Maciej Reluga: the link available online. You can also send your questions directly to my email address. The presentation is available on the bank website. To opening the call, we are opening the conference now over to the CEO.
Michał Gajewski: Good morning, ladies and gentlemen, and welcome to the Erste Bank Polska press conference. This is an exceptional year for us. In April, we went through a rebrand. Before we move on to the Q3 result, I would like to say a few words about how we are building the Erste brand in Poland. Just before the rebrand, spontaneous awareness of the Erste Bank reached up around 3%. By September, it reached already 35%, and this shows that in a very short time, we have managed to lay solid foundations. Erste is now far more visible in the media and public space, and brand awareness is growing steadily.
Michał Gajewski: For us, this is only the first step. We want to build a brand that our customers genuinely like and choose. Our ambition is to build the first banking love brand in Poland. This ambition rests on solid foundations. We have a reputation as a stable and responsible bank, which we have spent years earning. We have a new, interesting brand on the Polish market, and we have more than 200 years of experience with Erste Group. We have our own methodology based on consumer science, which we are further strengthening with technology. All of this to even better understand our customers and create exceptional experiences for them. We are currently working on a new strategy. I do not want to give too much away just yet. I can say that customer experience and the ambition to build a love brand will play an important role in it.
Michał Gajewski: Like Erste Group, we want to become more involved in financial education and in building good financial habits of our customers. We believe that a bank's role is not only about providing financial products. We want to help people make better decisions about their money and build their financial confidence. All of this has a very specific business dimension. We believe that a stronger brand, a better customer experience, and greater trust will boost our acquisition potential and the bank's further growth. We see that already in the result of the Q1. Our ambition is not only about customers. We want to be the best bank also for our shareholders. At the end of the Q3, in terms of market cap, we ranked first among private banks, second among all banks listed on the stock exchange, and third among all companies in the WIG20 index.
Michał Gajewski: This valuation reflects the recognition of our business model. We are building our position, like I said, on solid foundation.
Michał Gajewski: It has been recently noted by our audience, a poll awarded us for the best service for our clients. Our net profit is PLN 6 billion, 261 million, and that was, of course, burdened by the tax that grew by 51%. In Q3 alone, that was PLN 1 billion, 490 million. Let's move to slide number 4. There are a few pieces of information. We've been actually servicing 6.2 million clients. Now we have 4.2 million digital clients. The majority of them use the mobile application, and we have here a growth by 10% year on year. After Q3, we won 481,000 new customers. At the end of September, the deposits of customers totaled PLN 252 billion, and that grew by 14% year on year. Customer funds totaled PLN 287 billion and grew by 15%, while the loan portfolio in gross terms was PLN 183 billion and grew by 11%.
Michał Gajewski: Total assets grew by 4% year on year and reached PLN 330 billion. Slide number 5, key financial results. As I've mentioned, after nine months, the net profit was PLN 3 billion, 691 million, while in Q3, it was PLN 1 billion, 490 million. The NII totaled PLN 9 billion, 468 million, while in Q3 alone, it was PLN 3.3 billion. While in Q3, it grew by 6.5% quarter on quarter. The net fee income after nine months was PLN 2 billion, 182 million, while in Q3 alone, it was PLN 643 million. That was driven primarily by our intensive efforts in the acquisition. I will tell you more about it when we will be discussing the net fee income. Total income for three quarters were PLN 12 billion, 113 million and grew slightly.
Michał Gajewski: In Q3 alone, it was PLN 3 billion, 61 million and remained stable and comparable to what we saw in the previous quarter. Our capital position remains strong. Our Tier 1 was 18.53%, while the total capital ratio stood at 18.75%. These ratios reduced by 54 bps and 68 bps respectively compared to the previous quarter. This was driven by the quick growth in business and the growth in risk-weighted assets. Let me highlight that the KNF agreed to exclude from the ratio the operational risk related to Santander Consumer Bank, which impacted our risk-weighted assets by PLN 1.6 billion. This gives an attractive return to our customers.
Michał Gajewski: We remain among the most efficient banks in the entire sector. We have excellent liquidity, LCR at 187.3% at the end of September. Slides 6 and 7, this is selected business data. After the first three quarters in the retail segment, the number of digital payments rose by 17% year on year. Very important information about acquisition. The number of customers acquired increased by 13% year on year, 15% year on year, that's the growth of platinum customer portfolios, and also to the same extent, our affluent customer portfolio. So, two most active and most profitable groups in the retail segment. We maintain 4.9 million personal accounts. We have opened 377,000 new accounts. We granted PLN 12.1 billion in cash loans. In Q3 alone, we granted PLN 4 billion in cash loans, that's 20% up year on year.
Michał Gajewski: New mortgage origination, PLN 11.7 billion. In Q3 alone, that was PLN 4.9 billion. Investment funds, well, here we have already reached almost PLN 35 billion, and our market share is 10%. The SME segment, a strategic, very important segment. SME customer acquisition rose by 97% thanks to our promotional offer, among others. Over three quarters, we opened more than 115,000 business accounts, and this is twice as many as a year ago. In Q3 alone, this was 56,000. We now have more than 657,000 SME customers. According to a ranking by one of the leading business media outlets, we are now second in volume by number of SME customers, and we are closing the gap to the leader. This is, of course, the effect of the acquisition campaign and our special offer that we will be talking more in detail about on the following slides.
Michał Gajewski: We granted PLN 4.8 billion in loans to customers in the segment. That is 22% more than a year ago. In Q3 alone, that was PLN 1.6 billion, so an increase of 23%. We continue to develop digital processes for SME. Volume of loans granted end-to-end online through retail service process has more than quadrupled. So, financing sold online already accounts for almost one-third of the total number that is in the SME segment. We have had a very good quarter in corporate banking. We have seen a 15% growth in loan volumes and credit units for this segment. Customer activity in remote channels is growing. Also growing is the number of customers using the mobile app. 26% of customers in the corporate segment now use mobile banking. In corporate and investment banking, very good performance.
Michał Gajewski: For many quarters, we have been the leaders in treasury transactions, number one, top one for a number of quarters now. Income from M&A rose by 48%, and income from market sales to financial institutions increased by 34% year on year. So, very good quarter for corporate and investment banking. Slide 9, gross loans. As I mentioned a moment ago, when going through activity across all segments, we are seeing strong loan growth everywhere. You see the details on the slide. The portfolio structure remains diversified. I want to emphasize that, as always, the growth must be profitable. This is our top priority. Customer funds, slide 10. The deposit base up 14% year on year, 3% quarter on quarter.
Michał Gajewski: In Q3, we are growing individual customers' current account deposits much faster than the market, almost twice as much as the market grew by 1.6%, while we grew by as much as 2.7%. Individual customer deposits amounted to PLN 131 billion, business customers, PLN 121 billion. That is up 24% year on year and 5% quarter on quarter. Investment funds up 21% year on year. We now manage PLN 37 billion. Good result here. So total customer funds, PLN 287 billion, 15% more than a year ago, and 3% more quarter on quarter.
Michał Gajewski: Now, profit and loss account. For three quarters, the net interest income totaled PLN 9.5 billion, and that actually is the same what we generated last year in Q3 alone. The net interest income grew by 6.5% quarter on quarter, and by 3% compared to Q3 2025. That was despite lower interest rates. So, we can boast better net interest income than a year ago. This is the follow-up of the quick growth in the balance sheet, both on the credit and the deposit side. What we are happy with on the deposit side, we saw the growth in current deposits. Over the period of three quarters, interest income declined by 6%, while interest expense reduced by 22% year on year. As a result, the net interest margin in Q3 totaled 4.42%. Okay, let's move to net fee income, slide 12.
Michał Gajewski: Net fee income for three quarters totaled PLN 2 billion 182 million. In Q3 alone, it was PLN 643 million. I've already mentioned that I will tell you more about what happened in this area. This was related to the acquisition proposal for SME customers. The effect of this investment that we made in Q3, that was the cost of PLN 129 million. This, if we were to compare it to the previous quarters, we didn't have this acquisition and the special offer before. Of course, the return on this investment is expected in the longer run, but we've been analyzing the first results, and I can comment on that. We are happy with the effects. We acquired prospective customers in this segment. More than two-thirds of the newly acquired customers meet the activity requirement because they are active when it comes to transactions.
Michał Gajewski: The level of balances in the case of the newly acquired customers is close to the average for the whole SME base. The share of taking out loans in this segment is as much as 10%, which is consistent with our business case. Given that this was a short period of us being active, this is really satisfactory. As much as half of these customers have opened their personal accounts with us. So, there is a cross-sell potential, and we are actually leveraging it. So once again, let me say we have 657,000 customers in the SME segment, and that's the growth of 17% year on year. Let me preempt the questions after the previous call.
Michał Gajewski: In Q4, we can expect a little bit higher cost under this fee line, but we believe that this investment will be the driver of our further dynamic growth, not only when it comes to the number of customers, but also when it comes to our profits. So, our ambition to become number 1 in this area in Poland is sustained. We keep investing in it. It's a good year to make investments, and you know why. On a year-to-date basis, we saw really good results when it comes to asset management fees. We grew by 31%. We saw good fees when it comes to guarantees, up 29%, credit fees up 18%. As a result of that, the gains from capital markets increased by 22%, while on loans and insurance by 12% year on year. Let me wrap up on total income.
Michał Gajewski: It's the ninth quarter in a row when we generated PLN 4 billion in total income. We are happy with maintaining this outturn despite the interest rate cuts. The total income of the group over three quarters exceeded PLN 12 billion zloty. This is a little bit higher year on year and stable quarter on quarter. Year on year, the income from other operations was really good. The cost grew by 76%. In Q3, we didn't have a dividend as we used to have it in Q2, so it was lower. Net trading and revaluation at PLN 317 million, and major growth here in this line. In Q3 alone, we had a reduction in this item driven by the lower gains from the sales of debt financial assets and lower income from asset securitization. Operating costs, slide number 14.
Michał Gajewski: After nine months, the costs were PLN 4.4 billion, and there is a growth year on year, driven primarily by rebranding and integration. This is also driven by the high contributions to the Bankowy Fundusz Gwarancyjny. The rebranding costs after nine months totaled PLN 226 million, of which PLN 51 million was spent in Q3. Integration costs over nine months were PLN 158 million, of which PLN 51 million as well. Our estimates when it comes to the cost of integration and rebranding indicate that in 2026, our expense in this area will be lower by roughly PLN 16 million than what we budgeted. Yet the progress in this area will be continued in the next year, so we will have the deferral of PLN 16 million from 2026 to 2027. So, 2027 will be the year of continued investments into the future.
Michał Gajewski: But our focus when it comes to costs for 2027 is the growth in costs in accordance with the growth in inflation, or maybe at a bit slower pace, despite moving that PLN 16 million to that year. The cost-to-income ratio for the group was 36.1% after nine months. The comparable cost-to-income ratio, that is excluding integration, rebranding, and Bankowy Fundusz Gwarancyjny costs, was 29.3%. Loan loss provisions and the quality of the loan portfolio. That's slide number 15. On the consolidated basis, the net balance of provisions for expected credit losses was PLN 367 million, and in Q3, PLN 117 million. The average cost of risk was 30 bps, which is slightly better than what we saw in the recent quarters. The quality of loan portfolios remain sound and resilient to changing economic landscape. This is confirmed by our regular stress tests.
Michał Gajewski: We run these stress tests on regular basis. The non-performing loans ratio was 3.4%, and it improved compared to the previous quarter. So, we've been consistently executing our NPL management strategy. In Q3 alone, we sold NPL receivables worth PLN 177 million, which generated PLN 57 million in gross profit for us. In Q3, we did not introduce any major changes to the methodology and models used to calculate the expected credit losses. Okay, and the last slide to summarize it. I think that we recorded solid results, and we consistently are taking efforts to grow our business. We actually continue integration and rebranding. We continue investment, but we keep focusing on our clients. We continue investments into our further development, maintaining cost discipline, and maintaining high activity business, high business activity levels. The gross profit was PLN 6 billion, and the net profit was PLN 3.7 billion.
Michał Gajewski: The key driver here was the corporate income tax. In the last year, we paid corporate income tax of PLN 1.5 billion. This year, it is PLN 2.2 billion, and the effective tax rate is growing, unfortunately. Of course, we try to manage it in the best way we can. As you know, we are one of the biggest corporate income tax payers in our country, not only in the banking sector, but when it comes to the economy overall. Total income was higher than a year ago, thanks to good interest and non-interest income. The costs were driven primarily by the cost of integration and the branding. As mentioned at the beginning, and let me highlight this again, our ambition is to be the best bank for clients, employees, and shareholders. We want to invest, to grow, and become a love brand. We have been strongly growing our balance sheet.
Michał Gajewski: Our acquisition activities and the fact that we are increasing so much the number of new customers, this actually reflects our determination to grow profitably further. In our growth, we are focusing on affluent customers, platinum, and in those segments, we grew by 15%, and we also focus on the SME segment, where we recorded the growth of 17% year on year. Of course, that is being driven by this promotional activity. Thank you very much for your attention, and the floor is yours.
Maciej Reluga: Thank you, Michał. We have received many questions, and some of them were probably asked before our actual presentation. This particularly relates to the SME special offer. Let me start with some, if I understood the macroeconomic question, growth in loans in 2027 and whether our loan growth can be continued at the same rate.
Maciej Reluga: Short answer, yes, we are optimistic when it comes to loan growth. The base is growing, so the question is, in 2027, will it be a double-digit growth or a high single digit? We will be focusing particularly on the segments we did before, so you can expect growth particularly in individual customers, consumer loans, and loans on the segment we are focusing on, as Michał has put it, that is SME. That is where you can expect growth. In 2027, we are optimistic, like I said. Slight slowdown in loans overall, just reflecting what is happening in the economy overall.
Maciej Reluga: Next question was to refer to the cost of risk. We expect continued positive macroeconomic environment in 2027, so forecasted cost of risk in 2026 and 2027, and questions about our guidance, where we can say, if we look at the previous quarters, cost of risk between 0.3, 0.4, 30, 40 basis points, that is the guidance for the next quarter. Now we have questions about net interest income and net interest margin. The first question is about a slight decrease in net interest margin. Apparently, the competition shows something else. What is the outlook for the next quarter and the sensitivity of the income to higher interest rates? Bernhard, could you take this question?
Bernhard Leder: Okay. Thank you for the question. Actually, we saw quarter-on-quarter quite positive development of NII with a quarter-on-quarter increase of 6.5%. You observed rightly that the main driver of the increase was a rather strong volume growth on customer loans, as well on customer deposits, which was also funding base for funding customer loans and also the portfolio. On the interest rate side, we see a very positive reversal of the trend due to the increase of the rates. Rates on customer loans increased stronger than rates on customer deposits. I think what we are seeing here is a bottoming out of the trend of the previous quarter, so I rather look positively on this.
Bernhard Leder: With regards to the second question, with regards to the sensitivity, this hasn't changed much. We are exposed to a sensitivity in rates, so if rates would decrease by 1%, we would have a sensitivity in NII over the next four quarters of around PLN 300 million. No big change expected in terms of our interest rate positioning here. What we've done recently is slightly increase the duration of our investment book, which would lead to a further stabilization of the margins.
Maciej Reluga: Thank you, Bernhard. We will continue with questions to Bernhard. We have some questions about costs.
Maciej Reluga: First of all, why the costs, excluding the cost of integration, rebranding are growing by 8%? What is the reason for the growth in staff costs? Were there any salary rises? If so, what was the increase in salary costs and the outlook for costs in 2027 and 2026? In the meantime, there is another question related to costs, whether the expected growth in operating costs will be below inflation, as what we are offset. This is related to the reported cost of the costs reported excluding the integration and rebranding. This is the cost including integration. Bernhard, if you could answer the previous questions, please.
Bernhard Leder: Yeah. I think I will answer first the question with regards to the personal expenses. I think you see two effects that, one is rather technical, which is in respect of the quarter-on-quarter in the increase. So, basically, you see this effect for our performance bonus accrual, you see actually in Q3. This is the quarter-on-quarter delta you can see. On the year-on-year delta, it is basically the full effect you see now from the salary increases that came actually in 2025. So, you have now the full year effect in Q3. When it comes to the outlook, what was mentioned before is, and also what Maciej now shortly answered, we see a moderate cost increase also in 2027 due to several factors.
Bernhard Leder: First, there is basically an overspill of cost for keeping spend on rebranding and integration in 2026 into 2027. We face, and I think this is to be seen by us, an increase or an uptrend of IT service provider costs, which is above wage costs. As we said before, as Maciej said before, 2027 will also be a continuous year of investment. Having said that, I think we are looking at a very modest cost up drift below inflation, including all side effects on integration and rebranding, as Maciej mentioned.
Maciej Reluga: Thank you, Bernhard. Let us move on. Now, let us go back to SME for a moment. There are a few questions, and I think a few of them have already been answered. But it is worth saying it again. How many customers we acquired during this special offer? Can you see any attrition, because there are other special offers for customers from the segment in other banks? The first question is quite general. What was this special offer about? How long it will last, and what are the total costs? Will it have a similar impact on Q4? But that has already been answered by our CEO, that the scale of these costs might be similar or a bit higher. Then, there is another question. Will this return come back to the levels prior to the special offer? Yes, so this will come back to regular levels.
Maciej Reluga: What is the outlook for fees? How temporary is this when it comes to SME campaign? Overall, the growth piece is quite solid. Let us come back to the figures and details related to the special offer and the competition.
Michał Gajewski: Thank you, Maciej. You have already gave quite a few answers. What is this special offer? PLN 5,000 inflows to the account. Plus, clients have to be active. Five card transactions a week for minimum PLN 1,000. Plus, they have to make payments to Social Security or tax office through our account. All the three conditions have to be met for the customer to get the money back of PLN 1,500 for maximum three months. They have to give us marketing consent. This is really a well-thought-over exercise. This is also related to our data-driven approach when it comes to understanding and the profitability of individual segments.
Michał Gajewski: After three quarters, as I've said, we won 115,000 accounts, which is quite more than a year ago. In Q3 alone, that was 56,000 accounts. We have 657,000 of these customers. Taking into account the results, and I've already mentioned that briefly, it turns out that our assumptions in business case are met, because we can see now that the average inflows to the accounts and the balances in the accounts are like the average for the whole SME base. We can see that as many as 10% of these accounts are the accounts with loans taken out. Finally, these customers opened personal accounts with us, and that was not a condition on the special offer to get this money back bonus. We are happy with the results. We will also see the impact of that investment on cost in the next quarter.
Michał Gajewski: We can see that these customers stay with us. We cannot see attrition. Getting ready for acquisition and investing into digital processes for the segment, the whole credit process is digital for the segment. This is all about these customers seeing and experiencing our bank with regards to all individual services. We think that this experience and not the initial promotion will actually be the determinant of customers staying with us. There is a really deep economic sense to invest in this part of the market and customer segments. We are determined to be bank number one for SME.
Maciej Reluga: Okay. I assume that everybody believes, just like us, that this is a good investment. There is another question referring to the cost of risk. Is it sustainable at this low level?
Maciej Reluga: Well, it depends on the macroeconomy. We know how much uncertainty is there.
Maciej Reluga: But given our current forecast for 2027, 30 to 40 bps is something that will be sustainable. The risk is declining when it comes to the economic growth. But if the question marks disappear, the situation will be stable. We have to emphasize that in none of our portfolio sub-portfolios, we have not seen any concerning phenomena that could actually suggest any deterioration, and that's what we mentioned the quarter before.
Maciej Reluga: Now, there will be a question to Bernhard, or two, referring to capital. The first one is, at the end of Q3 2026, what was the impact of securitization transactions on capital ratios, and what are the plans in this area? The second, has KNF actually imposed a P2G additional add-on capital requirement on the bank
Bernhard Leder: Yeah, thank you, Maciej.
Maciej Reluga: and other changes in this area?
Bernhard Leder: Let me explain you the risk-weighted asset change in general, because there were quite some changes in risk-weighted asset base. There was what was added in Basel, and securitization was one smaller effect in the whole picture.
Maciej Reluga: Tak naprawdę sekurytyzacja miała tutaj niewielki wpływ, także generalnie nasza baza aktywów zwiększył się o 5.6 miliarda.
Bernhard Leder: Five billion increase in risk-weighted assets, including CCR, CVA, and securitization, partly offset by the operational risk-weighted asset reduction by the discontinued operation of the Santander Consumer Bank, which Michał already mentioned, PLN 1.6 billion, and market risk-weighted assets increased slightly by PLN 0.2 billion. So the biggest change was within actually the credit risk-weighted asset. As you can imagine, due to our quite significant loan increase in our books, the credit risk-weighted assets increased by PLN 7.2 billion. This was then partly offset by the CCR and CVA effect in total of PLN 1.9 billion. Securitization, a small effect, reduction of PLN 0.3 billion of the risk-weighted assets. Securitization will continue to be an actively used steering tool of our risk-weighted asset base in order to optimize our capital usage also going forward.
Bernhard Leder: Second question, you may have seen that we put the current report out yesterday with exactly the topic of the Pillar Two, there was a zero add-on from the KNF, so no change there.
Maciej Reluga: There is one more question. There is no good conference if the AI issue is not tackled. But seriously, there is one question because there are no more questions. Michał, could you answer it? Can you see any tangible effects of using AI in the bank?
Michał Gajewski: Let me start that we have very pragmatic approach in this area. First of all, we are reviewing our business model processes and we simplify them. Only then, based on use case, we decide whether we can actually apply artificial intelligence solutions or not. Of course, we are actually making analysis in this area, and of course, we use AI in some areas. The tangible effect is that despite the significant growth in the business, balance sheet, and transactions, we do not hire additional people.
Michał Gajewski: We think that AI will give us more benefits when it comes to making our proposition more tailored for our customers, and this will facilitate further growth in business and in the balance sheet. Undoubtedly, the new strategy will include the element related to using AI. But we have very pragmatic, hands-on approach in this area. We always need to see a return from that, and it will always have to involve simplification of processes.
Maciej Reluga: Thank you, Michał. Agnieszka, I can see that we do not have any more questions. We actually exhausted all questions asked, so thank you very much. Have a great Friday and a good weekend. Thank you.
