Speaker #1: And Marcin Mazurek, our Chief Economist. Pascal will start with the Q3 results, followed by Marcin with the macro update. Then we will open the floor for your questions.
Speaker #1: Pascal, over to you.
Speaker #2: Good morning also from my side, and welcome to our Q3 investors' call. We're really happy to share our results today, and let me start with the headline message.
Speaker #2: The headline message is: we are not just simply growing quickly; we are growing profitably. After 9 months of 2026, the evidence is there. We have gained market share across all our key products, we've delivered record earnings, and we've further strengthened our capital position.
Speaker #2: I will begin with the balance sheet on slide 4. The figures on this page illustrate the strength of our franchise on both sides of the balance sheet.
Speaker #2: On the left-hand side, gross loans increased by almost 18% year on year, to $164 billion. This growth clearly outpaced the market and drove further gains and market share.
Speaker #2: In the third quarter alone, gross loans increased by more than $10 billion. This was the highest quarterly increase in our history. The right-hand side shows equally strong momentum in customer deposits.
Speaker #2: Our deposit base grew by 19% year on year, to $255 billion, supported by sustained inflows into current and savings accounts. So overall, this demonstrates the strength of our franchise and our ability to grow the business in a balanced and sustainable way.
Speaker #2: Slide 5 shows how this balance sheet growth translates into revenues and operating efficiency. The revenue chart on the left provides the clearest starting point.
Speaker #2: Total revenues in the first 9 months reached $9.5 billion a record, slightly above the already strong level recorded a year ago. This was achieved despite a significant lack of interest rate environment.
Speaker #2: The average NBP reference rate was around 1.6 percentage points lower than in a comparable period. Strong business volumes, supported us to offset the resulting pressure on net interest income.
Speaker #2: An importantly, after reaching its low point in the second quarter, our net interest margin began to recover in Q3. The chart on the right shows that we combined this revenue resilience with disciplined cost management.
Speaker #2: The normalized cost-to-income ratio stood at 31.6%. And the key takeaway, therefore, is: the strength and scalability of our operating model allows us now to generate record revenues even in a less supportive rate environment.
Speaker #2: Slide 6 brings us to profitability. Strong operating performance translated into record profitability. Net profit for the first 9 months reached almost $3.1 billion, an increase of 24% year over year.
Speaker #2: And this is the best 9 months in our history. The improvement was supported by the strong underlying performance of our business and also by the significant reduction of our Swiss franc legal risk costs.
Speaker #2: At the same time, we absorbed the military higher fiscal burden, following the increase of the corporate income tax in Poland in 2026. But despite this headwind, we turned on tangible equity exceeded $21% from 20% a year earlier.
Speaker #2: And this brings me now to capital on slide 7. Growth only creates value if it is supported by a strong balance sheet. And who could know that better than we?
Speaker #2: We have been on a diet during our Swiss franc times. Our capital position remains solid, with comfortable surpluses above regulatory requirements, and ample capacity for further growth.
Speaker #2: Our capital position was supported by the inclusion of the part of the first year after earnings, and by the risk-rated asset relief of the generated securitization we completed in August.
Speaker #2: The $250 million EUR AT1 issue completed in September was already reflected in our emerald position, but is not yet included in own funds at quarter end.
Speaker #2: Once recognized, it would increase the Tier 1 ratio by approximately 14.5% on a proforma basis. Overall, we remain comfortably capitalized, and this provides capacity to fund further profitable growth and supports our intention to resume dividend payments.
Speaker #2: The commercial impact of this growth is visible on slide 8. The market share indicators show continued gains across all our strategic product categories. The strongest progress was in household mortgages, where our share increased by 1.1 percentage points in just 1 year, to 9.7%.
Speaker #2: And these are not isolated quarterly movements. They really reflect a sustained strengthening of our competitive position and a tangible progress toward our ambition in 2030 of achieving at least 10% market share in every of our key products.
Speaker #2: And let me now move from the 9 months overview to the third quarter performance in detail. In Q3 confirms that we are not only growing rapidly, but doing so profitably, efficiently, and on the foundation of our very resilient balance sheet.
Speaker #2: And with that in mind, let me now turn to the P&L on slides 10 and explain the main drivers. Beginning with revenues, total income rose by almost 4% quarter on quarter to $3.25 billion.
Speaker #2: Net interest income increased by 9% to a record, $2.7 billion. The increase was supported by strong business volumes, disciplined deposit pricing, and improving asset yields.
Speaker #2: Importantly, and in line with our guidance, net interest margin recovered by 10 basis points to $3.57% after reaching its low point in the second quarter.
Speaker #2: Net fee and commission income also reached a record level. Increasing by 4.4% quarter over quarter to $594 million. Net trading and other income were slightly negative.
Speaker #2: Mainly due to customer protection provisions, which I will explain in more detail on slide 14. Turning to costs, operating expenses remained broadly stable quarter over quarter.
Speaker #2: Consequently, the reported cost-to-income ratio improved to 29.1%. Loss provision and failure changes increased to $261 million, bringing the quarterly cost of risk to $67 basis points.
Speaker #2: And this increase was primarily driven by one single corporate exposure, and I will return to this topic on slide 16. At the same time, legal risk costs related to mortgages declined to $78 million.
Speaker #2: And all these together gives us a record quarter, a record net profit of $1.1 billion. Having reviewed the P&L, let me now turn to the commercial engine behind the new landing business.
Speaker #2: Starting with mortgages, the upper left chart shows the most important development on this page. Mortgage sales reached a record: $8.2 billion in just one quarter, an increase of 33% quarter over quarter.
Speaker #2: Growth was driven primarily by mBank Poland, where production increased by more than 40% quarter on quarter, and was further supported by our Czech and Slovak operations.
Speaker #2: Mortgage production reached all-time highs, both in Poland and across our international branches. The share of fixed-rate mortgages continued to increase, from 59% in July to 72% in September.
Speaker #2: At the end of the quarter, fixed-rate products represent around 48% of our outstanding P&L retail mortgage portfolio. And moving to the left chart, non-mortgage sales remained strong, at $4 billion for this quarter.
Speaker #2: Overall, retail loan production reached approximately $31 billion in the first 9 months, an increase of around 47% year over year. On the right-hand side, corporate lending production amounted to $14.2 billion in Q3.
Speaker #2: The quarter-on-quarter decline followed an exceptionally strong Q2. On our 9-month basis, production increased by 19% to $41.5 billion. Production increased across all major corporate categories and all client groups.
Speaker #2: So that confirms our growth is broad-based and scalable. And now, very important, there are two considerations which I would like to explain when looking at this expansion.
Speaker #2: First, we are not just pursuing volume at any expense of any value. Growth is concentrated in established client relationships. And in businesses that meet our return on margin requirements.
Speaker #2: And the second observation is that this growth is highly scalable. Our predominantly digital retail and corporate processes enable us to absorb this materially higher volumes without a corresponding increase in headcounts.
Speaker #2: This strong production is now very clearly visible in the loan portfolio on slides 12. If you focus on the bar chart on the left, gross loans increased by 6.5% during the quarter, and are almost 18% higher yearly.
Speaker #2: Mortgages were the strongest contributor, increasing by more than 10% quarter on quarter, and by 24% year on year. Other retail loans also continued to grow, and as a result, our core retail portfolio—excluding the non-book—expanded by 8% during the quarter, and by almost 20% year on year, reaching now $90 billion.
Speaker #2: The corporate loans increased by almost 5% quarter on quarter, and by over 16% year on year, reaching $72.8 billion. And the market share indicators on the right confirm that this growth is really creating value for us.
Speaker #2: We gained share in household loans, P&L mortgages, and enterprise lendings. Slide 13 completes the balance sheet picture by showing the development of our customer deposits and investment products.
Speaker #2: The chart on the left shows that customer deposits increased by 2.5% in Q3 to almost $255 billion. On a year-on-year basis, growth reached 19%.
Speaker #2: Retail current and savings accounts were once again the principal driver of growth. So these inflows support our variable funding mix and help us maintain disciplined funding costs.
Speaker #2: And at the bottom of the page, you can also see the continued expansion of our investment offerings. Assets and investment funds distributed through mBank reached $18.9 billion, including $6.2 billion managed by us, by our MTFI.
Speaker #2: During the first 9 months, MTFI's assets under management increased by $1.7 billion driven by positive net inflows and also solid performance of our investments.
Speaker #2: Overall, the deposits and investment products confirm that our customer relationships are further deepening, and provide strong and diversified funding base for our continued profitable growth journey.
Speaker #2: With loans and deposits covered, slide 14 links balance sheet expansion to revenue and margin development. So please focus on the income chart on the left.
Speaker #2: Total income increased by nearly 4% to a record $3.25 billion. The main driver was net interest income, which increased by 9% quarter on quarter to an all-time high.
Speaker #2: The most important development as I already highlighted two times is visible in the margin chart on the right. Net interest margin recovered. To $3.57, reversing the downward trend of the previous quarters.
Speaker #2: The improvement was supported by higher average yields on loans and debt securities, together with a higher share of loans and interest earning assets. Net fee and commission income also reached a new quarterly record, up 4.4% from Q2.
Speaker #2: Payment card fees were the main contributor, supported by higher card usage during the holiday season. Net trading in other income was negative, mainly because of the special items related to customer protection.
Speaker #2: In Q3, we recognized the loan $112 million of customer protection-related costs, and closed with those bookings open risk in the field. This amount includes $65 million related to the Orchid proceedings concerning modification clauses we did not receive a fine yet, but based on fines in the sector recently received, we derived our expectations.
Speaker #2: Furthermore, we included $40 million relating to unauthorized transactions in which we found an active agreement with Orchid in Q3. So both cases are expected to be economically closed.
Speaker #2: We also recognized $33 million of legal risk provision related to free loan sanction. And as this is a broadly debated risk in the sector, allow me now to provide our color of the risk assessment.
Speaker #2: Free loan sanction remains a source of concern for us and for the banking sector and everyone is watching it very closely. However, our exposure is significantly lower than that of many of our peers.
Speaker #2: The loan portfolio that we potentially see affected represents today less than 1% of our total retail book. And they are a few reasons, but two I would like to mention, why this is the case.
Speaker #2: The first one: we stopped originating the product in question in 2023, and we were among the first banks doing that. Second: our presence in the non-mortgage lending segment is smaller than our overall retail market share.
Speaker #2: And it is also important to look at the litigation track record. To date, we have won the vast majority of the lawsuits filed against us, nevertheless, we have built legal provisions for potentially future negative rulings.
Speaker #2: And now, difficult to move away from this special topic to the central message back on the slides. We have seen in Q3 record net interest income, record fee income, and recovery of net interest margin.
Speaker #2: And let me now turn from revenues to the cost base on slide 16. Our priority remains here every time unchanged. To fund growth and innovation while preserving the tight control of our cost base.
Speaker #2: And in Q3, operating costs remained broadly stable quarter on quarter, despite our continued investment in the franchise. And looking at the main cost categories, there are two things not ready.
Speaker #2: First, our personal expenses declined by 4.5% quarter on quarter, mainly due to the release of provisions for outstanding holiday entitlements, so a clearly one-off driven effect.
Speaker #2: Second, our amortization by contrast increased by 14.6%, reflecting faster amortization of selected systems. For the first 9 months, total cost increased by 7.5%, or if you exclude BFG contributions, by 7%.
Speaker #2: And this mainly reflects higher personal expenses. And continued investments in technology and security. Our strong revenue generation, combined with this disciplined cost management, resulted in our cost-to-income ratio of 29.1% in Q3.
Speaker #2: And for Q4, we expect a seasonal cost increase and we positively update our guidance of the cost-to-income ratio. We expect to stay below 33% cost-to-income ratio in the full year.
Speaker #2: From efficiency, let me now turn to credit risk on slide 16. In Q3, impairment losses increased to $261 million, so $67 basis points cost of risk.
Speaker #2: And this increase was driven primarily by a significant provision for a single defaulted corporate exposure in the construction sector. So no broader deterioration in the portfolio quality.
Speaker #2: And as a result, the cost of risk and the corporate segment increased to $89 basis points. Excluding provisions related to this single exposure, the group's cost of risk would have been approximately 40 basis points in Q3, while the corporate segment's quarterly cost of risk would have been remained below the Q2 level.
Speaker #2: On a 9-month basis, the group's cost of risk would have been around 10 basis points below the reported figure. The retail portfolio continues to perform very well, with cost of risk remaining at 50 basis points despite sustained loan growth.
Speaker #2: So overall, despite the increase in Q3, the cost of risk remains below our through-the-cycle assumptions, and we therefore reiterate our full year 26 guidance of approximately 55 basis points cost of risk.
Speaker #2: This sound underlying risk profile is also visible in the portfolio quality indicator on slide 17. Across the page, the indicators point in the same direction.
Speaker #2: The group's NPL ratio improved to 2.9, supported by portfolio growth and the sale of impairment loans. Asset quality improved in both major business segments, and the Polish Saudi mortgage portfolio continued to perform particularly well.
Speaker #2: The NPL ratio for individual mortgages declined further. Coverage levels remained prudent. Total coverage, including stage 1 and stage 2 provisions, increased, while the coverage of defaulted exposures remained close to 50%.
Speaker #2: So these metrics reinforce our confidence in the quality and resilience of our overall portfolio loan book. Having covered the developments in all important account lines already, we skip the next slide.
Speaker #2: And close the financial review with capital management, starting with slide 19. And the central message is that we manage capital proactively. Using our broad toolkit to support growth and optimize our capital structure.
Speaker #2: During Q3, we completed two landmark transactions. In August, we executed a synthetic securitization of $1.1 billion commercial real estate loan portfolio. This was the first CE transaction backed exclusively by a commercial real estate lending package.
Speaker #2: Across our six securitizations, the cumulative reduction in risk-weighted assets reached year-to-date 8.6 billion. In September, we successfully placed our $250 million 81 transaction, and this was the first Euro-denominated 81 issuance by a Polish issuer.
Speaker #2: Demand was very strong and we were very happy seven times oversubscribed and very broad allocation. And we hope to have opened the market for more Polish issuer to support the growth of the Polish economy in the end.
Speaker #2: The transaction was already reflected in MRL ratio at the end of September, and it's recognition in Tier 1 capital remains subject to relevant approval process and is expected in Q4.
Speaker #2: The third element on the right-hand side of the planned transition of the on the right-hand side of the page is the planned transition to the foundation internal rating-based approach.
Speaker #2: In September, we used non-objection approach FSA, and the implementation therefore is planned for Q4 2026. And it's expected to reduce risk-weighted assets by approximately 10 billion Polish zloty in Q4.
Speaker #2: Collectively, these actions optimize our capital structure and expand our capacity to finance profitable growth. Turning to slides 20, you see that our capital position remained comfortably despite the 2% founder cycle buffer comes in at the end of this quarter.
Speaker #2: Risk-weighted assets increased only marginally during the quarter as the impact of strong business growth was largely offset by the capital relief generated by our securitization.
Speaker #2: And given the recent volatility in global and Polish government bond markets, let me also provide some context on the sensitivity of our capital position to movement in bond yields.
Speaker #2: The average duration of our treasury bond portfolio was below 2 years, and shorter than the market average, which limits the impact of rising yields.
Speaker #2: At the end of September, the negative valuation of that securities measured at fair value through other comprehensive income amounted to only $29 million and was therefore fully material to our capital position.
Speaker #2: This limited sensitivity reflects the structure of the portfolio. Approximately 90% of the bond interest rate risk managed by us in the treasury is held in portfolios classified as hold to collect, so in line with our intended investment strategy.
Speaker #2: And here, our capital base therefore remains very robust, with ample headroom to support business expansion and our planned shareholder distribution. And now let me summarize the financial review with our four messages of the quarter.
Speaker #2: First, growth. Loans increased by 18%, deposits by 19% year on year. In Q3 alone, the gross loan portfolio increased by more than 10 billion, the highest quarterly increase in our history.
Speaker #2: This was broad-based and translated into further market share gains. Second, profitability. We delivered the highest net profit in our history, record revenues all-time highs in both net interest income, net fee income, and the rebound in the net interest margin.
Speaker #2: Third, strategy execution. We continued to develop solutions and services that enhance the client experience and simplify everyday banking. While maintaining best-in-class efficiency and disciplined risk management.
Speaker #2: And fourth, capital build capacity. We turned earnings, securitization, and the 81 issuance provide a strong capital foundation for continued growth and future shareholder distributions.
Speaker #2: And finally, let me set these results now in the context of our full-year outlook. Following our strong performance in the first nine months, we expect full-year revenues to be around 2% above the 2025 level.
Speaker #2: We expect the cost-to-income ratio to remain below 33%. We will continue to manage credit risk prudently as the business expands and expect 55 basis points cost of risk for the full year.
Speaker #2: And we expect business volumes to continue to grow faster than the market. So to sum it up for this quarter, we enter the final quarter with record earnings and improving margin and robust capital position.
Speaker #2: And this gives us all confidence in delivering our full-year objectives and continuing to create value for our shareholders. And with that, I'm now handing over to Martin for the economic outlook and afterwards we are happy to take your questions.
Speaker #1: Good morning. So we are now operating in a quite strong economy. GDP growth is hovering around 4%. We estimate that it's a little bit above the capacity of the economy, so output cap is positive.
Speaker #1: It is we are now close to the top of the cycle, so the next quarters are likely to bring a little bit less of economic growth.
Speaker #1: We estimate that even though this year GDP growth is going to amount to 3.9%, next year it will be closer to 2%. The main reason for that is slowing investment activity and also slower consumer activity, but as for now, consumer confidence indicators stay high.
Speaker #1: We are not seeing any changes in the market, so the market is very stable. Wage growth is amounted to 6% nominality, so it's also more or less consistent with price stability in the long term.
Speaker #1: However, recently the economy was struck with a cost shock driven by oil prices, and most likely also in the coming months for prices. And right now, this shock is going to elevate consumer price inflation to more than 4% at the start of 2027.
Speaker #1: And this elevated growth of prices is going to last at least several months. So there is a high chance for this to translate into broader price pressures.
Speaker #1: In that vein, we expect MPC monetary policy committee to increase interest rates by 75 basis points in order to keep core inflation stable. It is now running at 3%.
Speaker #1: Also, in this quite strong economy, we are seeing that the monetary aggregates are strong as well. Credit activity is going quite fast. Deposit activity as well.
Speaker #1: But as economy is slowing down next year, we also expect credit growth to slow down as well. But still, the growth rates are going to be decent.
Speaker #1: Government bond yields have risen have risen of late. There are at least two culprits for that. So first of all, higher inflation and expectations of higher rates.
Speaker #1: Secondly, we are seeing also asset swaps that have widened recently, reflecting partially higher sovereign risk. And last but not least, we are seeing that in the international market, there is more and more competition going on for capital also from the part of enterprises involved in artificial intelligence investment.
Speaker #1: So this is also putting pressure on yields right now. In these circumstances, as noted is under slight depreciation pressure. As I'm speaking, we hit 440 in European land.
Speaker #1: This depreciation pressure may be kept in the next few months. So this is also one of the reasons why we think that MPC is going to decide to increase interest rates just to keep this depreciation pressure in check.
Speaker #1: Thank you.
Speaker #2: Thank you very much, Martin and Pascal. And now we start our Q&A session. First, the first question on the current sensitivity of the NII to a 100 basis point change in interest rates.
Speaker #3: Yeah. Thank you for the question. So it has barely moved from our Q2 information. So we are talking about, again, 700 million Polish zloty for 100 basis points move in all rates.
Speaker #3: And what is very stressed every time as we also have operational check in Slovak plus also that our business and the corporate segment is US dollar and euro heavy.
Speaker #3: There is the majority of the 700, roughly 500 million Polish zloty related to a Polish rate move. And the other 200, roughly is attached to the other currencies we're working in.
Speaker #2: Thank you. Now we have a list of questions from Jovan. So I'll start with Q4 pipeline for corporate lending and what where should we see your next quarter's level of mortgage origination after such quarter?
Speaker #3: Yeah, that's a good question. So I mean, for me, what is very important and I stress it, when we start with the last topic, more than 8 billion of new sales on mortgage loans that is extraordinary.
Speaker #3: I also said in the speech, the question which comes first is how actually you achieve that. And luckily, this counts for all our businesses, not just for mortgage loans.
Speaker #3: We are achieving that with our existing clients in the majority. So we know them. And they are taking more and more and more our services and our capacity into consideration.
Speaker #3: And secondly, how actually can you really get this solid street? Because obviously, normally, if you increase such strong and on a mortgage loan, it's more than 70% higher production than last year.
Speaker #3: We are running a very digital operation. So this bank is really, as a platform concept, built and therefore we can cope with that. That means for us, when you have seen that the market high single digit has grown and we have double digit grown, therefore we are capturing market share.
Speaker #3: And this is our expectation forward looking as well. And we don't see from today's perspective any difference in the latest prints of our new sales.
Speaker #3: That this should fade away. So the conclusion is we expect to grow faster than the market. And here it means double digit.
Speaker #2: So given such long growth already at this stage, what do you think about 2030 targets?
Speaker #3: Our 2030 targets is to bridge the 10% in all our core categories and for us, it has not a clear view when it will happen.
Speaker #3: But we will definitely want to exceed it. But one other thing is also very important. That was the main message of this quarter. We are growing profitably.
Speaker #3: So for us, it is not just chasing volumes at any price. If there is not the margin, attached to it, which we need to grow profitably from a shareholder perspective, then this is something you would not pursue.
Speaker #3: But luckily, we are currently seeing lots of opportunities to further profitably grow.
Speaker #2: Okay. Now, some more detailed questions about our results. Can you explain a rising interest income from securities despite visibly lower balance in Q3 versus Q2?
Speaker #3: Yeah. So the balance of the debt securities has increased slightly between the two quarters. So that is actually the explanation to it. And also the NII in general is one more interest rate day.
Speaker #3: In this third quarter versus the second quarter, and therefore you also get an NII up.
Speaker #2: This is what we see in the in the statements is the it decrease of the balance, but the average balance.
Speaker #3: The average balance has increased exactly slightly. And that is then maybe not visible on this chart, but it is the fact that we have an average a higher and therefore also more supportive income based on the portfolio.
Speaker #2: Thanks. What are the costs of the latest large SRT and where are they booked?
Speaker #3: So I mean, we are not in detail discussing obviously the cost. How do we derive actually if we do an SRT and if it makes sense for us, we every time measure RW efficiencies.
Speaker #3: So how much does it cost us when we sacrifice a portfolio to get lots of investors and this transaction we had a significant portfolio of investors who were interested to partner with us.
Speaker #3: And then we compared what is the average we can earn with our different client groups. And this is plenty of headroom. So it is increasing our efficiency to do currently segregation.
Speaker #3: That has changed also over time because as we started three and a half years ago with our first sacralization, the clear message was that we need to have capital relief because here we had been under pressure of the Swiss frank legacy risk.
Speaker #3: And now we are really looking to fewer efficiencies.
Speaker #2: Can you share your view on 2027 a bit, especially NII volume growth and cost trajectory?
Speaker #3: So as we guided 2026, that we are 2% higher than 2025 in terms of total revenues. That is supported especially by our volume growth and therefore fooled in NRI trajectory.
Speaker #3: So we also expect in Q4 higher NRI than Q3. In the fees, we expect that the normally seasoned lower fee in Q4 versus Q3 is also coming in.
Speaker #3: But explaining that into the next year and also into the next years, we expect revenues is growing faster than our cost base. And therefore net profit supposed to be in the next year stronger.
Speaker #3: Then what we have seen this year. And that is how far we can go currently with our guidances.
Speaker #2: Thank you. Apart from securitization, where were there other factors that contributed to the lack of growth in the credit risk requirements despite the increase in the portfolio?
Speaker #3: Not other factors which would be massively mentioned. So we based on increase of credit risk by our business lines. As they grow their customer base.
Speaker #3: So this was an increase. And on a similar magnitude, we saw the release of the sacralization's compensating that.
Speaker #2: Do you see any. Effects of AI adoption on your cost base?
Speaker #3: So on AI, that's very interesting. I mean, you know us as one of the most digital banks in Europe. So doing a step back from AI in general and we invested every single year also as we have been under pressure with the Swiss frank environment, heavily laying on our back.
Speaker #3: We invested every single year more in our infrastructure, more in our capabilities of delivering digital services. And that means also here that we are heavily investing also in AI, the AI related use cases.
Speaker #3: We have use cases broadly implemented. We have not obviously every of those use cases entertained externally because there is a competitive edge also to it.
Speaker #3: But a few of them as we use it in complaints management or even in our finance operation that you can't ask the tool about any of this figures which makes it very convenient for the CFO.
Speaker #3: To find them in plain language your fact as a result. We are not seeing AI as an efficiency driver. We are seeing an AI as an enabler for further growth.
Speaker #3: So for us, the tools and also the capabilities our colleagues in our house can use is less of reduction cost-wise rather than funding the further growth without adding additional colleagues to our journey.
Speaker #2: Thank you. Why did the CEP1 reduce quarter on quarter noting just 1% risk weighted assets growth? What is the pro forma CEP1 ratio for Q3 profit?
Speaker #2: What does the pro forma capital ratio include? And do you expect Enbrel supply in Q4?
Speaker #3: Yeah. Starting off with the Enbrel supply, we are not expecting in Q4 Enbrel supply, but we conducting probably next year two senior non-profit insurances.
Speaker #3: In the amount of total roughly 800 million euros. We will probably split that in two half. And the first Enbrel supply you could expect from us is around Q1 next year.
Speaker #3: Coming to the capital trajectory, what we've seen and this is every time you know retro perspective then done, that we include retro perspective half years results in obviously our capital ratios.
Speaker #3: Therefore the capital ratio is increased. Every time with a time lag, then that is the I would say major answer why we see slight drop because we have applied that retro perspective if we now would proforma next to the 81 we have announced in the speech that this would bring us to 14.5% if we proforma included if you would then also on top add up the currently net profit we have generated in this quarter disaccount again of 0.5 percentage points.
Speaker #2: Thank you. Can you elaborate on the strong growth in retail mortgages especially? What are we doing different versus peers which is helping the market share?
Speaker #3: For us, what we've seen here is that first of all, we are growing with our clients. And that is the first message that you don't need to entertain externally because if you have the client here already in-house and also understand that there would be a demand because we are very well organized in terms of reading our data.
Speaker #3: This is for us the main source of generating new sales plus that we don't have a limitation in terms of volumes because as I said we're working on a platform and luckily also the digital solutions we have built here must have a competitive edge as our clients are not complaining when they are supporting us in the transition to give us the mortgage loan even in refinance perspectives.
Speaker #2: Can you touch upon competition you're seeing from new DG banks such as Revolut?
Speaker #3: I mean, in general, Poland is a very competitive landscape. And the good thing is everyone is also kind of digital operating. And therefore we have not seen for a long time really new incumbents making an impact.
Speaker #3: Now for the likes like Revolut, they obviously are here and also gaining clients. That is something we're observing. And also we find our own solutions.
Speaker #3: But this is not different to other universal banks where we also see that they have competitive edges and here also we try them to find our answer which hopefully keeps the clients then in-house because for us the most important thing is that we generate value for our existing clients.
Speaker #3: Therefore you see that we are broadening in the ecosystem have built in our infrastructure for instance in the retail environment something like e-commerce
Speaker #4: in that the convenience of the clients is high and that the clients stay with us next to typical banking products.
Speaker #5: Okay, now on net interest margin and deposit costs. What is your net interest margin outlook for Q4 '26 and 2027 at stable rates? And how much room is left for further deposit repricing?
Speaker #4: So on the net interest margin, as we have seen rebound, and this was quite a big rebound of 10 basis points quarter over quarter, we expect that this is not yet the end.
Speaker #4: So Q4 is supposed to be again slightly supportive. But then we are long-term feeling us comfortable between 2.5% to 2.6% of the net interest margin.
Speaker #4: It every time is an opportunity if interest rates are changing. So under the circumstance of no change, I would keep it with that. And what was the second question?
Speaker #4: About the deposit repricing? I mean, the deposit repricing, you know that we are not an accredited price strategy here. So therefore, I don't see any further actions to be done on that side.
Speaker #5: Then on tax and capital, does your tax guidance assume the bank corporate income tax rate falls to 26% in 2027? And how will you use the about 10 billion Polish zloty risk-weighted assets released from FIRB between growth and distributions?
Speaker #4: Okay, so on the tax side, and this I really would like to stress, if you look into the banking sector itself and I take our figures, we have an effective tax rate higher than 37%.
Speaker #4: And this does not include that the banking sector on top of that pays also the balance sheet tax, which is 44 basis points. If you take the total, which is the taxation of the company, and you compare the financial sector of Europe, then we are among the top taxpayers in the financial services.
Speaker #4: And that is something where you can do on a short period of time, but if you do that too long, you obviously give a disadvantage into a certain sector and maybe then even have— especially when we're talking about the banking sector, a negative effect on the economy.
Speaker #4: So this is the status quo, and therefore for me it is very clear that our base case is that the tax rate as intended in the law is going down and comes back to more normalized levels.
Speaker #4: So we surely expect that next year the tax rate is going down from the 30% to the 26% as it was intended. The second topic on On FIRBB, I mean, this is part of our strategy in our capital planning, so there is not that you would say Again, we now separately move into either distribution or in volume growth.
Speaker #4: We managed the capital position in general, and here we have the target of being on the CET1 at least 2.5 percentage points above the regulatory requirements, despite that we want to capture further and further market share growth.
Speaker #4: And here it's not changing our assumptions. So we want to further grow faster than the market. We will keep the capital on safe levels, and we intend to pay the dividend next year on the distribution of net profit 30%.
Speaker #5: Then a question on consumer loan legal risk. What is your exposure to the CGEU ruling on interest charged on non-interest loan costs, and what are the trends in pre-credit sanction cases?
Speaker #5: inflows and your win rate?
Speaker #4: Yeah, so the win rate, I already said in our speech, the vast majority— and if I'm talking about vast majority, I mean the vast majority— of the court cases we have won.
Speaker #4: So this is actually very good news. And the second, and this counts for SKD as well as the interest bearing on fee-related credit, This is for us, in terms of risk severeness on the portfolio level, smaller than most of our peers because we stopped issuing this kind of product as one of the first banks in already 2023.
Speaker #4: We never had as a bank in our business model a huge exposure to this cash loan, and this was the loan which is in question.
Speaker #4: driven product, and therefore also the impact for us is relatively small. I said that we built in the quarter, and you see it also on one page in here, Slide 14 is visible.
Speaker #4: We have built legal provisions, but please take the legal provisions as they are. They are for future potential negative rulings. It is kind of a caution instead of that this would be today's negative result.
Speaker #5: Do you still expect some risk-weighted assets regulatory relief from the first quarter '27? And is the risk-weighted model update included in the pro forma numbers?
Speaker #4: So in the pro forma numbers, this €10 billion FIRB approach is not included because this is then earliest for us implemented in Q4, and we expect to have it fully implemented in Q4, and therefore the full €10 billion supposed to be in Q4 visible.
Speaker #4: This is how we guide it today, and it will be not an additional effect next year if the €10 billion comes through in the 4th quarter.
Speaker #4: And on the question, what else is regulatory on the horizon, we don't see anything else currently which would be significant on the regulatory front, neither negative nor positive.
Speaker #4: on the horizon.
Speaker #5: Now, the risk costs in the corporate banking— can you talk about how you are managing the risk on the one-off corporate exposure and to avoid similar situations?
Speaker #5: Going forward, what were the reasons for the— this NPL formation? And how should we think about any recoveries from this NPL?
Speaker #4: Yeah, I mean, that's part of banking. I just wanted to allude that this spike of cost of risk is driven by one exposure and has nothing to do with any
Speaker #1: deterioration of any of the sectors. That is actually the core message. We're not talking about single exposure, and obviously this can every time happen, especially when you're running such a big
Speaker #4: bank like mBank. And here I would not count too much on this one topic. I just wanted to position there is a very resilient portfolio we are having.
Speaker #4: And even more important than the pure cost of risk, and that is how we look into
Speaker #1: the portfolio development is that all the KPIs which are risk-related— NPL ratio, coverage ratios— are actually improving. And as Marcin Mazurek was saying, there's currently on the horizon
Speaker #4: nothing from an economic point of view which would massively deteriorate us. So that is actually very good news, and this is an isolated separate case.
Speaker #5: I think the last question that I see, what was the reason to issue AT1 in euro instead of zlotys?
Speaker #4: So there are a few reasons for it. First of all, we made a zloty trade already and that was very successful, and that is the vast majority.
Speaker #4: Then the consideration to go into a next AT1 is because you can fill the bucket of 1.5%. As we are growing as a company, we have there then again some left room.
Speaker #4: Therefore, we decided to go out with an AT1. We've seen that especially in international sites, there is massive interest in Polish assets and therefore also very competitive pricing.
Speaker #4: And that was the consideration economically, plus that we said for Poland it is super important that we further get international investments. And either you invest directly or you invest indirectly in these kind of structures.
Speaker #4: And that is something where we also took the chance to do something for the first time. And it is not easy to do something for the first time because you have lots of discoveries.
Speaker #4: But that was another argument why we said no, we want to do it because this opens the market for Poland in general.
Speaker #5: There is one more question which came up. What can you comment on payout policy?
Speaker #4: On the payout policy, dividend policy. So on the dividend policy, we have said that we starting with 30% and ramping it up to 75%.
Speaker #4: We have not defined how this ramp up towards 2030 is exactly done. Here we also have no new news. For us, there's one thing very important.
Speaker #4: Yeah, this is a company at the Warsaw Stock Exchange. And we want to generate shareholder value. And we want to obviously come back to normality and to shareholder value.
Speaker #4: It is also counted that there are regular dividend payments. And for us, coming back into a very strong business model we used to have, and now seeing the momentum, we will start and we will continue paying regular dividend, and we will start, as I said, with 30%.
Speaker #4: Next year, and I don't see currently any objections that this would bring up the possibility.
Speaker #5: Thank you very much, Pascal. Thank you, Marcin. Thank you, ladies and gentlemen, for your attention and questions, and have a nice day. Thank you so much.
