Q2 2026 Banco Comercial Portugues SA Earnings Call

Speaker #1: Good afternoon, y'all. Maya speaking. Welcome to BCP's conference call. As usual, I will begin with the highlights of our performance, being followed by Miguel Vargens and Bernard Colas, who will provide additional detail.

Speaker #1: The first half of this year continued to be shaped by a complex global environment, marked by persistent geopolitical tension and its impacts on energy markets, international trade, and inflation.

Speaker #1: These dynamics have waged on global economic growth, despite these backdrops. The Portuguese economy has maintained a solid trajectory. The policy economy continues to grow at a robust pace, and the Mozambican economy also shows a clear sign of normalization.

Speaker #1: Against these challenging contexts, the group delivered another quarter with a strong set of results. Net income reached 565.8 million euros in the first half, and 12.7% year-on-year increase.

Speaker #1: This performance reflects the bank's sustained capacity to generate value and the resilience of our business model, as outlined in our strategic plan. In Portugal, we achieved a net income of 470.2 million, an increase of approximately 11%, reinforcing the profitability trajectory of previous quarters.

Speaker #1: This performance was driven by strong growing net interest income underpinned by the strength of our commercial franchise, disciplined cost management despite continuing investment in digital transformation, and effective balance sheet management involving interest rate environments.

Speaker #1: Turning to our international operations, net income increased by over 25%, reaching €183.5 million. This was notably driven by Bank Millennium in Poland, which recorded a net income of €167 million, representing a nearly 39% increase compared with the same period last year.

Speaker #1: For these significant improvements, contributed the nearly 65% reduction in charge associated with the Swiss franc mortgage loan portfolio, which stood at 96.7 million in the first half.

Speaker #1: The CHF mortgage portfolio continues to run off rapidly, having declined by 47% year-on-year, while accumulated provisions for CHF mortgage risk now represent 173% of the remaining portfolio.

Speaker #1: While recent developments regarding FX-related litigations have been positive, some uncertainty remains in the broader banking operating environment. Bank Millennium demonstrated strong commercial momentum, with corporate lending growing by nearly 32% and customer funds expanding by approximately 70%, carrying out key priorities of our strategic plan for this market.

Speaker #1: In Mozambique, although Millennium profitability continues to be impacted by provisions associated with sovereign risks, the underlying business performance remained positive. The adjusted net income reached 48 million, an increase of over 18% compared with the same period of previous year.

Speaker #1: Customer funds grew by over 10%, and lending expanded by nearly 12%, confirming the franchise strength and its positioning to benefit from the natural gas projects.

Speaker #1: The bank maintains a robust position, with a capital ratio above 40%. The quality of our relationship banking model is evident across all our core markets.

Speaker #1: On a consolidated basis, customer loans increased by 8.3% year-on-year to 65.2 billion, while total customer funds grew by 9.8 to 9.8% to 106.7 billion, in Portugal loans grew by 8.6% and customer funds by 7.2%, reflecting the trust that families and business continue to place in Millennium.

Speaker #1: We continue to operate with very strong capital ratios. Our common equity ratio stands at 15.1%, and our total capital ratio at 19.3%, comfortably above regulatory requirements and including just 10% of the first-half net income, according to the current distribution policy.

Speaker #1: At the same time, balance sheet quality continued to improve, with non-performing exposures declined by 187 million, and the NPU ratio falling to 2.2%. The cost of risk remained well contained at 32 basis points, both at the group level and in Portugal.

Speaker #1: Turning to our customer base, it continues to expand, underpinned by the quality of our teams and our distinctive digital capabilities. At group level, active customers grew by 4% over the last 12 months, reaching 7.4 million of which over 2.9 in Portugal.

Speaker #1: Mobile customers continued to grow at 8% per year, now accounting for 75% of the group's total customer base, and 67% in Portugal. These figures confirm that customers are increasingly choosing Millennium as their preferred bank, and our service continues to be recognized with several important distinctions, including the consumer choice award for the six consecutive years and the recognition of the new corporate website as product of the year 2026.

Speaker #1: Moving on to our mobile platform, it continues to deliver a complete and innovative value proposition with superior user experience, and this is clearly reflected in a consolidated support trend in both interaction and sales.

Speaker #1: In the first half, the Millennium app recorded 1.7 million logins per day, an 8% increase year-on-year, with customers accessing the app an average of 34 times per month.

Speaker #1: Sales, through the app, grew 8%, highlighted by 32% increase in credit card sales, and 23% rise in personal loans origination. Transactions increased by 9%, with international transfers growing by a remarkable 68%.

Speaker #1: Our digital penetration rates remain at industry-leading levels. In Portugal, 95% of stock market transactions—90% of savings projects—and 76% of both investment funds subscriptions and personal loans are now conducted through digital channels.

Speaker #1: In mortgage lending, we continue to redesign and digitize the entire end-to-end process, with 89% of approval letters already signed digitally, 66% of proposals submitted through digital channels, and 36% of the appointments booked digitally.

Speaker #1: Interactions with customers through BCP Group's digital channels allow us to compete on an equal footing with neobanks, with the advantage of having a physical network of proximity which allows us to know much better the communities we serve and having a human face available when the clients need it.

Speaker #1: This symbiotic relationship between technology and physical presence, which gives trust to the clients in an unpredictable and complex world, doesn't condition the operational efficiency that we present quarter after quarter.

Speaker #1: In a challenging environment, we once again delivered a very robust set of results. This performance demonstrates not only the quality of the direction set out in our strategic plan, but also our strong execution capabilities across business performance, operational efficiency, risk management, and discipline capital management, attributes that the market has increasingly come to recognize in BCP.

Speaker #1: We remain confident in the strength of the value proposition we offer to our customers and in our ability to continue enhancing it through technology with a particular focus on artificial intelligence.

Speaker #1: This will allow us to further improve our offering and the quality of the service we provide, while also reinforcing operational efficiency and risk management.

Speaker #1: Miguel, the floor is yours.

Speaker #2: Thank you very much. In a scientific view of our income statement, the more detailed view you can see in the annexes, including as per requested by some of you, a quarter-by-quarter evolution.

Speaker #2: You can see this in the annex. What you see is a very healthy pattern of growth in terms of the main items of our income statement.

Speaker #2: The net interest income growing, in spite of the fact that in Poland the interest rate came down, the reference interest rate came down by almost 2%, so we were able to maintain the NAI in Poland broadly stable with a very important growth of 11% of more than 11% of the NAI in Portugal, which is attributed to our consistency and commercial dynamics and pricing discipline.

Speaker #2: Commissions growing 6%, which is also a very healthy growth in the present context, mainly taking into consideration the competition of neobanks. Operating costs growing mid-signal digit, as commented before, and core operating profit because of the growing 3%.

Speaker #2: I would like here to highlight the positive evolution and the consistency in these dynamics. The profit before impairment and provisions, because of some one-offs linked to recoveries, grows slightly more, around 6%.

Speaker #2: And when we convert to the profit before income tax, we benefit from the important reduction of the Swiss franc charges, of more than 60%.

Speaker #2: We have guided to a value that would be, this year in any case, more than 50%, and we are overachieving this target with a value of more than 60%, which means that, at the end of the day, our net income has grown almost 13%.

Speaker #2: But I would like to comment the consistency of this key metrics that are very much linked to shareholder value creation. So our book value per share and dividend per share growing year on year almost 20%, 20%.

Speaker #2: And our roti and earnings per share growing almost 15%. Going forward, we see these dynamics continuing, and we see some consistency in these values, at least until the end of the year.

Speaker #2: Our view is that the value-by-year end most probably will be above these values in terms of ROTE and earnings per share, except if something extraordinary happens in geopolitical terms.

Speaker #2: In terms of group profitability, we see here in terms of NAI, the main item of the income statement, as you know, the growth of 11% with a growth of the net interest margin.

Speaker #2: And international operations, the possibility of the resilience of the net interest margin in the context of a strong reduction of interest rates. Here, I would make a strong tribute here to our commercial dynamics and volume growth.

Speaker #2: So we are growing. This is very important. We are growing more than what we had envisaged before. We see that in terms of customer funds, we are growing in Poland, as you will see, more than 17%, around 17%, one-seven, 17%.

Speaker #2: In Portugal, around 7%, which is also a very important growth rate for Portugal. And in credit, both in Portugal and in Poland, growing credit book around 9%.

Speaker #2: 9% in Portugal, 9% in Poland, with a different composition. In Poland, due to our strategy, basically growing more than 30% in terms of corporate SME, 32%, corporate SME, and in Portugal, more based on the corporate growth, more than 10%, around 11%.

Speaker #2: So Portugal more mortgages, around 11%. Poland more corporates as per our strategy, around 32%. And this growth, together with the evolution of interest rates, is what explains the evolution of and together, of course, with pricing discipline, is what explains the evolution of our NAI.

Speaker #2: Going forward, the guidance that we had given for Portugal at the beginning of the year was expecting mid-single-digit growth. In our last conference call, we raised this outlook to high-single-digit growth.

Speaker #2: At this moment, we think we feel comfortable with a low teens growth, aligned with what we are saying here in terms of the first and the second quarter of this year.

Speaker #2: Fees and commissions, also very resilient. Growing around 6% in consolidated terms, of which 5% in Portugal and 8.3% international operations. There is some compensation here; of course, between the margin of the savings and the fees on the investments, of course, when the markets are more volatile and when the retail investors I would say less bullish, they tend to invest less in funds and prefer deposits.

Speaker #2: The reverse happens in the other situations. Right now, of course, one part we are benefiting more in terms of deposits, but still growing around 5% in Portugal, aligned with what we said before of a growth of fees and commissions between mid-single digit and a high single digit.

Speaker #2: We are closer to the mid-single digit here for the reasons I just explained. In terms of other operating income, we had some extraordinaries this year.

Speaker #2: In Portugal, as we explained in the last results presentation, the gains are linked to assets received in the context of credit recoveries that we have sold, realizing capital gains. The remaining is relatively stable.

Speaker #2: Some growth in terms of mandatory contributions, because, as you may recall, last year we benefited in some quarters of a recovery of a previously paid contribution that then the courts have reversed.

Speaker #2: Operating costs. We are investing, we are investing in AI, we are investing in cyber, we are investing in requalifications. And in the context of these investments, we have been able to grow only 5.4%.

Speaker #2: As I mentioned before, our guideline here is to try to maintain a top-level cost-to-income ratio, aiming to be one of the most efficient retail banks in Europe with our business model.

Speaker #2: And within this context, we have been able to maintain this cost-to-income of 37%, and at the same time continue to invest which is also a tribute to the prudence of our strategy.

Speaker #2: Cost of risk, stable. We are not seeing any yet any relevant signs of the geopolitical turbulence creating credit issues for our corporates and for our retail clients, up to now.

Speaker #2: Of course, we cannot be complacent. But this is basically what explains these low cost of risk. Of course, I mean, the future is uncertain.

Speaker #2: We I mean, every week we hear a different piece of news of what may go on in our moods and in Ukraine and so on.

Speaker #2: So we cannot guarantee that we will maintain this cost of risk forever. But as far as you see it right now, we are not seeing any additional early warranty, early warning signals that would lead us to review our guidance in terms of cost of risk.

Speaker #2: And this, of course, is linked to the reduction in terms of NPEs. In spite of the fact that we already have a low level of NPEs, the normal NPE loan ratio, only loans, is already at 1.6% in Portugal.

Speaker #2: So it reduced furthermore from 2 to 1.6%. And the NPE ratio is calculated by the EBA, with securities and with off-balance sheet items, is already at 1.3%.

Speaker #2: In the international operations, this is slightly higher, but also in reduction mode, I would highlight here that in Poland, as you know, our business model has much less corporates and has much more consumer loans that typically have a higher NPE loan ratio.

Speaker #2: Business activity, this is the piece of good news that I had anticipated, or the growth of around 10% in terms of customer funds. And I would highlight here that the growth in the international operations of 15%, of which around 17% in Poland.

Speaker #2: Also, a consequence of the strength of our franchise and of the fact that we have a really genuine differentiated quality service proposal to our customers.

Speaker #2: The loan portfolio also growing in a healthy way. In spite of the reduction of the NPEs, we have grown the total loan portfolio 8.3% in a very balanced way between Portugal and the international operations, both of them around 8%.

Speaker #2: In terms of capital, the capital ratio is decreasing for next year because, of course, we have distributed dividends, as you know. But it is stable compared to last quarter.

Speaker #2: As you see here in page 22, we were able to generate before dividends dividend accruals and share buyback accruals, as you know, we are accruing a 90% payout, including dividends and share buyback.

Speaker #2: So this means that before this 90% payout, we are we have been able to accrue 55 to generate 55 basis points of capital per quarter.

Speaker #2: As you may recall, what I have commented in the last sessions is that the normal organic capital generation before distributions should be around 55 to 60, depending on the growth.

Speaker #2: In this case, we have been growing more. So for a good mainly in Poland. We also have grown in terms of creating Portugal, but most of the growth in Portugal came either from guaranteed loans, mortgages, as you know, or from loans and commercial paper that had already committed lines.

Speaker #2: So they did not increase materially the RWAs. Muriel position, very, very comfortable. We are in the process of executing our plan. As you know, we have issues 500,000 preferred in February, and another 500,000 of Tier 2 in June.

Speaker #2: So clearly aligned with our plan and comfortably above the minimum ratio. Pension funds, I would say a very cautious ILM management, considering the liabilities that are typically fixed rate, because this is our liabilities are basically the pensions that vary with the salaries and with the and which per present value also varies with the long-term interest rates.

Speaker #2: So around the 12-year interest rate. So we were able to deliver a 4.2% profitability that compensates part of the liabilities decrease, so that this means that our excess between the pension funds and the pension liability remain even increase vis-à-vis June of last year at a level of 300 million.

Speaker #2: I would highlight here that this excess is like a capital buffer. So it is what would have to be consumed before any type of impact on capital would occur.

Speaker #2: Liquidity—very, very strong liquidity position. And this is important. We would actually prefer to have a slightly weaker liquidity position, because this would mean that we are growing more in terms of credit.

Speaker #2: So and we are expecting, so to say, to allocate a part of this liquidity to genuine consumer customer business so as to normalize somehow this liquidity position.

Speaker #2: But in any case, this liquidity position is what enables us to be more comfortable in terms of paying a term deposit rates. So because we don't need funding, we can afford mainly in terms of these term deposits that are less franchise-driven both in Poland and in Portugal.

Speaker #2: We are able to deliver a higher margin on deposits. I will pass the floor here to Bernard, who will focus only on some of the slides.

Speaker #1: Okay. Thanks, Miguel. And good afternoon, ladies and gentlemen. As I did on the last earnings presentation, I'll briefly go through some of the slides for each geography, and I will not follow the full presentation, as you already have seen it.

Speaker #1: So starting on page 27, Portugal delivered a strong set of results in the first half of 2026, net income increased by almost 11% year on year to 470 million supported by 11.5 increase in net operating revenues, which reached almost 1.1 billion.

Speaker #1: And revenue growth continued to outpace cost growth, with operating costs increasing by a moderate 5%, reflecting ongoing investments while maintaining cost discipline. Impairments and other provisions rose by €100 million, mainly driven by a prudent risk management approach.

Speaker #1: Overall, in this slide, as you can see, the business continued to generate robust profitability and positive operating leverage in Portugal. On page 28, net interest income increased by 11.3% year on year, or if you want, more than 74 million euros, reaching 733 million in the first half of 2026, despite the lower interest rate environment.

Speaker #1: Growth was mainly driven by the positive contribution from higher loan volumes, which more than offset the negative impact of lower market rates. Additional support came from improved deposit pricing dynamics and lower wholesale funding costs.

Speaker #1: It is also important to highlight, as we did in the previous quarters, that this is the this is the seventh quarter with consecutive increase on NII in Portugal.

Speaker #1: So having said that, the bank maintained a resilient net interest margin, which improved from 2.12% in the first half of 25 to 2.22% in the first half of 26, reflecting the strength of its commercial franchise and balance sheet management.

Speaker #1: Moving to page 29, fees and commissions continue to show a solid performance, increasing by 5% year on year to 322 million. Growth was broad-based across the main business lines, but more significant variations were recorded in bank assurance, asset management, and securities operations.

Speaker #1: It is also important to highlight the growth on commissions related with loans and guaranties, reflecting the sustained customer activity and the strength of the bank's diversified franchise.

Speaker #1: Market-related fees increased by almost 11%, supported by higher investment products, activity, and assets under management. Net trading income increased from 7 million the first half of 25 to 41 million the first half of 26.

Speaker #1: And this was mainly driven by gains from the disposal of legacy assets, stemming from the recovery of non-performing loans in the first quarter of this year.

Speaker #1: Other operating income moved from minus 21.6 million to minus 38.3 million, driven primarily by mandatory contributions, which in the first half of 25 had benefit from the partial reversal of the solidarity surcharge and additionally by some effects related to earn-out that occurred in 2025.

Speaker #1: Going to page 30, operating costs increased by 5.4% year on year, to 361 million, reflecting continued investment in the business while maintaining a strong focus on efficiency.

Speaker #1: The increase was mainly driven by higher administrative admin costs and depreciations, as staff costs registered an increase of around 2%. Despite this cost growth, as I said before, revenue expansion outpaced expenses, allowing the cost-to-income ratio to stay at 33% at the end of the first half of 26.

Speaker #1: At the same time, the bank continued to streamline and to modernize its distribution network, number of employees decreased slightly and are currently below 6,000, and branches also showed a small decrease from the first half of last year.

Speaker #1: These actions contributed to efficiency gains, while preserving the bank's strong commercial presence in service capabilities across Portugal. And as I said, now, if you want, we will if you don't mind, let's skip some slides and move straight to page 34, which shows volumes in Portugal.

Speaker #1: So on this page, 34, regarding volumes, the bank continued to deliver strong commercial momentum in Portugal, with both customer funds and lending recording solid growth.

Speaker #1: Total customer funds increased by 7.2% year on year, to 77.5 million, billion, meaning 5 billion more meaning an increase of 5 billion year on year.

Speaker #1: This was supported by growth across all major categories in terms of customer funds, including demand deposits, term deposits, and off-balance sheet products. This performance reflects customer confidence in the bank and and investments.

Speaker #1: At the same time, gross loans grew by 8.6%, representing more 3.5 billion year on year, driven by strong activity in both the corporate and individual segments.

Speaker #1: Mortgage lending increased by 10.8%, while corporate lending recorded a healthy growth of 5.4%. All in all, the expansion of both deposits and loans highlight the strength of the bank's franchise and its ability to support customers while delivering sustainable balance sheet growth.

Speaker #1: Let's move now to page 37, and here this slide shows the contribution from international operations and its important to highlight their important contribution to the group's results.

Speaker #1: With earnings attributable to the group increasing by more than 20.2%, to €95.6 million in the first half of '26, and this is after deducting minorities.

Speaker #1: This performance was mainly driven by Bank Millennium in Poland, whose contribution rose by almost 39% to €170 million, reflecting the resilience of its business model in a more challenged interest rate environment.

Speaker #1: The result of Mozambique subsidiary remains conditioned by the financial situation of the country, as the result and now, if you don't mind, as a result of bank millennium were already widely known, I will skip also some slides related with bank millennium and I'll propose to go straight to slide number 41.

Speaker #1: And in here, on page 41, regarding volumes, bank millennium continued to deliver strong commercial growth with both customer funds and lending expanding significantly during the period.

Speaker #1: Customer funds increased by 16.8% year on year, representing an increase of more than 5 billion in just one year. This performance reflects the bank's ability to attract new customers and deepen existing relationships with competitive market environments.

Speaker #1: Gross loans to customers grew by 8.8%, which represents a growth of more than 1.5 billion. Growth was particularly strong in the corporate segment, where lending increased by almost 32%.

Speaker #1: While the mortgage portfolio remained stable and continued to represent the large share of total loans. Overall, the continued expansion of both deposits and lending demonstrates the strength of bank millennium's franchise and supports its sustainable growth and profitability perspectives.

Speaker #1: On page 42, regarding effects, mortgage portfolio, bank millennium continued to make a significant progress in reducing its legacy CHF mortgage exposure. The mortgage portfolio decreased by 47% year on year, reaching just 700 million at the end of June 26 and representing only 0.6% of the gross loan portfolio after legal risk provisions.

Speaker #1: This reflects the combined effect of settlements, court resolutions, and the natural amortization of the portfolio. At the same time, legal risk coverage continued to strengthen, with cumulative provisions reaching 173% of the outstanding CHF mortgage portfolio.

Speaker #1: The number of individual lawsuits declined by 38% year on year, while new inflows of litigation continued to trend lower. As a result, CHF-related costs fell sharply by 65% from €275 million in the first half of '25 to just €97 million in the first half of '26.

Speaker #1: In conclusion, these trends demonstrate the substantial de-risking of the CHF mortgage portfolio and its progressively lower impact on banks' earnings, including on Bank Millennium earnings.

Speaker #1: Turning to page 43, about BIM in Mozambique, profitability remained effective by the challenging operating environment. But if you adjust the net income I mean, it increased almost 20% year on year.

Speaker #1: Demonstrating the underlying resilience of the business, net operating revenues grew by 4.5%, while operating costs remained broadly stable. Asset quality remains robust, with the NPL ratio at 5% and capital above 40%.

Speaker #1: And I will conclude here my presentation, and before we move to Q&A, I will hand the floor to Mr. Miguel Varghese for some final comments about the evolution of the strategic plan on page 48.

Speaker #2: Sure. As you know, every quarter we present exactly what our evolution is vis-à-vis the targets that we presented to the market around one and a half years ago.

Speaker #2: As you see, we are clearly progressing very well towards the target. We are clearly overachieving the target. And as you as I commented and have been commenting also in the last in the last sessions, the guidance that we are giving both today and in the last session already leads us to believe that except if something extraordinary happens, we will clearly overachieve the target that we have presented to the target to the market in 28, with the consequence that we expect in terms of shareholder value creation.

Speaker #2: Thank you very much. I now open the floor to questions.

Speaker #3: We would now begin the question and answer session to ask question. Please press star 11 on your telephone and wait for our name to be announced.

Speaker #3: One moment for our first question. The first questions comes from the line of Ignar Hill Olagie from PMP Paripa. Please ask your question.

Speaker #4: Thanks. Good afternoon, everyone, and thanks very much for taking my questions. I have two questions. The first one is on lending growth. There has been a bit of a slowdown in lending growth in the quarter and just was wondering, Miguel, when you upgrade the guidance for an IAM Portugal to double-digit, I assume it's largely driven by margins, but how should we think about loan growth and loan demand in Portugal and which segments are you seeing a best worth for growth?

Speaker #4: The second one is about capital and capital generation. How should we think about it in the coming quarters? You were pointing in one quarter that there will be some measures taken in the second half to try to improve RWA optimization so that you get a bit closer to the 90% payout ratio.

Speaker #4: I just wanted to get a bit of your thoughts on how should we think about the payout and whether you think that 90% is at risk or not.

Speaker #4: And how should we think about the organic capital generation? Thanks.

Speaker #2: Ignar, so thank you very much for your questions. Lending growth in Portugal and in Poland—in Poland, we feel comfortable with the maintenance of this type of lending growth.

Speaker #2: Probably looking forward, probably a little bit less incorporated. It was really extraordinary 30% year on year, extraordinary and a little bit more on mortgages.

Speaker #2: On the other hand, in Portugal, what we expect also is probably the lending growth in mortgages to decelerate somewhat because 11% is also very high, so we expect it to decelerate somewhat.

Speaker #2: But it is possible that the corporate and SME growth also picks up a little bit. In any case, in any case, when I speak about a low teens or a low double-digit, low teens, low double-digit NII growth, it is not very sensitive because in these last six months of the year, as you might expect, it will not change a lot my guidance.

Speaker #2: So, when I speak about low teens, growing 1% more or 1% less when we are speaking only about six months and the average balance that is generated does not influence the guidance that I am giving of low teens, by the way, for '26, and in principle, if the interest rate behaves according to the forward rates, also for '27.

Speaker #2: So we are also expecting a low teens growth in this moment in this scenario of interest rates also for 27. In terms of capital generation, our main objective is shareholder value creation.

Speaker #2: Our main and we think that to achieve this shareholder value creation, we have to generate value, generate value through customer business, and we have to be disciplined on capital.

Speaker #2: But the discipline on capital is not an objective per se. Of course, it is important to be disciplined on capital. What I want to say is that the payout is not an objective per se.

Speaker #2: The payout is only relevant to the extent that it reflects a discipline in terms of capital and it is associated to shareholder value creation.

Speaker #2: Okay. So, when we say that, and when we presented our distribution strategy, we were very clear on that, presenting a table where the share buyback would be a function of the ratio before distributions.

Speaker #2: So if we increase our RWAs with genuine customer business that creates shareholder value, and because we are allocating capital to genuine customer value, that generates value for our shareholders, and so on.

Speaker #2: And if because of this, we need capital, we I mean, this has a consequence then in terms of shareholder distribution. On the other hand, if we do not need the capital, the objective of this distribution, we have presented a ratio that somehow commits us to distribute this additional capital.

Speaker #2: So this is the logic. So the 90% is not an objective per se. Our objective is to create value for customers and shareholders. I think this is important.

Speaker #2: Having said that, in terms of the evolution of our RWA, as I commented, in terms of our organic path, what we are expecting is around 55 to 60 basis points per quarter.

Speaker #2: This is the organic part. In terms of inorganic part, I was commenting that we were working on some securitizations. That probably we will try to close in this quarter, but the impact in terms of ratio, we will only occur next quarter because they are subject to they are subject to authorizations and so on.

Speaker #2: That we are expecting something in the order of magnitude of around 20 basis points. If you do the numbers, if you do the numbers, you will see that we are really very close, depending on the evolution of our portfolio, we are very close to the 90 or to the 80.

Speaker #2: We are more or less on the tipping point. So it is very difficult for me to commit at this point to say, well, it will be 90 or 80.

Speaker #2: What I can tell you is if there are genuine and value-enhancing opportunities, to grow our portfolio in our business areas, we will not restrain ourselves of doing so just to distribute 90 instead of 80.

Speaker #2: So the 90 or 80 is a consequence of our strategy. It's not an objective per se. Okay. But at this point in time—having said that—at this point in time, it will depend.

Speaker #2: It will depend. We will do our utmost to generate value. We will do our utmost to be close to our customers and to grow a healthy credit portfolio.

Speaker #2: And then the consequence, the output, will be the output. Okay.

Speaker #4: Thank you very much.

Speaker #1: Thank you for the questions. Please hold for our next question. The next question today comes from Alvaro Fernandez of UBS. Please ask your question.

Speaker #5: Yeah. Hi. Good afternoon. And thanks for taking my questions. I have one and also one follow-up. So first, on the low teens NII growth for 27, what interest rate assumptions are embedded in that guidance?

Speaker #5: And also related to this, do you still expect a flat NII in Poland in 26? And what to expect in 27? And second, long loans in Portugal are growing at 9%, so above the market, the industry is growing at 8%.

Speaker #5: But deposits are growing below 5%, versus the industry at 7%. So, what's driving the gap? What's your strategy here? What would trigger you to start becoming, basically, more competitive on the deposit front?

Speaker #5: Thanks.

Speaker #2: Okay. In terms of our we make our projections and we give our guidance based on the latest market implicit forward rates. So what I'm saying is based on our latest projections and our latest projections are based on the market implicit forward rates.

Speaker #2: If you do the calculations, you will get exactly what is the assumption behind it. Having said that, we are not too sensitive. So our NII is not too sensitive to interest rate movements.

Speaker #2: Of course, if we have a 200 basis point movement, as has happened in Poland, it is relevant. But a 25 basis point movement is not so relevant.

Speaker #2: As I commented, typically, in our in Portugal and in Poland, the sensitivity of our NII to a 1% change in interest rate is typically between 2% and 3% of the NII.

Speaker #2: So it is a low sensitivity. And the 1% change in market interest rates is a lot. So a 25 basis point change you can do the numbers.

Speaker #2: We'll have a 50 basis point impact in terms of the evolution of the NII. So we run a very, very conservative balance sheet from an interest rate perspective.

Speaker #2: So having said that, we feel quite comfortable. With these low teens, except, of course, if we enter in a broad recession in Europe and if interest rate goes down 1%, of course, this will have the impact of around 2% less of NII.

Speaker #2: Of course, this is wrong. But this is not our scenario. And this is not the scenario that is implicit in the market movement. In terms of the evolution of deposits and the evolution of credit in Portugal, and so on.

Speaker #2: So, we are in such a situation in Portugal of excess deposits over credit that, really, I'm not envisaging any scenario in the next two or three years that will drive us to pay more because of necessity in terms of balance sheet.

Speaker #2: So this is not the logic. So it is not because and more so, if you take a look at the total customer funds, the total customer funds are growing very much aligned with the loans.

Speaker #2: And one of the reasons is that on the margin, I would say the most some of the most great some of the most rate-sensitive customers are investing probably a little bit more in money market funds or in bond funds.

Speaker #2: So that the total customer funds are more or less aligned. And we are, I would say, so comfortable from a liquidity standpoint that this will not be the trigger.

Speaker #2: Of course, our trigger is really to have a good offer for our clients, to make sure that we serve our clients, of course, in a segmented way.

Speaker #2: Being comfortable that what we offer to our clients are best-in-class offers and best-in-class products, making sure that we also differentiate between, of course, private banking clients and mass market clients, and so on, because this is part of our business.

Speaker #2: But this is the key issue. So if you ask me what could trigger us paying more, it's much more the market dynamics as a whole.

Speaker #2: And if somehow the market dynamics change, then we would need funding because of the dynamics of the gap. So, yeah. What is clear for us is that if the market starts paying much more, we will have to start paying much more.

Speaker #2: That's life. We are in a competitive market, and that's life.

Speaker #5: Thanks.

Speaker #1: Thank you for the questions. Please hold for the next questions. The next questions today comes from Maximin from JB Capital. Please go ahead.

Speaker #6: Hi. Good afternoon. Thank you very much for the presentation and taking our questions too from me, please. One on the fee revenues. I was just wondering if you could update us on the guidance for Portugal now that we leave the second quarter behind.

Speaker #6: And the other question is on other provisions. This line has increased compared to last year. I remember that 2025 was abnormally good. Should we assume a €13 million new run rate?

Speaker #6: And also, what is the rationale to keep increasing NPE coverage given it is above 100% already? Thank you.

Speaker #2: Okay, okay. In terms of fee coverage, I mean, as I commented, and as you’ve seen, a large part of our fee comes from asset management products or investment products, including unit-linked and bancassurance products, and so on.

Speaker #2: And these products are very are substitutes to some extent mainly on the low-risk part of these products are substitutes to some extent for deposits.

Speaker #2: So to say. And the evolution is also, to some extent, linked to the degree of risk appetite of the retail business, so to say.

Speaker #2: So, if the markets become much more bullish, people in the retail market will tend to invest more in equity funds. As you know well, it's also your business to some extent.

Speaker #2: If the market becomes more conservative, they tend to invest more in deposits. Okay? So that's the way. On the other hand, what we also see is that the business model of banks is also being challenged, I would say, by low-fee providers in the market.

Speaker #2: So we cannot—I mean, there are risks to the franchise if we increase prices without giving genuine value to our customers. So we have to be very careful in terms of having a strategy where we really offer genuine value for our customers.

Speaker #2: Taking all of this into consideration, the guidance that I gave was amid too high single digit, okay, with a lower guidance in terms of NII.

Speaker #2: I think that also the guidance that I would like to maintain is the same. Need too high single digit, but it's an interval. If you ask me right now, probably we will overachieve more in terms of NII and in terms of fees, we will be closer to the mid single digit.

Speaker #2: But of course, this will depend on the market movement and on the risk appetite of the clients. In terms of the other provisions, the other provisions are a little bit like trading games.

Speaker #2: The other provisions have a degree of volatility on a quarter-to-quarter basis that is difficult to anticipate. Another provision may be a provision for litigation or a provision for a tax issue.

Speaker #2: So to say, there are a lot of small events that contribute to this. So it is difficult in the same way that I cannot I mean, give you some type of comfort in terms of the evolution of trading gains.

Speaker #2: For me, it's difficult to give you a fixed value that will be always the same on a quarter-by-quarter basis. However, expecting these values between 10 and 15 million per quarter on average, but with some volatility, as with trading gains, is reasonable if you take a look at what happened in the past.

Speaker #2: It's something that's reasonable. In terms of the impairment models, I mean, with the impairment models we are having some overlays. This is because of the situation that we are seeing in geopolitical terms.

Speaker #2: So, we do think that right now the environment is uncertain. And as long as we have this cost of risk in Portugal, slightly above 30 basis points, we don't see—I would say, we think it's prudent to maintain a degree of overlays. Because in spite of the fact that we are not seeing any early warning signals, any relevant early warning signals linked to the geopolitical risk, I mean, we cannot be complacent.

Speaker #2: So for the moment, we think that it is not necessarily in the best interest of the bank and of its shareholders to go below this low 30s cost of risk.

Speaker #6: Thank you very much.

Speaker #2: If then they prove if after our moves is solved and if after I mean, the tragedy in your country is solved, we come to the conclusion that they are not necessary, of course, they will not be necessary.

Speaker #2: And we'll reverse them.

Speaker #6: Thanks.

Speaker #1: Thank you for the questions. Our next question comes from the line of Sophie Pettersens from Goldman Sachs. Please ask your question.

Speaker #7: Yeah. Hi. This is Sophie from Goldman Sachs. Thanks a lot for taking my questions. So one follow-up question on capital. Could you also just remind me if you have any capital deal or headwinds that we should be mindful of going forward?

Speaker #7: And also, what the sensitivity is to a change in the pension discount rate. And then I was also wondering—there have been some press articles around, for soon, about potentially considering selling the stake in VCP.

Speaker #7: How do you think about M&A opportunities and what would it potentially mean for VCP if Soonu was to sell the stake?

Speaker #7: And then maybe just a final one on Mozambique provisions. How should we think about this going forward? Thank you.

Speaker #2: Thank you very much, Sophie. I will start probably with the latest question regarding Mozambique. Mozambique is one of the countries in the world with the largest gas reserves.

Speaker #2: As we all know, the gas does not need to flow through the Red Sea or through Ormuz. It's becoming more and more important in geopolitical terms.

Speaker #2: There have been many new announcements in the country. It's a large country, both in terms of geography and in terms of population. So we are structurally bullish in terms of the country.

Speaker #2: Okay? I think this is the first point that I would like to highlight. The country, due to issues that we know, faced some social unrest around two years ago.

Speaker #2: This social unrest is broadly solved, but it left issues to be addressed in terms of government debt and public finances stress.

Speaker #2: Okay? So this means that we had to reclassify the debt in Stage 2. We only hold domestic debt. But we also think that, from a prudency standpoint, what makes sense for us is, last year and this year, to have a net income that is close to break even—so slightly positive—but we think it makes sense for us.

Speaker #2: In spite of the fact that we do not hold any foreign denominator debt, we think it makes sense for us. In spite of the fact that at the end of the day, probably local government debt will not face a difficulty in being paid because I mean, the central bank is local.

Speaker #2: They have their own currency. We think it is in the interest of the bank to keep the funds there and to have a prudent approach to provisioning.

Speaker #2: And so last year and this year, we are close to break even. Looking at next year, '27, with don't think that it will be already the steady state, but it will be a progress towards the steady state.

Speaker #2: And what we would expect is '28 to be very close to a steady state. So that's the way. So, we will provide this year something to maintain the bank slightly above break-even, as we are seeing here.

Speaker #2: Next year will be a progression towards a steady state. And '28, we think in principle will be the steady state. Of course, with all the uncertainty that we are living in the world right now, with all the caveats that we have to say there.

Speaker #2: In terms of for Zoom, I mean, we are in the market. For Zoom behaves a lot like a professional institutional investor. As some of your clients also behave, the relationship that we have with For Zoom is a relationship where we speak about financial issues, where we speak about ROE, where we speak about shareholder value creation, matching the same way as the way we speak with other investors.

Speaker #2: I mean, we know that they are satisfied with their investment in VCP. We know that also that there are they don't hold a controlling state, so it's not an M&A issue.

Speaker #2: They hold a 20% stake. So we know also that there would be other investors fortunately because of the story that we of the equity story that we have here, some institutional investors that probably would be available also to invest in VCP.

Speaker #2: We see a lot of interest in VCP securities. So, we see that For Zoom continues to be interested in VCP. We see that they are satisfied with their investment in VCP.

Speaker #2: However, our job is to generate shareholder value and to make sure that we are an attractive equity story for everybody. And if for whatever reason, for their personal for their idiosyncratic reasons, if they want to invest elsewhere instead of VCP, we have to make sure that we deliver value and we are an attractive equity story for other investors that we think are available, by the way.

Speaker #2: So we don't see as this as an M&A catalyst. In terms of the sensitivity to the discount rate, so if the discount rate goes down by 25 basis points, and this is more or less linear, the impact on the liabilities of the pension fund is around 86 million.

Speaker #2: Okay? And the reverse occurs if it goes up. But I would like to highlight that we have an excess of around €300 million. So the first €300 million do not have any impact in terms of capital.

Speaker #2: So broadly speaking, I mean, the interest rate would have to go down by around 1%. I'm only speaking about the discount rate. There is some ILM on the would have to go down by around 1%.

Speaker #2: For it to start to have any impact in terms of capital. Okay? Because the first part is basically a consumption of the excess between the assets that are already in the pension fund and the liabilities of the pension fund.

Speaker #2: So the first 1% does not have any impact. After the first 1%, the impact on capital is broadly €86 million for each 25 basis points.

Speaker #2: I mean, broadly speaking, and assuming that this is not compensated by the portfolio—which it is, because we do some asset management and a large part of the evolution is compensated in the portfolio.

Speaker #2: So I would it's not I would say it is not a material risk to our equity right now, I would say.

Speaker #1: That's very clear. Thank you.

Speaker #3: Thank you for the questions. Please hold for our next question. Our next question today comes from Mirona Kirea from Jefferies. Please go ahead.

Speaker #1: Good afternoon, and thank you very much for taking my questions. I had a follow-up on Portugal. If I'm looking at the year-on-year growth rate in your corporate loans in June versus March, this has slowed down, going from 5.7% in June versus 7.6% in March.

Speaker #1: Whereas at the system level, we haven't really seen a slowdown, so just wondering what's going on there. And then the second one was, I just wanted to have a clarification on Poland.

Speaker #1: Have you taken any provisions this quarter related to consumer loans post the ECG's ruling? And if so, what are your expectations for this type of provision going forward?

Speaker #1: Thank you.

Speaker #2: Starting with the last question. As I believe I've commented here often, we are reaching the end of the Swiss franc saga. But I would say the litigation risk, the operational risk linked to litigation risk, of course, at another level will be a part of doing business in Poland.

Speaker #2: So we have to prepare ourselves. We don't know exactly what the amount will be. We don't know exactly what will pop up. But the way we see the Polish macro environment, it is that it is a market very prone to litigation and to litigation risk.

Speaker #2: And there will always be, I think, at least for the foreseeable future, some files, some elements of risk that will pop up, that will generate here the need to assume costs and to provide some.

Speaker #2: I think this is the first point that I would like here to highlight. Exactly what will pop up? I mean, it's difficult to anticipate.

Speaker #2: But what I can be sure of is that something will pop up, because there are a lot of litigation lawyers focused on this business, and they will try to, and they'll try to do it.

Speaker #2: The good part of it, I would say, is that the system realizes it. The system realizes it. And make sure that NIM of Poland, above 3%, and the ROE of Poland before litigation is good enough to cope with this additional operational risk and this operational cost.

Speaker #2: So I think this is what has to be said here. In terms of this very specific issue, the effectively Mirona, as you correctly point out, there was a decision by the way, applicable to all of Europe.

Speaker #2: So it's not a decision applicable to Poland. By the ECJ, saying that banks should not finance upfront commissions and upfront costs in the context of consumer loans.

Speaker #2: So it is normal in some geographies that when you contract a consumer loan, you pay I don't know, a 1, 2% organization fee. And it's normal because when people ask for a consumer loan, typically they don't have the funds that this gets incorporated into the capital and gets financed.

Speaker #2: By the way, we're not doing this in Portugal, I think. But in some geographies, it's normal to have it. And what the ECJ said, it is that it is not consistent with European law to do this.

Speaker #2: Okay? And it's applicable to I mean, to several geographies. In the specific case of Poland, it's difficult to anticipate what's the consequence of this will be because ECJ did not tell what the consequence is.

Speaker #2: Whether the consequence is, for instance, just giving back to the customers the interest on this upfront cost, or whether a special penalty would apply, as happens in Poland.

Speaker #2: In any case, we had a small we have a simplified methodology for it. And in this simplified methodology, this made a register a one-off cost of around 8 million euros in terms of the Polish NII and around 15 million euros in terms of provision.

Speaker #2: Which reflects, I would say, the data that we have until now—so to say, the claims that we have until now and the court cases that we have until now.

Speaker #2: That's what I can tell. In terms of the corporate credit, what can I tell you that is important? Effectively, more than a slowdown, what we see is that in the first quarter of the year, in the first quarter of the year, in Portugal, we were in the corporate loans, we were basically stable.

Speaker #2: So that was basically what happened. And in the second quarter of the year, on a quarter-on-quarter basis, the growth was relevant. So we grew 2.8%.

Speaker #2: So it is basically the first quarter of the year that for several reasons that had to do with some delays in projects and so on and some more granular issues, that probably explains why we were a little bit left behind or we lost a little bit of market share in the first quarter of the year.

Speaker #2: That we then more than recovered in the second quarter of the year. And this is exactly this influence that explains what the dynamics that we are commenting.

Speaker #2: The good part of it is that apparently we are now with a new dynamics and we are going. Okay?

Speaker #3: Thank you for the questions, Mirona. Please hold for the next questions. Our next questions comes from the line of Carlos Peixoto from CaixaBank BPI.

Speaker #3: Please ask your question.

Speaker #1: Yes. Hi. Good afternoon. A couple of questions from my side as well. So the first one would actually still be on the fees outlook.

Speaker #1: Just basically, even if we sit back sit on the low end of the mid-single-digit growth in 2026, it does feel that this is still a bit of a challenging environment or challenging goal.

Speaker #1: I just wondering if you see any levers in the second half that could give an extra boost, perhaps performance fees or just to have some additional visibility on that.

Speaker #1: And still, within fees, in the second quarter, there was a bit of a decline if you look at the second quarter standalone in credit card fees.

Speaker #1: I was just wondering whether this is the reflection of some kind of changes in pricing or whether there is any specific related to this.

Speaker #1: Then on another topic, on the cost side, I was wondering what is your guidance for whether you keep your guidance for cost growth in 2026?

Speaker #1: And whether that guidance is including or excluding last year's specific items, namely some retirement costs, if I remember correctly. And just a final question.

Speaker #1: Effective tax rate in Portugal, how do you see it evolving and what your expectation for the full year? Thank you very much.

Speaker #2: In terms of effective tax rate, of course, it depends exactly on the items. But what you would say for the full year, value between 24 and 26 makes sense for us.

Speaker #2: But of course, it depends on what we are seeing. In terms of fees, I mean, there are no miracles in terms of fees. What we try to do is there is a part of it that has to do with asset management fees and with bank assurance fees that you know as well as we do.

Speaker #2: And this part of the fees, I mean, is linked to the market perception and also to us being able to offer good advice to our clients, have a good platform, and so on.

Speaker #2: So and we think there's still some room to go. If the markets behave well, so to say. I think this is a part. In terms of credit card fees, it is well noticed what you commented.

Speaker #2: In terms of full year, we are expecting a growth. There are sometimes some how can I say incentive fees from the Visa and from Mastercard that in different years may occur in different months.

Speaker #2: But so sometimes the comparison on with the same month or with the same quarter of the same of last year is a little bit misleading.

Speaker #2: But in terms of the full year, we are expecting the credit card fees to grow aligned with the credit card transactions and with the credit card rate and debit card volume, so to say, which are evolving well.

Speaker #2: Then it's clients, clients, clients. I mean, it is this is not a sprint. This is a marathon. So what we try to do on a daily basis is to try to give the best service, to be able to acquire new clients and to do the acquisition of new clients and cross-selling to deserve more fees.

Speaker #2: It's not to charge more fees to deserve more fees from the clients. And that's what we do. When we say mid to high single digit, we are actually on the mid single digits where we are growing 5%.

Speaker #2: So, it is—we are delivering what we said, within the interval that we said. We feel comfortable with it. So, it is a lot of work, as you've seen in the first page presented by Miguel Maia.

Speaker #2: We are acquiring clients. We are acquiring the clients who are satisfied with our app, are satisfied with our service. If we deserve, through better service, more loyalty from the clients, we will have more fees.

Speaker #2: But more and more, it has to be deserved. It is not a charge. It's not a bullet, a silver bullet. In terms of cost, I mean, right now, we are in a moment of transformation of the banking sector.

Speaker #2: And it's very difficult to anticipate which investments—and some of these investments that flow through the cost line—are exaggerated or are worthwhile, mainly when we speak about AI and cyber.

Speaker #2: It is very difficult to really say, in terms of investing—should I invest $5 million or $2 million in additional cybersecurity? It's very, very difficult.

Speaker #2: So what we try to do is, as a rule of thumb, if in doubt, of course, if it's a clear-cut business case, both in terms of risk and in terms of revenue, of course, we do it.

Speaker #2: But if in doubt, what we try to maintain is a cost to income that is best in class. We think that this is a discipline.

Speaker #2: This is something that we want to focus on. So as long as we are with a cost to income that is broadly best in class, we will tend to be more prone to invest in AI and to invest in cyber because this or to invest in transformation.

Speaker #2: To go beyond that, either I mean, having a higher cost to income or starting cutting even more in terms of cost to income there have to be very good arguments for it.

Speaker #2: When we speak about cost to income, we don't include the extraordinary linked to early retirements and so on. But in any case, I mean, we have not designed any early retirement plan this year.

Speaker #2: It's not something that we have decided yet. Let's see by year end where it makes sense or not. But this is not a decision that we have taken yet.

Speaker #1: Thank you for the questions. Please hold for our next question. Our next question is they come from the live of Ugo Cruz from KBW.

Speaker #1: Please ask your question.

Speaker #3: Hi. Thank you for the time. So on the topic, I have three questions, but on the topic of costs, the first question. So the press some Portuguese press has talked about your discussions with the labor unions and the discussions seem a bit challenging.

Speaker #3: Could this have an impact on your cost trend for next year, just on the staff side specifically? Then, two questions on the cost of risk.

Speaker #3: Earlier in the call, you mentioned that you’ve been creating some overlays for geopolitical uncertainty. I was wondering if you could quantify those overlays. What’s been built so far?

Speaker #3: In your millions. And then finally, when I look at your business plan that goes to 2028, you have cost of risk targets of 50 for the group, 45 for Portugal.

Speaker #3: I think cost of risk has been probably a bit better than expected over the last year or so. So I was wondering if there's room to revise those targets, and if you think the cost of risk could be lower.

Speaker #3: Thank you.

Speaker #1: Okay. Okay.

Speaker #2: When we presented the '28, I would say, plan, it is an ambition. But what I said is that every quarter, we will be updating the guidance, so to say.

Speaker #2: And what I said at the end of my presentation is that right now we are clearly overdelivering, and the guidance that we are giving is better than the target.

Speaker #2: So we said one and a half ago that we thought that for Portugal, the cost of risk should be somewhat below 45 basis points.

Speaker #2: We are now having around 32 basis points. I would say it's difficult to anticipate what will occur two years from now, mainly in terms of cost of risk.

Speaker #2: But at least for the next 12 months, I would say that the cost of risk that we are expecting is much more aligned to the cost of risk that we have now, than with the cost of risk that we had projected for 2028.

Speaker #2: So the guidance that we are the 28 is just here or just to remember what we said one and a half ago. But it's not a guidance.

Speaker #2: The guidance is what we comment in this presentation. In terms of the overlays, the quantification of the overlays and I believe they are public information, they will be in our report.

Speaker #2: In Portugal, we have 130 million euros of overlays. And in Poland, we have 40 million euros of overlays. In terms of the labor unions, the labor unions, I mean, are I mean, it's part of doing business.

Speaker #2: The negotiation with the labor unions is part of management. I would say. So it's part of our job to do the negotiation, of course, and it's a normal process.

Speaker #2: So I would not highlight anything special.

Speaker #3: Thank you.

Speaker #1: Questions? Please hold for our next question. The next question comes from the line of Luiz Pratas from Autonomas. Please ask your question.

Speaker #4: Good afternoon, everyone. Thanks for taking my questions. My first one is on deposit competition. I wanted to ask you whether you have you seen any impact in deposit outflows or IRB pricing from the new attractive treasury certificates launched by the government.

Speaker #4: And looking ahead, if the Portuguese government also introduces a tax-free investment account similar to the ISA account here in the UK, would you see this as a risk to deposit growth or deposit costs going forward?

Speaker #4: Then my second question is on the there was this recent favorable decision to the banking sector regarding the resolution fund contribution. Could you please quantify the potential P&L upside for BCP?

Speaker #4: And what's the expected timeline before any recovered could be recognized in earnings? And then just a very quick follow-up. Could you please provide the tailwinds and headwinds in terms of capital SRTs or maybe like the higher capital requirements at Poland?

Speaker #4: Thank you.

Speaker #2: Okay. In terms of the decision from the court, it is a specific case. That will be discussed. The amount that was being discussed in this specific case was €30 million.

Speaker #2: It has not been it is not final the decision because in theory, the tax authorities may still actually the resolution authorities may still ask for a review of the decision.

Speaker #2: I would say that this it will the decision the final decision probably will occur first quarter of next year. But it's we are speaking here about 30 million.

Speaker #2: Okay? In terms of the competition from the government, we are seeing some outflows as we had seen in the past. There is some fluctuation in these outflows when we had the certificates, the four also more competitive.

Speaker #2: But in any case, in any case, I would say nothing dramatic, so to say. Our approach to our clients is, I would say, a special approach.

Speaker #2: So, we are not a monoliner, so we are really specialists in the daily banking relationship, and in the relationship and in the full banking relationship.

Speaker #2: So typically, we don't have customers that only have a term deposit with us. So we have a customer that typically has its current account with us, has the nominal deposit with us, has the day-to-day relationship with us, and then on top of the day-to-day, may have then a consumer credit, may have the mortgage, may have the investments, and so on, which creates, so to say, a relationship that's much more than mono product.

Speaker #2: So these are, of course, immunizes us a lot from, I would say, more opportunistic, so to say, offers that always appear in the market.

Speaker #2: In terms of capital tailwinds, what I would like to highlight here, as I mentioned, is the securitization that we are working on—around 20 basis points—and the organic capital generation.

Speaker #2: Then, of course, other things may occur. But, I mean, it is experience here to anticipate any other thing.

Speaker #1: May go either way. Thank you for the question, Luiz. One moment for our next question. The next question comes from the line of Borja Ramirez from City.

Speaker #1: Please ask your question.

Speaker #5: Hello. Good morning. Good afternoon. Thank you very much for taking my questions. I have two questions on NII, please. Firstly, so in Portugal, the NII growth was very strong around 5% quarter over quarter.

Speaker #5: This actually is more than just for the takeout and the volume growth that we’ve seen in Portugal. So, maybe I would like to ask if you could please provide more details on the drivers of NII growth quarter over quarter.

Speaker #5: Which was very strong and also following a very strong Q1. And then my second question would be on the NII guidance of meetings for 2026 and 2027.

Speaker #5: Could you—I understand that's driven by volume growth, a little bit by rates, and then the reinvestment of the structural hedge. I would like to ask if you could please provide a bit more color on the yields of maturing hedges?

Speaker #5: Thank you.

Speaker #2: Starting with the last question. In terms of the yields of the maturing hedges, what if they are here on the page—I think in the annex, I think on the page—just check here.

Speaker #2: What is the page? Page 56 of the presentation. I don't know whether we can wait, just check here whether I can hear. Okay. Sorry.

Speaker #2: I want okay. What you see here I mean, is this is basically the hedge that we have and the average rate that we have in our maturing hedges.

Speaker #2: These maturing averages have to cover broadly speaking our current accounts and around 50% of the term deposits. Broadly speaking. So as they mature, as they mature, we reinvest them.

Speaker #2: And as I mean, as a rule of thumb, it's good to assume that we can invest them on a at five-year rates that probably right now are around 3%.

Speaker #2: So in 2027, you can assume that the difference that you see here between the stock of the hedges of 32.5 billion and 2027.7 billion, so these five billion, will be will mature at around 2.3 because the average rate does not change.

Speaker #2: And we'll be reinvested at around three. So effectively, we will have here a benefit to our margin of around 70 basis points. And effectively, this is one of the reasons why we feel comfortable with the guidance of the low teams for 2027.

Speaker #2: And as you see here for 2028, there will be an additional, if the five-year interest rates continue to be as high, you see there will be an additional benefit in 2028 of almost €9 billion invested at 70 basis points.

Speaker #2: In terms of the evolution in the quarter, of the margin, I would say we have a large part of this, I would say, has to do with the fact that our assets have a large part of our assets have a beta of almost 1, so to say, and in the term deposits, our beta is around in retail term deposits is around 50%, I would say.

Speaker #2: And it is in this management, together with the investments in reinvestments of the structural hedges, that explain these evolution. The beta of 50% on the term deposits comes from a very, I would say, sophisticated management of the segmentation and of the pricing.

Speaker #2: So what we see is that we are able to gain slightly market share whereas if you compare, for instance, our average term deposits rate with the term deposits rate of the market, you see that we are around 20 basis points below.

Speaker #2: In terms of term deposits. So this means that if we are not losing the clients, it means that we have to calibrate very well what type of interest rate, we offer in which type of situation and to which type of client.

Speaker #2: At this point in time, I would not comment much more than this.

Speaker #1: Okay. Thank you for the question.

Speaker #5: Thank you very much.

Speaker #1: One moment for our next question. We have the last questions coming from the line of Cecilia Romero from Barclays. Please ask your question.

Speaker #6: Thank you very much for taking my questions. Most of my questions have already been addressed, so just two quick follow-ups from my side. On medium-term targets, thank you for the regular updates to this year's guidance, which we obviously appreciate.

Speaker #6: I was under the impression that there would also be an update on the 2028 targets at some point this year. Is that still the plan?

Speaker #6: And just one follow-up on Paul and if I may. Álvaro touched upon this earlier, but I'm not sure whether it was fully addressed. You have previously indicated a relatively stable NII in Poland for this year.

Speaker #6: Do you still see that as achievable, or do you see any risk to this target? Thank you.

Speaker #2: The guidance for NII in Poland is stability. As you see right now, it is decreasing somewhat. So the guidance that we are giving is stability.

Speaker #2: Stability, maybe plus or minus two. So its stability is not necessarily zero. So it is a value around zero, but with some interval around it.

Speaker #2: In terms of updating the targets, the targets are the targets. So, we have a medium-term plan. We do not approve a medium-term plan every year, but we approve a strategic plan every four years.

Speaker #2: So the targets are the targets. What we can do, and we have to decide whether we will do it or not, there are some banks that do it, others that don't do it.

Speaker #2: What we can do is to be more formal in terms of the updating of the outlooks, maybe for 2027, maybe for 2028. And what I commented is that in the context of the results of Q3, we will analyze whether we will do it or not.

Speaker #2: So it's a decision that the board has not taken yet. There are some banks that do it. Then we have to decide whether we'll do it for 2027 and or for 2028.

Speaker #2: But it is possible that we do it. So we have not decided it yet. But we will not change the plan, but we may change the outlook, which is a little bit different.

Speaker #1: Okay.

Speaker #6: Thank you very much. That’s very clear.

Speaker #2: Okay. Okay.

Speaker #1: That concludes the Q&A session. I'll now hand over to Mr. Miguel Braganza for final remarks.

Speaker #2: Okay. Thank you very much. I think this quarter shows very clearly the robustness and the consistency of our results. Results that are based on customer business, results that are based on commercial activity, and results that are based on a very disciplined management of the margin, which we expect to continue going forward.

Speaker #2: Thank you very much for following us, and we are, of course, available for them one-to-one sessions if you have additional doubts. Thank you very much.

Speaker #2: Bye-bye.

Miguel Maya: Good afternoon, Miguel Maya speaking. Welcome to BCP's conference call. As usual, I will begin with the highlights of our performance, being followed by Miguel Bragança and Bernardo Colaço, who will provide additional detail. The H1 of this year continued to be shaped by a complex global environment marked by persistent geopolitical tensions and their impacts on energy markets, international trade, and inflation. These dynamics have weighed on global economic growth. Despite this backdrop, the Portuguese economy has maintained a solid trajectory. The Polish economy continues to grow at a robust pace, and the Mozambican economy also showing clear signs of normalization. Against this challenging context, the group delivered another quarter with a strong set of results. Net income reached EUR 565.8 million in the H1, a 12.7% year-on-year increase.

Miguel Maya: This performance reflects the bank's sustained capacity to generate value and the resilience of our business model as outlined in our strategic plan. In Portugal, we achieved a net income of EUR 470.2 million, an increase of approximately 11%, reinforcing the profitability trajectory of previous quarters. This performance was driven by strong growth in net interest income, underpinned by the strength of our commercial franchise, disciplined cost management despite continuing investment in digital transformation, and effective balance sheet management in an evolving interest rate environment. Turning to our international operations, net income increased by over 25%, reaching EUR 183.5 million. This was notably driven by Bank Millennium Poland, which recorded a net income of EUR 167 million, representing a nearly 39% increase compared with the same period last year.

Miguel Maya: For this significant improvement contributed the nearly 65% reduction in charges associated with the Swiss franc mortgage loan portfolio, which stood at EUR 96.7 million in the H1. The CHF mortgage portfolio continues to run off rapidly, having declined by 47% year-on-year, while accumulated provisions for CHF mortgage risk now represents 173% of the remaining portfolio. While recent developments regarding FX-related litigations have been positive, some uncertainty remains in the broader market banking operating environment. Bank Millennium demonstrated a strong commercial momentum, with corporate lending growing by nearly 32% and customer funds expanding by approximately 70%, carrying out key priorities of our strategic plan for this market. In Mozambique, although Millennium profitability continues to be impacted by provisions associated with sovereign risks, the underlying business performance remained positive. The adjusted net income reached EUR 48 million, an increase of over 18% compared with the same period of the previous year.

Miguel Maya: Customer funds grew by over 10% and lending expanded by nearly 12%, confirming the franchise strength and its positioning to benefit from the natural gas projects. The bank maintains a robust position with a capital ratio above 40%. The quality of our relationship banking model is evident across all our core markets. On a consolidated basis, customer loans increased by 8.3% year-on-year to EUR 65.2 billion, while total customer funds grew by 9.8% to EUR 116.7 billion. In Portugal, loans grew by 8.6% and customer funds by 7.2%, reflecting the trust that families and business continue to place in Millennium. We continue to operate with very strong capital ratios. Our common equity one stands at 15.1% and total capital ratio at 19.3%, comfortably above regulatory requirements and including just 10% of the H1 net income according to the current distribution policy.

Miguel Maya: At the same time, balance sheet quality continued to improve, with non-performing exposures declined by EUR 187 million and the NPE ratio falling to 2.2%. The cost of risk remained well contained at 32 basis points, both at the group level and in Portugal. Turning to our customer base, it continues to expand, underpinned by the quality of our teams and our distinctive digital capabilities. At group level, active customers grew by 4% over the last 12 months, reaching 7.4 million, of which over 2.9 in Portugal. Mobile customers continued to grow at 8% per year, now accounting for 75% of the group's total customer base and 67% in Portugal.

Miguel Maya: These figures confirm that customers are increasingly choosing Millennium as their preferred bank. Our service continued to be recognized with several important distinctions, including the Consumer Choice Award for the sixth consecutive year, and the recognition of the new corporate website as Produto do Ano 2026. Moving on to our mobile platform, it continues to deliver a complete and innovative value proposition with superior user experience, and this is clearly reflected in a consolidated upward trend in both interactions and sales. In H1, the Millennium app recorded 1.7 million logins per day, an 8% increase year-on-year, with customers accessing the app in average of 34 times per month. Sales through the app grew 8%, highlighted by a 32% increase in credit card sales and a 23% rise in personal loans origination. Transactions increased by 9%, with international transfers growing by a remarkable 68%.

Miguel Maya: Our digital penetration rates remain at industry-leading levels. In Portugal, 95% of stock market transactions, 90% of savings products, and 76% of both investment funds subscriptions and personal loans are now conducted through digital channels. In mortgage lending, we continue to redesign and digitize the entire end-to-end process with 89% of approval letters already signed digitally, 66% of proposals submitted through digital channels, and 36% of these appointments booked digitally. Interactions with customers through BCP Group's digital channels allow us to compete on an equal footing with neobanks, with the advantage of having a physical network of proximity, which allow us to know much better the communities we serve and having a human face available when the clients need.

Miguel Maya: This symbiotic relationship between technology and physical presence, which gives trust to the clients in an unpredictable and complex world, doesn't condition the high operational efficiency that we present quarter after quarter. In a challenging environment, we once again delivered a very robust set of results. This performance demonstrates not only the quality of the directions set out in our strategic plan, but also our strong execution capabilities across business performance, operational efficiency, risk management, and discipline capital management, attributes that the market has increasingly come to recognize in BCP. We remain confident in the strength of the value proposition we offer to our customers and in our ability to continue enhancing it through technology with a particular focus on artificial intelligence. This will allow us to further improve our offering and the quality of the service we provide, while also reinforcing operational efficiency and risk management.

Miguel Maya: Miguel, the floor is yours.

Miguel Bragança: Thank you very much. Here in a synthetic view of our income statement, the more detailed view you can see in the annexes, including, as per requested by some of you, a quarter by quarter evolution. You can see this in the annex. What you see is a very healthy pattern of growth in terms of the main items of our income statement. The net interest income growing in spite of the fact that in Poland, the interest rate came down, the reference interest rate came down by almost 2%. We were able to maintain the NII in Poland broadly stable with a very important growth of more than 11% of the NII in Portugal, which is a tribute to our consistency in commercial dynamics and pricing discipline.

Miguel Bragança: Commissions growing 6%, which is also a very healthy growth in the present context, mainly taking into consideration the competition of neobanks. Operating costs growing mid-single digit as commented before, core operating profit because of growing 3%. I would like here to highlight the positive evolution and the consistency in these dynamics. The profit before impairment and provisions. Because of some one-offs linked to recoveries, grows slightly more, around 6%. When we convert to the profit before income tax, we benefit from the important reduction of the Swiss franc charges of more than 60%. We have guided to a value that would be this year, in any case, more than 50%, and we are overachieving this target with a value of more than 60%, which means that at the end of the day, our net income has grown almost 13%.

Miguel Bragança: I would like to comment the consistency of these key metrics that are very much linked to shareholder value creation. Our book value per share and dividend per share growing year on year, almost 20%. Our ROTE and earnings per share growing almost 15%. Going forward, we see these dynamics continuing, we see some consistency in these values at least until the end of the year. Our view is that the value by year-end, most probably will be above these values in terms of ROTE and earnings per share, except if something extraordinary happens in geopolitical terms. In terms of group profitability, we see here in terms of NII, the main item of the income statement, as you know, the growth of 11% with a growth of the net interest margin.

Miguel Bragança: International operations, the resilience of the net interest margin in the context of a strong reduction of interest rates. Here, I would make a strong tribute here to our commercial dynamics and volume growth. We are growing, and this is very important. We are growing more than what we had envisaged before. We see that in terms of customer funds, we are growing in Poland, as you will see, around 17%. In Portugal around 7%, which is also a very important growth rate for Portugal. In credit, both in Portugal and in Poland, growing credit book around 9%. 9% in Portugal, 9% in Poland with a different composition. In Poland, due to our strategy, basically growing more than 30% in terms of corporate and SME, 32%. In Portugal, more based on the corporate growth, more than 10%, around 11%.

Miguel Bragança: Portugal, more mortgages, around 11%. Poland, more corporates as per our strategy, around 32%. This growth, together with the evolution of interest rates, and together, of course, with pricing discipline, is what explains the evolution of our NII. Going forward, the guidance that we have given for Portugal was, in the beginning of the year, we were expecting mid-single digit growth. In our last conference call, we raised this outlook to high single digit growth. At this moment, we feel comfortable with a low teens growth aligned with what we are saying here in terms of the Q2 of this year. Fees and commissions, also very resilient, growing around 6% in consolidated terms, of which 5% in Portugal and 8.3% international operations. There is some compensation here, of course, between the margin of the savings and the fees on the investments.

Miguel Bragança: Of course, when the markets are more volatile and when the retail investors, I would say less foolish, they tend to invest less in funds and prefer deposits. The reverse happens in other situations. Right now, of course, one part, we are benefiting more in terms of deposits, but still growing around 5% in Portugal, aligned with what we said before of a growth of fees and commissions between mid-single digit and a high single digit. We are closer to the mid-single digit here for the reasons I just explained. In terms of other operating income, we had some extraordinaries this year in Portugal that we explained in the last results presentation, linked to assets received in the context of credit recoveries that we have sold, realizing capital gains, the remaining relatively stable.

Miguel Bragança: Some growth in terms of mandatory contributions, because as you may recall, last year, we benefited in some quarters of a recovery of a previously paid contribution that then the courts have reversed. Operating costs. We are investing. We are investing in AI. We are investing in cyber. We are investing in requalifications. In the context of this investment, we have been able to grow only 5.4%. As I commented before, our guideline here is to try to maintain a top level cost-to-income ratio, trying to be one of the most efficient retail banks in Europe with our business model. Within this context, we have been able to maintain this cost income of 37% and at the same time continue to invest, which is also attributed to the prudence of our strategy. Cost of risk, stable.

Miguel Bragança: We are not seeing yet any relevant signs of the geopolitical turbulence creating credit issues for our corporate and for our retail clients up to now. Of course, we cannot be complacent. This is basically what explains these low cost of risk. Of course, the future is uncertain. Every week we hear a different piece of news of what may go on in Hormuz and in Ukraine and so on. We cannot guarantee that we will maintain this cost of risk forever. As far as you see it right now, we are not seeing any additional early warning signals that would lead us to review our guidance in terms of cost of risk. This, of course, is linked to the reduction in terms of NPEs.

Miguel Bragança: In spite of the fact that we already have a low level of NPEs, the normal NPE loan ratio on loans is already at 1.6% in Portugal, so it reduced furthermore from 2% to 1.6%. The NPE ratio as calculated by the EBA with securities and with off-balance sheet items is already at 1.3%. In the international operations, this is slightly higher, but also in reduction mode. I would highlight here that in Poland, as you know, our business model has much less corporates and has much more consumer loans that typically have a higher NPE loan ratio. Business activity. This is the piece of good news that I had anticipated, the growth of around 10% in terms of customer funds. I would highlight here that the growth in the international operations of 15% of which around 17% in Poland.

Miguel Bragança: Also a consequence of the strength of our franchise and of the fact that we have a really genuinely differentiated quality service proposal to our customers. The loan portfolio also growing in a healthy way. In spite of the reduction of the NPEs, we have grown the total loan portfolio 8.3% in a very balanced way between Portugal and the international operations, both of them around 8%. In terms of capital, the capital ratio decreasing for next year because, of course, we have distributed dividends, as you know, but stable vis-a-vis last quarter. As you see here in page 22, we were able to generate before dividends, dividend accruals, and share buyback accruals. As you know, we are accruing a 90% payouts, including dividends and share buyback. This means that before this 90% payout, we have been able to generate 55 basis points of capital per quarter.

Miguel Bragança: As you may remind, what I have commented in the last sessions is that the normal organic capital generation before distributions should be around between 55 and 60, depending on the growth. In this case, we have been growing more, mainly in Poland. We also have grown in terms of credit in Portugal, but most of the growth in Portugal came either from guaranteed loans, mortgages, as you know, or from loans and commercial paper that had already committed lines, so they did not increase materially the RWAs. MREL position, very comfortable. We are in the process of executing our plan. As you know, we have issued EUR 500 million of senior preferred in February and another EUR 500 million of Tier 2 in June. Clearly aligned with our plan and comfortably above the minimum ratio.

Miguel Bragança: Pension funds, I would say a very cautious ILM management considering the liabilities that are typically fixed rate, because our liabilities are basically the pensions that vary with the salaries and which present value also varies with the long-term interest rates, so around the 12-year interest rate. We were able to deliver a 4.2% profitability that compensates part of the liabilities decrease. That this means that our excess between the pension fund and the pension liability even increased vis-a-vis June of last year at a level of EUR 300 million. I would highlight here that this excess is like a capital buffer. It is what would have to be consumed before any type of impact on capital would occur. Liquidity. Very strong liquidity position, and this is important.

Miguel Bragança: We would like even to have a slightly weaker liquidity position, because this means that we will be growing more in terms of grade. We are expecting, so to say, to allocate a part of this liquidity to genuine customer business so as to normalize somehow this liquidity position. In any case, this liquidity position is what enables us to be more comfortable in terms of paying term deposit rates. Because we don't need funding, we can afford, mainly in terms of these term deposits that are less franchise-driven, both in Poland and in Portugal, we are able to deliver a higher margin of deposits. I will pass the floor here to Ricardo that will focus only on some of the slides.

Bernardo Colaço: Okay, thanks, Miguel. Good afternoon, ladies and gentlemen. As I did on the last earnings presentation, I'll briefly go through some of the slides for each geography. I will not follow the full presentation as you already have seen it. Starting on page 27, Portugal delivered a strong set of results in H1 2026. Net income increased by almost 11% year on year to EUR 470 million, supported by 11.5 increase in net operating revenues, which reached almost EUR 1.1 billion. Revenue growth continued to outpace the cost growth, with operating costs increasing by a moderate 5%, reflecting ongoing investments while maintaining cost discipline. Impairments and other provisions rose EUR 100 million, mainly driven by a prudent risk management approach. Overall, in this slide, as you can see, the business continued to generate robust profitability and positive operating leverage in Portugal.

Bernardo Colaço: On page 28, net interest income increased by 11.3% year on year, or if you want, more than EUR 74 million, reaching EUR 733 million in H1 2026, despite the low interest rate environment. Growth was mainly driven by the positive contribution from higher loan volumes, which more than offset the negative impact of lower market rates. Additional support came from improved deposit pricing dynamics and lower wholesale funding costs. It is also important to highlight, as we did in the previous quarters, that this is the seventh quarter with consecutive increase on NII in Portugal. Having said that, the bank maintained a resilient net interest margin, which improved from 2.12% in H1 2025 to 2.22% in H1 2026, reflecting the strength of its commercial franchise and balance sheet management. Moving to page 29.

Bernardo Colaço: Fees and commissions continued to show a solid performance, increasing by 5% year on year to EUR 322 million. Growth was broad-based across the main business lines, but more significant variations were recorded in bank insurance, asset management, and securities operations. It is also important to highlight the growth on commissions related with loans and guarantees, reflecting the sustained customer activity and the strength of the bank's diversified franchise. Market-related fees increased by almost 11%, supported by higher investment products activity and assets under management. Net trading income increased from EUR 7 million in H1 2025 to EUR 41 million in H1 2026. This was mainly driven by gains from the disposal of legacy assets stemming from the recovery of non-performing loans in Q1 of this year.

Bernardo Colaço: Other operating income moved from EUR -21.6 million to EUR -38.3 million, driven primarily by mandatory contributions, which in H1 2025 had benefit from the partial reversal of the solidarity surcharge, additionally by some effects related to earn-out that occurred in 2025. Going to page 30. Operating costs increased by 5.4% year on year to EUR 361 million, reflecting continued investment in the business while maintaining a strong focus on efficiency. The increase was mainly driven by higher admin costs and depreciations, as staff costs registered an increase of around 2%. Despite this cost growth, as I said before, revenue expansion outpaced expenses, allowing the cost-to-income ratio to stay at 33% at the end of H1 2026. At the same time, the bank continued to streamline and to modernize its distribution network.

Bernardo Colaço: Number of employees decreased slightly and are currently below 6,000. Branches also showed a small decrease from H1 of last year. These actions contributed to efficiency gains while preserving the bank's strong commercial presence in service capabilities across Portugal. As I said, now, if you don't mind, let's skip some slides and move straight to page 34, which shows volumes in Portugal. On this page 34, regarding volumes, the bank continued to deliver strong commercial momentum in Portugal with both customer funds and lending recording solid growth. Total customer funds increased by 7.2% year on year to EUR 77.5 billion, meaning an increase of EUR 5 billion year on year. This was supported by growth across all major categories in terms of customer funds, including demand deposits, term deposits, and off-balance-sheet products.

Bernardo Colaço: This performance reflects customers' confidence in the bank and sustained success in attracting savings and investments. At the same time, gross loans grew by 8.6%, representing more EUR 3.5 billion year on year, driven by strong activity in both the corporate and individual segments. Mortgage lending increased by 10.8%, while corporate lending recorded a healthy growth of 5.4%. All in all, the expansion of both deposits and loans highlights the strength of the bank's franchise and its ability to support customers while delivering sustainable balance sheet growth. Let's move now to page 37. Here, this slide shows the contribution from international operations, and it's important to highlight their important contribution to the group's results. With earnings attributable to the group increased by more than 22% to EUR 95.6 million in H1 2026. This is after deducting minorities.

Bernardo Colaço: This performance was mainly driven by Bank Millennium in Poland, whose contribution rose by almost 39% to EUR 170 million, reflecting the resilience of its business model in a more challenged interest rate environment. The result of Mozambique subsidiary remains conditioned by the financial situation of the country. If you don't mind, as a result of Bank Millennium were already widely known, I will skip also some slides related with Bank Millennium, and I'll propose to go straight to slide 41. In here on page 41, regarding volumes, Bank Millennium continued to deliver strong commercial growth in both customer funds and lending, expanding significantly during the period. Customer funds increased by 16.8% year on year, representing an increase of more than EUR 5 billion in just one year. This performance reflects the bank's ability to attract new customers and deepen existing relationships with competitive market environments.

Bernardo Colaço: Gross loans to customers grew by 8.8%, which represents a growth of more than EUR 1.5 billion. Growth was particularly strong in the corporate segment, where lending increased by almost 32%, while the mortgage portfolio remained stable and continued to represent a large share of total loans. Overall, the continued expansion of both deposits and lending demonstrates the strength of Bank Millennium's franchise and supports its sustainable growth and profitability prospectus. On page 42, regarding FX mortgage portfolio, Bank Millennium continued to make a significant progress in reducing its legacy CHF mortgage exposure. The mortgage portfolio decreased by 47% year on year, reaching just EUR 700 million at the end of June 2026, and representing only 0.6% of the gross loan portfolio after legal risk provisions. This reflects the combined effect of settlements, court resolutions, and the natural amortization of the portfolio.

Bernardo Colaço: At the same time, legal risk coverage continued to strengthen, with cumulative provisions reaching 173% of the outstanding CHF mortgage portfolio. The number of individual lawsuits declined by 38% year on year, while new inflows of litigation continued to trend lower. As a result, CHF-related costs fell sharply by 65%, from EUR 275 million in H1 2025 to just EUR 97 million in H1 2026. In conclusion, these trends demonstrate the substantial de-risking of the CHF mortgage portfolio and its progressively lower impact on Bank Millennium earnings. Turning to page 43 about BIM in Mozambique, profitability remained affected by the challenging and operating environment. If you adjust the net income, it increased almost 20% year on year, demonstrating the underlying resilience of the business. Net operating revenues grew by 4.5%, while operating costs remained broadly stable.

Bernardo Colaço: Asset quality remains robust, with the NPE ratio at 5% and capital above 40%. I will conclude here my presentation, before we move to Q&A, I will hand the floor to Mr. Miguel Bragança for some final comments about the evolution of the strategic plan on page 48.

Miguel Bragança: As you know, in every quarter, we present exactly what is our evolution vis-a-vis the target that we have presented to the market around 1 year and a half ago. As you see, we are clearly progressing very well towards the target. We are clearly overachieving the target. As I commented, and I have been commenting also in the last sessions, the guidance that we are giving both today and in the last session already leads us to believe that except if something extraordinary happens, we will clearly overachieve the target that we have presented to the market in 2028, with the consequence that we expect in terms of shareholder value creation. Thank you very much. We will open the floor to questions.

Operator: We will now begin the question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. One moment for our first question. The first question comes from the line of Ignacio Ulargui from BNP Paribas. Please ask your question.

Ignacio Ulargui: Thanks. Good afternoon, everyone, and thanks very much for taking my questions. I have two questions. The first one is on lending growth. There has been a bit of a slowdown in lending growth in the quarter, and just was wondering, Miguel, when you upgrade the guidance for NII in Portugal to double digits, I assume it is largely driven by margins, but how should we think about loan growth and loan demand in Portugal, and which segments are you seeing are best reward for growth? The second one is about capital and capital generation. How should we think about it in the coming quarters? You were pointing in Q1 that there will be some measures taken in H2 to try to improve our value optimization, so that you get a bit of closer to the 90% payout ratio.

Ignacio Ulargui: Just wanted to get a bit of your thoughts on how should we think about the payout, and whether you think that 90% is at risk or not, and how should we think about the organic capital generation. Thanks.

Miguel Bragança: Ignacio, thank you very much for your questions. Lending growth in Portugal and in Poland. In Poland, we feel comfortable with the maintenance of this type of lending growth. Probably looking forward, probably a little bit less in corporate. It was really extraordinary, 30% yearly, and a little bit more on mortgages. On the other hand, in Portugal, what we expect also is probably the lending growth in mortgages to decelerate somewhat because 11% is also very high, so we expect it to decelerate somewhat. It is possible that the corporate and SME growth also picks up a little bit. In any case, when I speak about low teens or low double digits, low teens, low double digit NII growth, it is not very sensitive because in these last six months of the year, as you might expect, it will not change a lot my guidance.

Miguel Bragança: When I speak about low teens growing 1% more or 1% less, when we are speaking only about six months and the average balance that is generated, this does not influence the guidance that I'm giving of low teens. By the way, for 2026 and in principle, if the interest rate behaves according to the forward rates, also for 2027. We are also expecting a low teens growth in this moment, in this scenario of interest rates, also for 2027. In terms of capital generation. Our main objective is shareholder value creation. We think that to achieve the shareholder value creation, we have to generate value, generate value through customer business, and we have to be disciplined on capital. The discipline on capital is not an objective per se. Of course, it is important to be disciplined on capital.

Miguel Bragança: What I want to say is the payout is not an objective per se. The payout is only relevant to the extent that it reflects a discipline in terms of capital, and it is associated to shareholder value creation. Okay. When we say that, and when we have presented our distribution strategy, we were very clear on that, presenting a table where the share buyback would be a function of the ratio before distributions. If we increase our RWAs with genuine customer business that creates shareholder value, and because we are allocating capital to genuine customer value that generates value for our shareholders and so on, and if because of this, we need capital, this has a consequence then in terms of shareholder distribution.

Miguel Bragança: On the other hand, if we do not need the capital, the objective of the distribution, we have presented a ratio that somehow commits us to distribute this additional capital. This is the logic. The 90% is not an objective per se. Our objective is to create value for customers and shareholders. I think this is important. Having said that, in terms of evolution of our RWA, as I commented, in terms of our organic path, what we are expecting is around 55 to 60 basis points per quarter. This is the organic part.

Miguel Bragança: In terms of inorganic part, I was commenting that we were working on some securitizations that probably we will try to close in this quarter. The impact in terms of ratio will only occur next quarter because they are subject to authorizations and so on, that we are expecting something in the order of magnitudes of around 20 basis points. If you do the numbers, you will see that we are really very close, depending on the evolution of our paid portfolio, we are very close to the 90 or to the 80. We are more or less on the tipping point. It is very difficult for me to commit at this point to say whether it will be 90 or 80.

Miguel Bragança: What I can tell you is if there are genuine and value-enhancing opportunities to grow our portfolio in our business areas, we will not restrain ourselves of doing so just to distribute 90 instead of 80. The 90 or 80 is a consequence of our strategy, it's not an objective per se. Okay? At this point in time, having said it, at this point in time, it will depend. We will do our most to generate value. We will do our most to be close to our customers and to grow a healthy credit portfolio. Then the consequence, the output will be the output. Okay?

Ignacio Ulargui: Thank you very much.

Operator: Thank you for the question. Please hold for our next question. The next question today comes from Alvaro Serrano of UBS. Please ask your question.

Alvaro Serrano: Yeah. Hi. Good afternoon, and thanks for taking my questions. I have one, and also one follow-up. First, on the low teens NII growth for 2027, what interest rate assumptions are embedded in that guidance? Also related to this, do you still expect a flat NII in Poland in 2026, and what to expect in 2027? Second, loans in Portugal are growing at 9%, so above the market. The industry is growing at 8%, deposits are growing below 5% versus the industry at 7%. What is driving the gap? What is your strategy here? What would trigger you start becoming basically more competitive on the deposit front? Thanks.

Miguel Bragança: Okay. We make our projections, and we give our guidance based on the latest market implicit forward rates. What I am saying is based on our latest projections, and our latest projections are based on the market implicit forward rates. If you see the calculations, you will get exactly what is the assumption behind it. Having said that, we are not too sensitive, our NII is not too sensitive to interest rate movements. Of course, if we have a 200 basis points movement, as it happens in Poland, it is relevant. A 25 basis points movement is not so relevant. As I commented, typically in Portugal and in Poland, the sensitivity of our NII to a 1% change in interest rates is typically between 2% and 3% of the NII. It is a low sensitivity, a 1% change in market interest rates is a lot.

Miguel Bragança: A 25 basis points change, you can do the numbers. We will have a 50 basis points impact in terms of evolution of the NII. We run a very conservative balance sheet from an interest rate perspective. Having said that, we feel quite comfortable with these low teens, except, of course, if we enter in a broad recession in Europe, if interest rate goes down 1%, of course, this will have the impact of around 2% less of NII. Of course, this is all. This is not our scenario, this is not the scenario that is implicit in the market move. In terms of the evolution of deposits and the evolution of credits in Portugal and so on. We are in such a situation in Portugal of excess deposits over credit.

Miguel Bragança: That really, I am not envisaging any scenario in the next two or three years that would drive us to pay more because of necessity or in terms of balance sheet. This is not the logic. More so, if you take a look at the total customer funds, the total customer funds are growing very much aligned with the loans. One of the reasons is that on the margin, I would say some of the most rate sensitive customers are investing probably a little bit more in money market funds or in bond funds, that the total customer funds are more or less aligned than we are, I would say, so comfortable from a liquidity standpoint, that this will not be the trigger.

Miguel Bragança: Of course, our trigger is really to have a good offer to our clients, to make sure that we serve our clients, of course, in a segmented way, being comfortable that what we offer to our clients are best-in-class offers, are best-in-class products, making sure that we also differentiate between, of course, private banking clients and mass market clients and so on, because this is part of our business. This is the key issue. If you ask me what could trigger us paying more, is much more the market dynamics as a whole. If somehow the market dynamics change, then we needing of funding because of the dynamics of the gap. What is clear for us is that if the market starts paying much more, we will have to start paying much more. It is life. We are in a competitive market, and that's life.

Alvaro Serrano: Thanks.

Operator: Thank you for the questions. Please hold for the next questions. The next questions today comes from Maksym Mishyn from JB Capital. Please go ahead.

Maksym Mishyn: Hi, good afternoon. Thank you very much for the presentation and taking our questions. Two from me, please. One on the fee revenues. I was just wondering if you could update us on the guidance for Portugal now that we leave Q2 behind. The other question is on other provisions. This line has increased compared to last year. I remember that 2025 was abnormally good. Should we assume EUR 13 million a new run rate? What is the rationale to keep increasing NPE coverage given it is above 100% already? Thank you.

Miguel Bragança: Okay. In terms of fee coverage, as I comment, as you've seen, a large part of our fee comes from asset management products or investment products, including unique links and bank insurance products and so on. These products are substitutes to some extent, mainly on the low-risk part of these products, are substitutes to some extent for deposits, so to say. The evolution is also to some extent, also linked to the degree of risk appetite of the retail business. If the markets become much more bullish, the retail market will tend to invest more in equity funds. As you know well, it's also your business to some extent. If the markets become more conservative, they tend to invest more in deposits. Okay. That's the way.

Miguel Bragança: On the other hand, what we all see is that the business model of banks is also being challenged, I would say, by low-fee providers in the market. We cannot. There are risks to the franchise if we increase prices without giving genuine value to our customers. We have to be very careful in terms of having a strategy where we really offer genuine value for our customers. Taking all of this into consideration, the guidance that I gave was a mid to high single digit, okay, with a lower guidance in terms of NII. I think that also the guidance that I would like to maintain is the same, mid to high single digit, but an interval. If you ask me right now, probably we will overachieve more in terms of NII.

Miguel Bragança: In terms of fees, we will be closer to the mid-single digit, but of course, it will depend on the market movement and on the risk appetite of the clients. In terms of the other provisions, the other provisions are a little bit like trading gains. The other provisions have a degree of volatility on a quarter-per-quarter basis that are difficult to anticipate. Another provision may be a provision for a litigation or a provision for a tax issue. So to say there are a lot of small events that contributes to this. It is difficult in the same way that I cannot give you some type of comfort in terms of the evolution of trading gains. For me, it's difficult to give you a fixed value that will be always the same on a quarter-by-quarter basis.

Miguel Bragança: However, expecting these values between EUR 10 million and EUR 15 million per quarter on average, but with some volatility as with trading gains, is reasonable if you take a look at what happened in the past, is something that's reasonable. In terms of the impairment models. The impairment models, we are having some overlays in our impairment models because of the situation that we are seeing in geopolitical terms. We do think that right now the environment is uncertain, and as long as we are with this cost of risks in Portugal, slightly above 30 basis points, we don't see, I would say, we think it's prudent to maintain a degree of overlays because in spite of the fact that we are not seeing any relevant early warning signals linked to the geopolitical risk, we cannot be complacent.

Miguel Bragança: For the moment, we think that it is not necessarily in the best interest of the bank and of its shareholders to go below these low thirties cost of risk.

Maksym Mishyn: Thank you very much.

Miguel Bragança: If they prove, if after all moves is solved and if after the tragedy in your country is solved, we come to the conclusion that they are not necessary, of course they will not be necessary, and we will reverse them.

Operator: Thanks. Thank you for the questions. Our next questions comes from the line of Sofie Peterzens from Goldman Sachs. Please ask your question.

Sofie Peterzens: Yeah. Hi, this is Sofie from Goldman Sachs. Thanks a lot for taking my questions. One follow-up question on capital. Could you also just remind me if you have any capital tail or headwinds that we should be mindful of going forward? Also what the sensitivity is to a change in the pension discount rate. Then, I was also wondering, there have been some press articles around Fosun, potentially considering selling the stake in BCP. How do you think about M&A opportunities and what would it potentially mean for BCP if Fosun was to sell the stake? Then maybe just a final one on Mozambique provisions, how should we think about these going forward? Thank you.

Miguel Bragança: Thank you very much, Sofie. I will start probably with the latest question regarding Mozambique. Mozambique is one of the countries in the world with the largest gas reserves. As we all know, the gas does not need to flow through the Red Sea or through Hormuz. It's becoming more and more important in geopolitical terms. There have been many new announcements in the country. It's a large country, both in terms of geography and in terms of population. We are structurally bullish in terms of the country. Okay? I think this is the first point that I would here like to highlight. The country, due to issues that we know, faced some social unrest around 2 years ago. This social unrest is broadly solved, but it left issues to be addressed in terms of government debt and in terms of public finances stress. Okay?

Miguel Bragança: This means that we had to reclassify the debt in stage 2. We only hold domestic debt, but we also think that also from a prudency standpoint, what makes sense for us is last year and this year to have a net income that is close to breakeven, so slightly positive. We think it makes sense for us, in spite of the fact that we do not hold any foreign denominated debt. We think it makes sense for us in spite of the fact that at the end of the day, probably the local government debt will not face a difficulty being paid because, I mean, the central bank is local. They have their own currency. We think it is in the interest of the bank to keep the funds there and to have a prudent approach to provisioning.

Miguel Bragança: Last year and this year, we are close to breakeven. Looking at next year, 2027, we don't think that it will be already the steady state, but it will be a progress towards the steady state, and what we would expect is 2028 to be very close to a steady state. That's the way. We will provide this year something to maintain the bank slightly above breakeven as we are seeing here. Next year will be a progression towards the steady state, and 2028 we think in principle will be the steady state. Of course, with all the uncertainty that we are living in the world right now, with all the caveats that we have to say there. In terms of Fosun. I mean, we are in the market. Fosun behaves a lot like a professional institutional investor, as some of your clients also behave.

Miguel Bragança: The relationship that we have with Fosun is a relationship where we speak about financial issues, where we speak about ROE, where we speak about shareholder value creation, much in the same way as the way we speak with other investors. I mean, we know that they are satisfied with their investment in BCP. We know also that they don't hold a controlling stake, so it's not an M&A issue. They hold a 20% stake. We know also that there would be other investors, fortunately, because of the equity story that we have here, some institutional investors that probably would be available also to invest in BCP. We see a lot of interest in BCP security. We see that Fosun continues to be interested in BCP. We see that they are satisfied with their investment in BCP.

Miguel Bragança: However, our job is to generate shareholder value and to make sure that we are an attractive equity story for everybody. If for whatever reason, for their idiosyncratic reasons, if they want to invest elsewhere instead of BCP, we have to make sure that we deliver value and we are an attractive equity story for other investors that we think are available, by the way. We don't see this as an M&A catalyst. In terms of the sensitivity to the discount rate. If the discount rate goes down by 25 basis points, and this is more or less linear, the impact on the liabilities of the pension fund is around EUR 86 million. Okay? The reverse occurs if it goes up. I would here like to highlight that we have an excess of around EUR 300 million.

Miguel Bragança: The first EUR 300 million do not have any impact in terms of capital. Broadly speaking, I mean, the interest rate would have to go down by around 1%. I am only speaking about the discount rate, and there is some ILM would have to go down by around 1% for it to start to have an impact in terms of capital. Okay? Because the first part is basically a consumption of the excess between the assets that are already in the pension fund and the liabilities of the pension fund. The first 1% do not have any impact. After the first 1%, the impact on capital is broadly EUR 86 million for each 25 basis points.

Miguel Bragança: I mean, broadly speaking, assuming that this is not compensated by the portfolio, which it is partly because we do some asset management and a large part of the evolution is compensated in the portfolio. I would say it is not a material risk to our equity right now, I would say.

Sofie Peterzens: That's very clear. Thank you.

Operator: Thank you for the question. Please hold for our next question. Our next question today comes from Miruna Chirea from Jefferies. Please go ahead.

Miruna Chirea: Good afternoon. Thank you very much for taking my questions. I had a follow-up on Portugal. If I'm looking at the year-on-year growth rate in your corporate loans in June versus March, this has slowed down, going from 5.7% in June versus 7.6% in March. Whereas at the system level, we haven't really seen a slowdown. Just wondering what's going on there. The second one was, I just wanted to have a clarification on Poland. Have you taken any provision this quarter related to consumer loans post the ECJs ruling? If so, what are your expectations for these type of provisions going forward? Thank you.

Miguel Bragança: Starting with the last question. As I believe I've commented here often, we are reaching the end of the Swiss franc saga. I would say the litigation risk, the operational risk linked to litigation risk at, of course, at another level, will be a part of doing business in Poland. We have to prepare ourselves. We don't know exactly what the amount will be. We don't know exactly what will pop up. The way we see the Polish macro environment is that it is a market very prone to litigation and to litigation risk, and there will be always, I think, at least for the foreseeable future, some files, some elements of risk that will pop up that will generate here the need to assume costs and to provide something. I think this is the first point that I would like here to highlight.

Miguel Bragança: Exactly what will pop up, it's difficult to anticipate, but what I can be sure is that something will pop up because there are a lot of litigation lawyers focused on this business, and they will try to do it. The good part of it, I would say, is that the system realizes it and makes sure that the NIM of Poland above 3% and the ROE of Poland before litigation is good enough to cope with this additional operational risk and this operational cost. I think this is what has to be said here.

Miguel Bragança: In terms of this very specific issue, effectively, Miruna, as you correctly point out, there was a decision. By the way, applicable to all of Europe, it is not a decision applicable to Poland, by the ECJ saying that banks should not finance upfront commissions and upfront costs in the context of consumer loans. It is normal in some geographies that when you contract a consumer loan, you pay, I don't know, 1%, 2% organization fee, and it is normal because when people ask for a consumer loan, typically, they don't have the funds that it gets incorporated into the capital and gets financed. By the way, we are not doing this in Portugal, I think. But in some geographies, it is normal to have it. What the ECJ said it is that it is not consistent with European law to do this. Okay. It is applicable to several geographies.

Miguel Bragança: In the specific case of Poland, it is difficult to anticipate what the consequence of this will be because ECJ did not tell what the consequence is. Whether the consequence is, for instance, just giving back to the customers the interest on these upfront costs or whether special penalties would apply as it happens in Poland. In any case, we have a simplified methodology for it, and in this simplified methodology, this made us register a one-off cost of around EUR 8 million in terms of the Polish NII, and around EUR 15 million in terms of provision, which reflects, I would say, the data that we have until now, so to say, the claims that we have until now and the court cases that we have until now. That is what I can tell. In terms of the corporate credits, what can I tell you that is important?

Miguel Bragança: Effectively, more than a slowdown, what we see is that in the Q1 of the year in Portugal, in the corporate loans, we were basically stable. That was basically what happened. In the Q2 of the year, on the quarter-on-quarter, the quarter-on-quarter growth was relevant, we grew 2.8%. It is basically the Q1 of the year that for several reasons that had to do with some delays in projects and so on, and some more granular issues, that probably explains why we were a little bit left behind, or we lost a little bit of market share in the Q1 of the year, that we then more than recovered in the Q2 of the year. This is exactly this influence that explains what the dynamics that we are commenting.

Miguel Bragança: The good part of it is that apparently we are now with the new dynamics, we are going

Operator: Thank you for the questions, Miruna. Please hold for the next questions. Our next question comes from the line of Carlos Peixoto from CaixaBank BPI. Please ask your question.

Carlos Peixoto: Yes. Hi, good afternoon. A couple of questions from my side as well. The first one would actually still be on the fees outlook. Just physically, even if we sit on the low end of the mid-single-digit growth in 2026, it does feel that this is still a bit of a challenging environment or challenging goal. I was just wondering if you see any levers in the H2 that could give an extra boost, perhaps performance fees, or just to have some additional visibility on that. Still within fees, in the Q2, there was a bit of a decline. If you look at the Q2 standalone in credit card fees, I was just wondering whether this is the reflection of some kind of changes in pricing or whether there is any specific related to this.

Carlos Peixoto: On another topic, on the cost side, I was wondering what is your guidance or whether you keep your guidance for cost growth in 2026, and whether that guidance is including or excluding last year's specific items, namely some retirement costs, if I remember correctly. Just a final question, on effective tax rate in Portugal, how do you see it evolving and what is your expectation for the full year? Thank you very much.

Miguel Bragança: In terms of effective tax rate, of course, it depends exactly on the items. What we would say for the full year value, a value between 24 and 26 makes sense for us. Of course, it depends on what we are seeing. In terms of fees, there are no miracles in terms of fees. What we try to do is, there's a part of it that has to do with asset management fees and with bank insurance fees that you know as well as we do. This part of the fees is linked to the market perception and also to us being able to offer good advice to our clients, have a good platform and so on. We think there's still some room to grow if the markets behave well, so to say. I think this is a part.

Miguel Bragança: In terms of credit card fees, it is well noticed what you commented. In terms of full year, we are expecting a growth. There are sometimes some, how can I say, incentive fees from Visa and from Mastercard that in different years may occur in different months. Sometimes the comparison with the same month or with the same quarter of last year is a little bit misleading. In terms of the full year, we are expecting the credit card fees to grow aligned with credit card transactions and with the credit and debit card volumes, so to say, which are evolving well. It is clients. This is not a sprint, this is a marathon.

Miguel Bragança: What we try to do on a daily basis is to try to give the best service, to be able to acquire new clients and through the acquisition of new clients and cross-selling to deserve more fees. It is not to charge more fees, to deserve more fees from the client. That is what we do. When we say mid to high single digits, we are actually on the mid single digits, so we are growing 5%. We are delivering what we said within the interval that we said, and we feel comfortable with it. It is a lot of work. As you've seen in the first page presented by Miguel Maya, we are acquiring clients. The clients are satisfied with our app, are satisfied with our service.

Miguel Bragança: If we deserve through better service, more loyalty from the clients, we will have more fees, but more and more it has to be deserved. It's not a charge, it's not a silver bullet. In terms of costs. Right now, we are in a moment of transformation of the banking sector, and it's very difficult to anticipate which investments, and some of these investments flow through the cost line, are exaggerated or are worthwhile, mainly when we speak about AI and cyber. It is very difficult to really say should I invest 5 million or 2 million in an additional cybersecurity? It's very difficult. What we try to do is, as a rule of thumb, if in doubt, of course, if it's a clear-cut business case or both in terms of risk and in terms of variance, of course, we do it.

Miguel Bragança: If in doubt, what we try to maintain is a cost-to-income that is best-in-class. We think that this is a discipline, this is something that we want to focus on. As long as we are with the cost-to-income that is broadly best-in-class, we will tend to be more prone to invest in AI and to invest in cyber or to invest in transformation. To go beyond that, either having a higher cost-to-income or starting cutting even more in terms of cost-to-income, there have to be very good arguments for it. When we speak about cost-to-income, we don't include the extraordinaries linked to early retirements and so on. In any case, we have not designed any early retirement plan this year. It's not something that we have decided yet.

Miguel Bragança: Let's see by year-end whether it makes sense or not, but this is not a decision that we have taken yet.

Operator: Thank you for the questions. Please hold for our next question. Our next question today comes from the line of Hugo Cruz from KBW. Please ask your question.

Hugo Cruz: Hi, thank you for the time. On the topic, I have two, three questions, but on the topic of costs, so some Portuguese press has talked about your discussions with the labor unions, and the discussions seem a bit challenging. Could this have an impact on your cost trend for next year? Just on the staff side specifically. Two questions on the cost of risk. Earlier in the call, you mentioned that you've been creating some overlays for geopolitical uncertainty. I was wondering if you could quantify those overlays, what's been built so far, in EUR millions. Finally, when I look at your business plan that goes to 2028, you have cost of risk targets of 50 for the group, 45 for Portugal. I think, cost of risk has been a bit probably better than expected over last year or so.

Hugo Cruz: I was wondering if there's room to revise those targets and if you think the cost of risk could be lower. Thank you.

Miguel Bragança: Okay. When we presented the 2028, I would say plan, it is an ambition, but what I said is that every quarter we will be updating the guidance, so to say. What I said at the end of my presentation is right now that we are clearly over-delivering and the guidance that we are giving is better than the target. We said one year and a half ago that we thought that for Portugal, the cost of risk should be somewhat below 45 basis points. We are now having around 32 basis points. I would say it is difficult to anticipate what will occur two years from now, mainly in terms of cost of risk.

Miguel Bragança: At least for the next 12 months, I would say that the cost of risk that we are expecting is much more aligned to the cost of risk that we have now than with the cost of risk that we had projected for 2028. The guidance, the 2028 is just here just to remember what we said one year and a half ago, but it is not a guidance. The guidance is what we comment in these presentations. In terms of the overlays, the quantification of the overlays, and I believe they are public information, they will be in our report. In Portugal, we have EUR 130 million of overlays, and in Poland, we have EUR 40 million of overlays. In terms of the labor unions, it is part of doing business. The negotiation with the labor unions is part of management, I would say.

Miguel Bragança: It is part of our job to do the negotiation, of course, and it is a normal process, so I would not highlight anything special.

Hugo Cruz: Thank you.

Operator: Questions, please hold for our next question. The next question comes from the line of Luis Pratas from Autonomous. Please ask your question.

Luis Pratas: Good afternoon, everyone. Thanks for taking my questions. My first one is on deposit competition. I wanted to ask you whether have you seen any impact in deposit outflows or IRB pricing from the new attractive treasury certificates launched by the government. Looking ahead, if the Portuguese government also introduces a tax-free investment account similar to the ISA account here in the UK, would you see this as a risk to deposit growth or deposit cost going forward? My second question is, there was this recent favorable decision to the banking sector regarding the resolution fund contribution. Could you please quantify the potential P&L upside for BCP and what's the expected timeline before any recovery could be recognized in earnings? Just a very quick follow-up.

Luis Pratas: Could you please provide the tailwinds and headwinds in terms of capital SRTs or maybe like the higher capital requirements out of Poland? Thank you.

Miguel Bragança: Okay. In terms of the decision from the court, it is a specific case of where it will be discussed, the amount that was being discussed in this specific case was EUR 30 million. It is not final, the decision, because in theory, the tax authorities may still, actually, the resolution authorities may still ask for a review of the decision. I would say that the final decision probably will occur Q1 of next year. We are speaking here about EUR 30 million. Okay? In terms of the competition from the government, we are seeing some outflows, as we had seen in the past. There is some fluctuation with the outflows when we had the Certificados de Aforro also more competitive. In any case, I would say nothing dramatic, so to say.

Miguel Bragança: Our approach to our clients is, I would say, is a special approach. We are not a monoliner. We are really specialists in the daily banking relationship and in the full banking relationship. Typically, we don't have customers that only have term deposits with us. We have a customer that typically has its current account with us, has the nominal deposit with us, has a day-to-day relationship with us, and then on top of the day-to-day, may have then a consumer credit, may have the mortgage, may have the investments and so on, which creates, so to say, a relationship that's much more than mono product. This, of course, immunizes us a lot from, I would say, more opportunistic, so to say, offers that always appear in the market.

Miguel Bragança: In terms of tailwinds of capital, what I would like here to highlight, as I commented, is the securitization that we are working on around 20 basis points and the organic capital generation. Of course, other things may occur, but it is experience here to anticipate anything. May go either way.

Operator: Thank you for the question, Luis. One moment for our next question. The next question comes from the line of Borja Ramirez from Citi. Please ask your question.

Borja Ramirez Segura: Hello. Good morning. Good afternoon. Thank you very much for taking my questions. I have two questions on NII, please. Firstly, in Portugal, the NII growth was very strong, around 5% quarter over quarter. This is actually more than if I just for the day count and the volume growth that I saw in Portugal. Maybe I would like to ask if you could please provide more details on the drivers of the NII growth, quarter over quarter, which was very strong and also following a very strong Q1. My second question would be on the NII guidance of mid-teens for 2026 and 2027. I understand that's driven by volume growth, a little bit by rates, and then the reinvestment of the structural hedge. I would like to ask if you could please provide a bit more color on the yields of maturing hedges. Thank you.

Miguel Bragança: Starting with the last question. In terms of the yields of the maturing hedges, they are here in the page, I think in annex, I think in page. Just check here. What is the page? Page 56 of the presentation. I don't know whether Wait, let me just check whether I can.

Miguel Bragança: Okay. Sorry. Okay. What you see here is basically the hedge that we have and the average rate that we have in our maturing hedges. These maturing hedges have to cover, broadly speaking, our current accounts at around 50% of the term deposits, broadly speaking. As they mature, we reinvest them. As a rule of thumb, it's good to assume that we can invest them at five-year rates that probably right now are around 3%. In 2027, you can assume that the difference that you see here between the stock of the hedges of EUR 32.5 billion and EUR 27.7 billion, this EUR 5 billion will mature at around 2.3% because the average rate does not change and will be reinvested at around 3%. Effectively, we will have here a benefit to our margin of around 70 basis points.

Miguel Bragança: Effectively, this is one of the reasons why we feel comfortable with the guidance of the low teens for 2027. As you see here for 2028, there will be an additional, if the interest rates of the five-year interest rates continue to be as high, you see there will be an additional benefit in 2028 of almost EUR 9 billion invested at 70 basis points. In terms of the evolution in the quarter of the margin, a large part of this, I would say, has to do with the fact that a large part of our assets have beta of almost 1, so to say. In the term deposits, our beta in retail term deposits is around 50%, so I would say.

Miguel Bragança: It is in this management, together with the reinvestments of the structural hedges, that explain this evolution. The beta of 50% on the term deposits comes from a very, I would say, sophisticated management of the segmentation and of the pricing. What we see is that we are able to gain slightly market share, whereas if you compare, for instance, our average term deposits rate with the term deposits rate of the market, you see that we are around 20 basis points below in terms of term deposits. This means that if we are not losing the clients, it means that we have to calibrate very well what type of interest rate we offer in each type of situation to each type of client. At this point in time, I will not comment much more than this. Okay.

Borja Ramirez Segura: Thank you for the question.

Borja Ramirez Segura: Thank you very much.

Operator: One moment for our next question. We have the last question coming from the line of Cecilia Romero from Barclays. Please ask your question.

Cecilia Romero Reyes: Thank you very much for taking my questions. Most of my questions have already been taken, so just two quick follow-ups from my side. On medium-term targets, thank you for the regular updates to this year's guidance, which we appreciate, obviously. I was under the impression that there will be also an update on the 2028 targets at some point this year. Is that still the plan? Just one follow-up on Poland, if I may. Álvaro touched upon this earlier, but I'm not sure whether it was fully addressed. You have previously indicated a relatively stable NII in Poland for this year. Do you still see that as achievable, or do you see any risk to this target? Thank you.

Miguel Bragança: The guidance for NII in Poland is stability. As you see right now, it is decreasing somewhat. The guidance that we are giving is stability, maybe plus or minus two. Its stability is not necessarily zero. It is a value around zero, but with an interval around it. In terms of updating, the targets are the targets. We have a medium-term plan. We do not approve a medium-term plan every year. We approve the strategic plan every four years. The targets are the targets. What we can do, and we have to decide whether we will do it or not, there are some banks that do it, others that don't do it. What we can do is to be more formal in terms of the updating of the outlooks, maybe for 2027, maybe for 2028.

Miguel Bragança: What I commented is that in the context of the results of Q3, we will analyze whether we will do it or not. It's a decision that the board has not taken yet. There are some banks that do it. We have to decide whether we'll do it for 2027 or for 2028. It is possible that we do it. We have not decided it yet, but we will not change the plan, but we may change the outlook, which is a little bit different. Okay.

Cecilia Romero Reyes: Thank you very much. That's very clear.

Miguel Bragança: Okay.

Operator: That concludes the Q&A session. I'll now hand over to Mr. Miguel Bragança for final remarks.

Miguel Bragança: Okay. Thank you very much. I think this quarter shows very clearly the robustness and the consistency of our results that are based on customer business, results that are based on commercial activity, and results that are based on a very disciplined management of the margin, which we expect to continue going forward. Thank you very much for following us, and we are of course available for the one-to-one sessions if you have additional doubts. Thank you very much. Bye-bye.

Operator: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.