenty of questions. We are ready. We keep stable deposit base, and in case of something, we know how to attract our clients to keep it in our bank.
Okay. Thank you very much, gentlemen.
I see no further question. Yes, Michał, please.
Hey, the last moment. Sorry, if you could maybe, I know it's been widely discussed, but maybe you can share something more about the benchmark change and what we should expect to happen in 2027. Are you willing to be proactive here, or maybe you learn something more about potential regulatory interventions here? Thank you.
Benchmark, you mean benchmark rates?
No, I was referring to POLSTR.
POLSTR.
Yes, but again, yeah.
Sorry.
On the one hand side, as you know, we already switched for mortgages from WIBOR to POLSTR, and we are going to, and we have to, as a matter of fact, switch with other products based on WIBOR by the end of the year. We definitely plan it to do it in late fourth quarter. And of course, the impact in 2027 will then depend how the, not only we, but also how the competition will behave in setting the margins, because currently POLSTR is lower than WIBOR. However, the higher impact might be if the regulation will go through in the form presented in May, concerning mandatory, for banks mandatory offer for the customers to switch from WIBOR, sorry, to POLSTR or initial fixed rate without adjustment spread or without adjustment of margin or rate.
Then, as you remember, we have credit holidays with significant impact, and in this case, we have similar situation in the context of a need from the accounting rules point of view, calculation of modification result and one-off in P&L. And of course, it will then, it will depend on consumer take-up, but the amounts might be significant for us and for the sector. For now, as we see in the table published by the Ministry of Finance, this topic was marked as for further clarification. There were already some consultation concerning other things, but this one was for now not discussed with Ministry of Finance. But this is, I would say, real, might be real significant impact if the regulation will go through in the form presented this year.
However, we, and also if you look in the table, also National Bank of Poland writes that implementation without adjustment or having adjustment spread or adjustment of margin is not compliant with BMR, and the adjustment should be in place.
We shared our thoughts with the Ministry of Finance, especially this potential negative consequence connected with this recognition. That's not a base case scenario from my personal perspective. The motivation was, or probably still is, simply to put pressure on banks to send offers to clients due to the fact that we should actively refinance legacy WIBOR-based portfolio and not to create negative results for the bank. But of course, as Kuba said, under clarification means under clarification. But as I said, my understanding is it's not a base case scenario to implement in the shape like it was presented a few months ago.
Thank you. Very clear. Just a follow-up, is there any timeline you are aware of when we should learn about a decision here?
Unfortunately not. I expect that the consultation concerning this point will be still this year. However, the exact date was not set. This information we have from the Polish Banking Association, which is, I would say, part in the counterpart for the Ministry of Finance in this discussion. But we don't have exact date.
Thank you.
Jimmy, three, please.
Yeah, thank you. Just a quick one from my side. I wanted to ask about the CET1 capital. In light of all the moving parts, like SRTs and other legals, is there generally like a CET1 ratio you try to steer to over the next few years, or no? Thank you.
I would say that, and what we also previously said, in the context of capital ratios, we want to keep the capital ratios minimum 100 basis points over dividend minimums. This is actually our kind of threshold or guidance which we have and the levels which we would like to, at minimum, keep. What does it mean? If we will be close to this dividend level + 100 basis points, then we will take extra actions to increase a certain layer of capital.
Got it. Thank you.
Olga, please.
Thank you for taking my questions, and thank you for this call. It is very helpful. Clarification on POLSTR. Jakub, you mentioned that you already started to provide mortgages, and some other competitors do this as well. When you offer new mortgages under POLSTR instead of WIBOR, do you automatically increase the spread over benchmark by, whatever, 30 basis points, or you have to compress the spread? How do you do that when you offer new mortgages? My second question is also on this transition. You say potential impact might be significant, and I do hear you that probability is not high. But if it is there, how significant? Are we talking about double-digit percent of bottom line teens? Maybe you can give some range. How significant could it be? Thank you.
In case of POLSTR, we adjusted our margins, but not in full, meaning not the full difference between WIBOR and POLSTR. Now we are looking also what our competitors will do, and I would say margin adjustment is an ongoing process. Even when we had WIBOR, we adjusted it almost every month just to be competitive enough on the one hand side. But on the other hand side, if we look on our average margins of WIBOR loans, they were relatively high in comparison to our competition. So, already our WIBOR margins were higher, and we are just adjusted, but again, not in full. That is one point. Secondly, concerning the impact, it will depend actually on a few elements. One, as I already mentioned, customer take-up. That is one point. Second point, the level of POLSTR and WIBOR at the moment of this calculation.
The trigger for such calculation would be signature on the president under act, if the act will be ready and there will be a signature. That is another point. The point which is not clear also is which loans will be actually under this act will be impacted, because it is clear that the loans which are currently on WIBOR. But the question mark is about the loans which are currently on initial fixed rate for five years, but after these five years, the loan, as a default way, will switch to WIBOR. The question is if also for such loans, we will not be able to use adjustment spread. Then the impact is increasing. So, we are then talking, in our case, at least about hundreds of millions, in the, I would say, negative scenario, of course.
I can add only that now we are selling two-thirds of new originations in fixed rate mortgages. What means that that is a theoretical discussion, hypothetical. Of course, if it is a case, we simply have to be transparent that there will be a need for recognition, but generally, it is not easy to calculate because we have to know what is the assumption and so on.
Thank you.
I do not see other hands. Maybe I will add one thing to the one of the first question concerning NII sensitivity, because indeed, the sensitivity for 100 basis points is PLN 320 million, but for 200 basis points, it is over PLN 1 billion, it is PLN 1.2 billion. But please remember, this is not symmetrical, meaning that for a large part of the portfolio or liabilities deposits, we still have room to decrease the rates by 100 basis points. But we do not have room to decrease by 200 basis points, because we have floor for the retail deposits.
That is why the sensitivity is not growing asymmetrically, meaning that for 200 basis points, it is not PLN 320 million times two, but it is much, much higher, again, due to the fact that 200 basis points decrease of interest rates, it is definitely lower possibility on our side to compensate such high decrease on the liability side.
And I think this is good point to conclude the call. Thank you for participation.
Thank you.
If you have additional questions, do not hesitate to contact us directly. Thank you and goodbye.
Thank you very much.
Thank you.
Thanks.