[Company Representative] (Bank Millennium): Welcome to Bank Millennium Q3/9 M 2026 Results Call. With us, we have, as usual, our CEO, Mr. João Bras Jorge, and our CFO, Mr. Fernando Bicho. The structure of the call is probably typical. First, we will start from opening remarks and comments on the main business achievements from Mr. Bras Jorge. Then our CFO will guide you through the results, and then we will be ready to answer your questions. To remind, you have to click on the presentation on the website or use the one offline because we will not be projecting. Thank you very much.
João Brás Jorge: Good morning and thank you very much for attending these presentations of the results. Let's start with slide four. We are almost closing the year, so it is a good moment to see our business performance before going to the financials. The results are very good in the business terms. In these nine months of 2026, the growth in deposits, total deposits, was 11% year-on-year. The growth in credit, net loans, grew 11% year on year, with 7% in consumer loans, so keeping performing very well. 5% in PLN mortgage, which shows a recovery on this segment. An outstanding 25% in net loans for companies, is showing that we keep this strong trend of growing the corporate side as it was presented in our strategy in 2024. 11% in leasing year on year, and 21% in investment funds portfolio year on year.
João Brás Jorge: Also, in the quarter, we closed with 3.4 million active customers in retail. This is a strong growth since one year ago, so we are going in our direction, in the strategy to achieve 3.7 million customers at the end of 2028. We achieved already 95% of the digital activity of these active customers. Also very impressive are the increase on the sale side. If we just look for the sales, in the first 9 months of this year, we achieved PLN 6.8 billion in consumer loans, and this is 26% higher than the first 9 months of 2025. In mortgage, the sales were PLN 7.9 billion, which is 224% higher year on year. Corporate loans, PLN 8.3 billion of corporate sales in loans, which is 25% year on year. Leasing, PLN 3.4 billion, which is 22% year on year.
João Brás Jorge: In terms of factoring, using, for example, the turnover, we are at PLN 25.7 billion, which is 22% year on year growth. If we go to slide 5, we show the traditional tracking of our strategy. The strategy, as you remember, was presented at the end of 2024, and for the 4 years from 2025 to 2028. As you can see, the strategy targets in the different areas are being achieved on a regular basis and according to our plan. Some we are already achieving the final goal, as for example, the digital penetration of active customers. Others will take a little bit longer, like retail primacy. Anyhow, all the targets are being achieved, taking into consideration the calendar that we are having and the moment that we are having on time.
João Brás Jorge: Also, it is important to see that the revenue targets, the efficiency targets, the risk targets in terms of non-performing loans and capital, and also, of course, the NPS of customers and the engagement of the employees are also on track to be delivered in the strategy time. Looking for slide 6, it is also interesting to show. So it is a benchmark. The benchmark that we have at the moment of the Polish banking sector is just from June, which means 1 and a half year of the strategy. When we compare the end of 2024 with the H1 of 2026, we can see that we perform at 22% growth in deposits of individuals, which is the second-best performance in the market. For example, in corporate loans, we perform 38%, which is the highest growth in the market.
João Brás Jorge: This was achieved with a major improvement in return on equity, also outperforming the market, and also with this very prudent management of the risk, improving the NPL ratio for 3.4% versus 3.7% of the market. Now I will pass to Fernando.
Fernando Bicho: Thank you. Good afternoon. Starting with the main financial achievements in these first 9 months of the year. We reached net profit of PLN 1,109,000, which represents a growth of 30% versus 1 year ago. The return on equity reported at 13.8%, adjusted at 14%. We have shown resilient net interest income despite a lower interest rate environment. We have actually only a 1% drop year on year against decrease on average by 105 basis points in the average 3 months WIBOR rates. In Q3, we had a rebound of the NIM to 3.52%. We continue to show also a growth and a well-diversified growth of fee and commission income by 9% year on year. The cost to income adjusted at 37.6%.
Fernando Bicho: Cost of credit risk continues to be relatively low and stood at 37 basis points during these first 9 months of the year, with an NPL ratio low at 3.6%. At the same time, we have a very strong capital and liquidity position, reflected in consolidated total capital ratio of 20.6% at Tier 1 ratio at 16.1% and CET1 ratio at 13.7%, which means substantial surplus over the minimum regulatory requirements. Also, solid buffers over the minimum MREL requirements. Also safely fulfilling the new long-term funding ratio with the new formula, so significantly above the minimum of 20%. At the same time keeping a stable loan to deposit ratio at 58%. Pages 9 and 10 summarize key financial and business data from this Q3 and 9 months of the year.
Fernando Bicho: We will go through that in more detail in the next pages, so I would move to page 11. In Q3, we have shown a net profit of PLN 400 million, very similar to the net profit of Q2, and substantially above last year. At the same time, year-to-date net profit, as I mentioned initially, was 30% above one year ago. The improvement of the reported net profit was possible due to the fact that the much lower legal risk costs related to FX mortgages and also lately with consumer loans, were offset by a resilient core income. Sorry, were also added by resilient core income, and this helped to much more than offset the much higher taxation during these first nine months of the year. On a reported basis, as you can see on the top right, ROE close to 14%.
Fernando Bicho: Looking at the quarter, operating income in Q3 was 5% above the homologous quarter of last year, while total costs were 3% above the homologous quarter of last year. On page 12, we see the evolution of the net interest income, which has proved very resilient in this lower interest rate environment. Actually, for the first nine months of the year, it only dropped 1%, but in Q3, it already went up by 7%. This improvement happened despite having an additional adjustment to NII related to the consumer loans of PLN 16 million in Q3 against PLN 35 million in Q2. This improvement of the NII was also followed by an improvement of the net interest margin, which rebounds to 3.52%, helped by a decrease in the average cost of deposits.
Fernando Bicho: On the net fee and commission income, a continuation of the growth, 9% year on year for the first nine months, 3% quarter on quarter. On the cost side, we see that this year, cost growth is significantly decelerating when compared with the last two years. Overall, we had total costs growing by 7% year on year, including 6% of staff costs, 11% admin and depreciation, excluding BFG related costs. This is always in line also with the expectations that we have formulated at the end of last year of gradual deceleration in the overall cost growth. This is being followed also by continuation of the optimization of the branch network and a slight change in the number of employees.
Fernando Bicho: Regarding credit quality, continues to be resilient, NPL ratio at 3.6%, overall cost of risk at 37 basis points year to date over total loans, and the coverage of impaired loans by total credit risk provisions was above 80%. In this quarter, we did not have sales of NPLs. On page 15, the evolution of capital ratios, which have significantly improved, namely the total capital ratio improved significantly in Q3, through a combination of incorporation of the proceeds from the subordinated bond issue that we had completed in May to the total capital, and also to the inclusion in own funds after regulatory approval of 65% of the net profit of H1. This last factor also positively influenced the Tier 1 ratio that finished the quarter at 16.1%.
Fernando Bicho: The capital ratios at the end of September still do not include the further impact of another synthetic securitization transaction of a consumer loan portfolio that we have concluded on 30 September, and its inclusion in capital is still subject to supervisory confirmation. On page 16, we continue to show a significant surplus of MREL and liquidity ratios. In particular, regarding MREL, we exercise the call option of our first senior non-preferred issue in September 2026. As you can see, we have a significant surplus over the minimum regulatory requirement. The same happens with the long-term funding ratio now in its new formula, where we close the quarter at 36%, substantially above the minimum of 20%.
Fernando Bicho: Regarding FX mortgage legal risk, in the first 9 months of the year, total pretax costs related to the FX mortgage legal risk dropped by 64% year on year, continuing to show the significant drop that also has occurred in 2025. For this drop contributes lower inflow of court cases, which actually in Q3 was the lowest of the last 5 years, and at the same time, the effort of the bank to close the existing court cases, mainly through settlements with customers and as a consequence of this effort. We have reduced the portfolio of active loan court cases by more than 2,000 during Q3. Moving to the third part of the presentation regarding business development. Starting with page 19.
Fernando Bicho: Already double-digit growth of the loan portfolio accelerating to 11% year on year, fueled by the 25% growth of loans to companies, including leasing and factoring, followed by 7% growth in consumer loan portfolio and 5% growth in PLN mortgage, also significantly inflecting the trend of past quarters in which the portfolio was contracting and now already showing a reasonable growth of 5% year on year. As a consequence, we continue to gradually change the structure of our loan portfolio, diluting the share of PLN mortgages, which is now below 44%, and increasing the share of loans to companies leasing and factoring. On the customer deposits, double-digit growth, 11% growth year on year, driven mainly by deposits from retail customers, which have grown 14%, while investment products grew by 21% year on year. We continue to have a positive momentum in terms of loans to individuals.
Fernando Bicho: In particular, we had record sales of consumer loans in Q3, and overall, in the first 9 months, total sales of cash loans grew by 26% versus one year ago, allowing us to have a market share above 10%. At the same time, there was also clearly during this year, a rebound in the origination of mortgage loans, which reached PLN 7.9 billion in the first 9 months of the year, allowing us to achieve a more normal market share of 7.6%. Since 1 October, we have introduced in the new mortgage contracts, the new benchmark index, POLSTR, not having any more in the new origination loans indexed to WIBOR. On page 21, we continue the solid pace of customer acquisition, which translated into net growth of 40,000 active customers in retail during Q3, bringing the total growth in the last 12 months to 160,000.
Fernando Bicho: At the same time, the active micro business clients number grew by 15,000 year on year. All this process of acquisition of new customers is translating into a significant increase in the number of current accounts and the number of cards. On page 22, we would like to highlight another milestone that was achieved in July. We have reached 3 million active mobile app users. Additionally, we have now 3.2 million active digital users, including mobile app plus internet, which represents 95% of our active retail customer base. The growth of active mobile users was 8% year on year. We have 2.57 million customers that are mobile-only users. Page 23.
Fernando Bicho: Most sales of banking products take place via the mobile app, which confirms the high level of adoption of digital tools and customers' growing confidence in remote processes. We have been regularly showing these figures. Already 89% of share of digital in cash loan sales, 76% in current accounts, 90% in junior accounts. During Q3, 31% of current accounts were opened online. Page 24 illustrates a number of other secure, convenient, and smart digital solutions that allow to build long-term relationships with our customers. On page 25, we also would like to highlight the development of a coherent and orchestrated contact channel model that enables the bank to deliver a consistent and seamless customer experience regardless of the channel that they use to contact the bank. The mobile app, the helplines services and branch network, all are functions of a cohesive ecosystem.
Fernando Bicho: Our goodie platform continues to grow. In this quarter, we will highlight the increase by 18% of the number of users of the return in purchase service. Moving to corporate, we keep a robust momentum in terms of corporate financing, translated into growth of 25% of the corporate loan portfolio, especially driven by loans to companies, 35% growth, followed by a growth of 22% in outstanding factoring and 11% in leasing exposure. In terms of origination in the first nine months of the year was 25% above last year. On the deposit side, we will highlight especially the double-digit growth of current accounts by 13% year on year, which illustrates a significant increase in the relationship with customers, not only through lending but also through other transactional products.
Fernando Bicho: On page 28, you can see also the numbers from leasing sales, which have grown by 22% year on year, and factoring turnover that also during the first nine months of the year has grown by 22% year on year. This effort in the corporate segment, including small, medium, and large enterprises, is supported by new solutions and also by day-to-day operations as it is illustrated on page 29 with different offer of guarantees as an example.
Fernando Bicho: Finally, on page 30, the increase in the corporate business, of course, is also being supported by further investment in expanding online channels and digitizing key corporate banking processes, including a significant percentage of loan agreements signed electronically, and also issuance of guarantees electronically, and a significant share of foreign exchange transactions concluded through our Millennium Forex Trader platform. These are the most important highlights of our Q3 and nine months results. Now we will go through the questions. Thank you.
[Company Representative] (Bank Millennium): Thank you very much, Fernando. I think you deserve a bit of time to take care of your voice. It's a bit croaky. Everyone hears it. Let me start from maybe not so obvious, but questions that I think Mr. João Jorge will be delighted to address. They relate mostly to loans and deposits. First question is about, there has been a significant slowdown in year-on-year growth in corporate deposits. What was the reason behind it?
João Brás Jorge: It was mainly, we don't provide the breakdown here, but if we would, we have the breakdown. It's increase of current accounts and decrease of time deposit. It's just a pricing issue. A bank like ours have always the big discussion about what should be in terms of how to stimulate the growth of deposits or not. For us, it's already clear that the retail, we should keep stimulating and should keep developing the positioning of the bank as a savings bank because it's bringing time deposit, savings account, later on investments in pension products and everything like that.
João Brás Jorge: On the corporate side, it's a little bit different discussion because deposits are usually more price sensitive and not connecting with the daily banking of the companies. I would say that in the corporate side, in time deposits, we are very much opportunistic by the situation and the pricing and we are not aggressive at all there. For us, the main concern is how we are developing in current accounts, and this is developing very well.
Fernando Bicho: First, just to once again to stress, we have a very low loan-to-deposit ratio, so it is 58%, so it does not make sense to overpay for time deposits from companies, because we have already a huge excess of liquidity.
[Company Representative] (Bank Millennium): Staying in the subject of lending, you are very active in SME financing. Are not you afraid of midterm cost of risks?
João Brás Jorge: Although the question was about SME, I would separate also SOHO, small, and then SME. SOHO and small, at least according to my knowledge, is the most difficult area to have a healthy lending product and strategy because usually the models are not as good as they are for retail and for the credit of individuals. It is not possible to have also a, even if it is very well prepared and digitalized, but it is very difficult to have a full personalized and credit underwriting as we will do for SME, even if it is with very streamed processes. Here is difficult, of course, a lot of the business done recently, not only by us, but by the sector, have been leveraging in BGK guarantees. These guarantees are changing.
João Brás Jorge: They used to be on COVID times, and then they changed after COVID times, and now they will change again to give priority for dual use. They will change a little, and we need to adapt ourselves in the sector for that. But for the time being, we have been prudent. It is a sensible area, so we need to see what are the changes that we need to do in an environment with higher interest rates. In terms of SME now, in terms of SME and more mid-corporate, we believe that our underwriting capabilities are strong.
João Brás Jorge: We are growing well, and we are not concerned about the loans that we are doing. If in due time we need to make preemptive revision, we will do it, so it is part of the game, and to reassess the exposures that we have. But for the time being, we are quite. This is the area where we are growing in corporate loans. It is SME mid-corporate area. We are quite confident about the sectors and the companies where we are growing.
[Company Representative] (Bank Millennium): Thank you. So a more general question. What is your appetite on deposit until year-end, and will you be more active on the retail side?
João Brás Jorge: Very curious question. If you see the numbers in the quarter during the summer, we were pursuing a strategy of cost reduction. At the same time, there was an inversion of the expectations of interest rates. So the growth in terms of deposits and savings account was not so big as we would like during this quarter for retail. So it is probably that we will be a little bit more active.
João Brás Jorge: It is a quarter with a lot of liquidity, and also we have been also promoting a lot of pension products. So I would say that we would be more active, but we do not have a specific target. So liquidity is very strong in the bank, and by no means we will make actions of window dressing. What is important is to still grow in mass retail deposits, where the customers tend to have a relation where they place also their savings. It is not
[Company Representative] (Bank Millennium): All right. Fernando, ready? Ready. Okay. I propose or suggest that we go quickly through questions which are specifically related to our three key results. There aren't that many, which speaks very well for the quality of disclosure. First question, reason for 20 basis points increase in consumer NPL ratio in Q3.
Fernando Bicho: So on a regular basis, we continue to grow the consumer loan portfolio. Consumer loan portfolio is also the portfolio that has higher NPLs. Usually two times a year, we sell NPLs, usually in the Q2 and Q4. In the Q3, we did not sell NPLs, and also as far as I remember, we also did not make significant write-offs. So it's normal that in quarters where we did not sell NPLs, there is a small increase in the NPL ratio, but usually this is reversed when we actually sell them. So I would say here we don't see any signs of deterioration. It's just normal part of the business and some quarters have the effects of the sale of NPLs, others not. So I would say this is the main explanation.
[Company Representative] (Bank Millennium): I would call it a bit of a seasonality or cyclicality, right? Because they rise with that. Do you expect any unusual effective tax rate in Q4?
Fernando Bicho: The technical answer would be that not, otherwise we would have adjusted already the estimation of the effective tax rate after the first nine months. Because actually what we are doing at the end now of each quarter is to try to estimate the full year effective tax rate. So the tax rate that you see now after nine months is the best estimate of the tax rate that will happen for the full year. Having said that, of course, we are subject to some items which can make a difference in terms of the final tax rate, such as sometimes in the legal related costs, part of the costs can be tax deductible, others not. So it always depends on how much such costs are actually incurred in a particular quarter. So there is always a possibility of having some differences on a quarterly basis.
Fernando Bicho: Also, of course, the calculation that was done at the end of Q3 assumes that the corporate income tax rate for banks will drop from 30% this year to 26% next year. If this would not happen, this would force us to do a reevaluation of ETIs in Q4. This could provide a different final effective tax rate. I think this is the answer.
[Company Representative] (Bank Millennium): Very clear. Thank you. Let's now go through capital and dividend-related questions, then we go to interest rate and consumer loan. First question, 35% payout has been accrued for H1 2026. Shall we consider this as a dividend from the full year 2026?
Fernando Bicho: To remind, in our strategy, we had targeted to return to dividend payment in 2027 from the net profit of 2026. Our dividend policy is to distribute net profit dividend between 35% to 50% of the net profit. The final decision about dividend payment will always depend on the guidelines and recommendations of KNF regarding dividend policy of the Polish banks. That usually comes around year-end. What we have done in Q3 was to request permission to consider 65% of the net profit of H1 in the own funds, keeping open the possibility to distribute 35% of the net profit, but always depending on the final recommendations that will come from the regulator. That will be known only around year-end.
[Company Representative] (Bank Millennium): Do you plan more securitizations in the future?
Fernando Bicho: We have done, since 2022, several synthetic securitization transactions with different portfolios. It is an effective way to manage the growth of the risk-weighted assets. There has been a market for these. Also, what is good is that we have seen different types of investors being interested in participating in these transactions, from supranational entities to private equity investors. The last one was done with IFC now at the end of September. Going forward, we will always consider synthetic securitizations as a way to optimize risk-weighted assets and to manage the levels of capital ratios that we want to achieve.
[Company Representative] (Bank Millennium): Thank you. Now a very technical question. What is your current level of P2G? When do you expect KNF to update P2G calculations for you? Will it lead to an increase or decrease?
Fernando Bicho: The current level was disclosed, I think, at the end of last year, which is almost zero. It will not decrease for sure, because it is almost zero. It can increase. We will only know probably until the end of the year, which is the timing that usually we receive the final decision from the regulator. Of course, the P2G is also relevant for the dividend distribution policy. This is one of the elements that are included in the thresholds that are usually defined by KNF. We will also have to take that into consideration when finally proposing the distribution of the net profit from 2026.
[Company Representative] (Bank Millennium): Fernando is willing to continue. Now we are moving to questions which will be related to interest rate and interest rate sensitivity in general. What is your interest rate scenario, and what would be the NIM and NII outlook for the next 3 to 4 quarters in case of stable rates? What is the sensitivity of NII to 100 basis points rate movement?
Fernando Bicho: Starting with the sensitivity. We are disclosing this in our quarterly financial report. We are disclosing that the sensitivity for a parallel move of interest rates by 100 basis points would be an impact of 2.6% of the last 12 months NII. It is very similar to the previous we have given. Previously, it was 2.2%, now it is 2.6%. At the end of last year, it was 2.2%, now it is 2.6%. But still, it is relatively low. Regarding outlook for NII and NIM. From one side, we have seen some spread contraction in some parts of the lending market. It is visible in corporate loans. We see a lot of competition in the market, and as a consequence, there is some tightening of spreads.
Fernando Bicho: In mortgage loans, a gradual move that probably will translate also into some tightening of spreads, although, of course, still higher than other Western European countries. This is something that could, let's say, have influence in terms of further growth of the NII. But what we are expecting is that the continuation of the volume growth, and I remind that we are growing double digits both in loans and in deposits, will help to more than offset this pressure on the margins and will contribute to a sustainable path of further improvement of the NII. The NIM, we had a good Q3 in terms of rebound. Actually, it was mainly driven by this continuation of the decrease of the average cost of the deposits.
Fernando Bicho: It is not that we expect a much further growth of the NIM, but at least we have stopped the downward trend of NIM that we have been observing already since, I think, 2024. Summarizing prospects for NII in a stable interest rate environment are positive. Of course, market implied rates point to an increase of interest rates in Poland during the next 12 months. This is not consensual among macroeconomists. Of course, if interest rates would move up in general, this tends to be beneficial for banks. Although, to a large extent, we have been hedging against interest rate movements, and so, of course, it is not that the results would improve substantially, but in the long term, of course, higher interest rates provide better net interest income than otherwise.
[Company Representative] (Bank Millennium): Thank you. Staying in the universe of interest rates and sensitivity, how much does it take for your balance sheet to reprice? Also, could you please provide any color on the amount of fixed rate loans and bonds on your assets?
Fernando Bicho: There is not a one, let's say, simple answer to the question about how much time it takes for our balance sheet to reprice. Because first of all, part of the repricing is not automatic. It is dictated by commercial decisions of the bank, right? So the pricing of the deposits, for example, is not indexed to any market index. So it depends on the pricing policy, on commercial objectives, and so on, of the bank. But usually, in terms of looking at our composition of our liabilities size, usually deposits tend to reprice maximum up to 12 months, although usually three to six months. On the lending side, we have a combination of fixed rate loans, including more than 40% of our mortgage loan portfolio has a temporary fixed rate for five years. And all the consumer loans have a fixed rate.
Fernando Bicho: It is actually rather the corporate and most of the leasing and factoring that have variable rate loans. On the top of that, we also have a significant amount of fixed rate bonds in two portfolios, holds to collect and holds to collect and sale. The amount of PLN fixed rate bonds is close to PLN 37 billion. On the top of that, we are also diversifying investments in sovereign bonds to other Western European Union countries in order also to have a proper diversification of the bond portfolio.
[Company Representative] (Bank Millennium): To finish off on the interest rate sensitivity. On the liability side, what is the expected deposit beta?
Fernando Bicho: We do not provide this type of number for, let's say, ballpark number. But I just remit this to what happened during the We had two important shocks in the last four years, right? Five years. One was COVID, when interest rates went to zero, and actually the deposits interest rates went almost to zero in a relatively short period of time. Then we had the war that started in 2022, significant inflation, increase of interest rates to 6.75%. And of course, the deposits also went up but did not follow exactly the trend of the NBP reference rate.
Fernando Bicho: Additionally, the fact is that the Polish banking system is so liquid that, and the loan-to-deposit ratio is relatively low. We have the lowest, but still on average, the loan-to-deposit ratio is very low. Does not force banks to, let's say, to increase the cost at the same speed of a potential increase of interest rates. There is a partial reflection, of course, because there is also a market and a competition for the deposits, but it's not a one-to-one readjustment, I would say.
[Company Representative] (Bank Millennium): Thank you. I have to add that the concept of a deposit beta is not very common here in Poland for different reasons. Now moving away from these interesting questions to our all time, I wouldn't call it a friend, but acquaintance, FX legal risk. Can you update us on the outlook for the CHF mortgage provisions? Shall we expect Q on Q declines going forward?
Fernando Bicho: First of all, after 9 months, I think we are in line with the expectations. We have a drop of more than 50% in the costs related to FX mortgages during the current year. I think this is the first thing, the drop is 64% on a pre-tax basis. Going forward, we expect the costs to decline further. Of course, this is still subject to the continuous monitoring of the inflow of the court cases and also the speed of solving the stock of existing court cases. Although, of course, it's difficult to be very precise, we continue to expect further substantial drop in the costs related to FX mortgage, unless there will be, say, a new event not currently considered in the assumptions for the calculation of the provisions.
[Company Representative] (Bank Millennium): Thank you. We have also received a handful of questions related to consumer loans. In essence, they are around provisioning approach for consumer loans, legal risk, what is the coverage, what can we comment on future provisions, run rate, statistics on new litigations, and win-loss ratio. Do we expect provisions to evolve? Same thing.
Fernando Bicho: In our financial report that we have published today, we have provided updated information on the number of cases that we have regarding consumer loans and what we are providing for currently. Let me first explain what we have done so far. Between Q2 and Q3, we have made adjustments to NII to cover two specific situations. One, stop charging interest on the financed non-credit part of the loans. It is a loss of future income, and we booked PLN 35 million adjustment in NII in Q2. In Q3, we made a further adjustment of PLN 16 million through NII regarding the return of the interest charged since the verdict of the European Court of Justice of 23 April. These were two movements that were done through NII.
Fernando Bicho: Additionally, taking into consideration that we have a number of court cases that are pending, although until now, a large majority was won by the bank. But taking into consideration the existence of those court cases, also the risk of having, let us say, less favorable verdicts. Also looking at the flow of claims that we have received, we have booked provisions that were originally booked through other operating costs, which are exactly dedicated for the existing court cases, plus a number of future court cases that we expect to come based on the analysis of the claims that we have received so far. This is the way that we are, let us say, analyzing the portfolio and the risk and making the calculation of the provisions that should be assigned to this problem.
Fernando Bicho: There were recent important developments, namely in September, regarding the position of the Polish Banking Association regarding this topic that we have followed fully. Also there are still important questions pending in the European Court of Justice that also can have influence on the outcome of this topic. The costs that we have booked so far, which between NII and other operating costs between Q2 and Q3, reached PLN 211 million. This is our, let us say, best assessment for the time being of the costs to be incurred with this topic. But obviously, we need to continue to monitor the flow of the claims and court cases every single quarter.
[Company Representative] (Bank Millennium): Thank you. Now let us keep Mr. João Jorge busy. Strategy 28. The slide deck mentions the bank identifies selected areas where execution must be reinforced to maximize value. Could you please elaborate these comments and mention which areas you need to improve?
João Brás Jorge: We didn't change the strategy. We went through the exercise of the strategy, and we were happy with the assessment and also supervisory report. We're happy with the assessment of the strategy up to now. We analyze mainly five areas, where we want to refocus or to leverage more the development that we are having or changing the course that we were establishing beginning. The first one, and most obvious of the changing of the course was in mortgage. If you remember when we present in 2024, we didn't highlight much on mortgage. We have in our plans even the decrease of the portfolio, in order to fulfill the long-term financial ratios that were in that time established. Meanwhile, the formula changed. The long-term funding ratio is different, that it allow us to grow much more there. Also, the bank was very imbalanced.
João Brás Jorge: To mortgage. Now with growth in corporate, we can do also more interesting part. Moreover, also there was the change from WIBOR to POLSTR. Now we have a new index, so it's a more stable environment to do this. The bank decided to have a new and more ambitious targets for mortgage. We will be more active in the segment and with higher ambitions. The second one, for example, it's to complement, was in corporate. If you remember when we presented in 2024, it was a challenge reached, a challenge, the goals to achieve the doubling of the credit portfolio in corporate. The bank is strong in retail. It was not perceived as not so strong in corporate.
João Brás Jorge: Now that we deliver such a growth, we can complement the strategic activities that we have in this area that goes more in the revenue part, besides the growth of the exposure with the additional business, cross-selling, strict also usage of allocation of capital and all of that. It's a kind of, not a change as it was in mortgage, but a complement on the top of such a successful increase of lending now to have also a strategy to profit through these exposures. Also on investments. It's mortgage, corporate. Investment side, the investment side, the bank has been growing quite well, 20% to 30% per year in investment funds. We are achieving more or less the challenge, if it's a ceiling or not at the present level. We want to go further.
João Brás Jorge: This would be more than doubling the starting point, but we feel confident for that. We rescaled the ambitions, but also the resources that we allocate to this area to grow more than the market and to gain market share in investment funds. Then there were another two that are more complementary about what we are doing. One was more connected with fee. Fees, the bank have a fee gap versus the top peers. We know that this is also attached to lower exposure in corporate, but also with the strategy of having organic customer acquisition. It means to have more beneficiary price structures. It also complements. This will take longer to have the process, but it was one of the fronts that is now time to improve and also in primacy. But it's a more technical approach than anything else.
João Brás Jorge: I would say that for more immediate impacts, which is what the analyst audience looks more, I would say that it will be more ambitions on the volumes in mortgage, more ambitions on the revenues, supported with keep growing on the volumes in corporate, but more ambitions on the revenues in corporate, and keep the ambitions growth in investment funds part.
[Company Representative] (Bank Millennium): Thank you. We have a question on AI, which is becoming a must-have question, and I think you both will like it, although for different reasons, probably. The question is: Are there any AI use cases already in place or planned that could meaningfully affect the 2027 OPEX outlook?
João Brás Jorge: The question was very nice until talk about OpEx. It is very difficult when every time that we go to OpEx because there is always a promise and then I think one of the biggest challenge now is how to manage the AI costs and not so much how to manage the AI implementation. The biggest example of really costs that we have, it was the first thing that was done in the bank. It was the AI bot for call center. A lot of you know that we have insourced call center. There is reasons for that, but the main reason is that we believe that to provide top quality service needs to be done by ourselves and not delegate this contact with the customers, which means that we have 700 FTEs allocated to the call center.
João Brás Jorge: There used to be 770, and with the bot, we were able to move it to 700, delivering the same calls, receiving the same calls and everything like that. This is the biggest example that we have 45% of our inbound calls. We have around 100,000, 150,000 of calls per month that we receive from customers, and 45% of that calls are received by bot. This 35, and this is what is outstanding versus some references of other operators, is that 30% of this, so 45, 15, there is a moment that there is a human intervention, but there is 30% that is end-to-end with a bot, so without human intervention, and this is one place that is seen.
João Brás Jorge: Besides that, we are using in anti-fraud, anti-money laundering, and all of these areas, but these are areas that are requiring such a big investment that AI are helping to not make such a big investment. They are allowing us to not escalate hundreds of people that we would be required in order to track frauds and anti-money laundering, in real time basis as it is demanded now by the authorities. I would say like that. Our strategy for AI is known, so it is one of these areas on primacy, have been one of the areas of biggest investments of Bank Millennium. Bank Millennium made a big investment for several time, in terms of ecosystem, a platform, I would say a recommendation platform, let's call it like that.
João Brás Jorge: That, in real times looks for what is the communication and the action that should recommends to customers, and also changing even the form of the communication to the customer in that time. So the need, the opportunity, the timing, and also the format. We have 1 million of customers of the 3 million already inside of the platform. The platform is still very digital, the way that interact with the customer. Now we are moving to the non-digital channels as well. So to be able to absorb also all the other customers. This have been one of the biggest investments of Bank Millennium, not only by the systems per se, but also by the human talent to operate these systems. But it is also what we believe will be one of the biggest competitive advantage for our retail bank in the future.
João Brás Jorge: Besides that, of course, we are deploying the normal things that they are seen as very efficient for people, but people work more and faster, but we do not require less people to do the addressing to customers.
[Company Representative] (Bank Millennium): Thank you. Since we try to stick to the rule of a one-hour meetings or calls, it is five past. Let's do a quickie question first that Fernando will be kill immediately. Do you expect to print more MREL in Q4?
Fernando Bicho: No.
[Company Representative] (Bank Millennium): Okay. Gentlemen, any of you would like to dwell on the OKI accounts? There is a question, what is your opinion on OKI accounts? Will you be ready with them on day one? For those who do not know what OKIs are, it is effectively an ISA in the UK or ISK in Sweden. These are personal investment accounts that will be launched in Poland on 1 January 2027.
João Brás Jorge: I would go with a more simplified approach for long-term investment and pension products. One thing is known, it is only successful, and a lot of the successful of the stock market in US is because of that. It is only successful if there is a real incentive, investment, tax incentive for these long-term savings. Whatever it is, it is important. I do not know if we are ready on day one, but I am sure that we will be ready on month one at least. This is one of the commitments, so yes.
[Company Representative] (Bank Millennium): Gentlemen, thank you very much for your time, your, as usual, insightful answers. Thank you to all the viewers for participation and interest. A bit of a housekeeping announcement is that we will report. We have not published yet the reporting dates, but if you look at last year, early 2027 reporting dates shouldn't differ much. We expect to travel quite a bit in Q4, so we hope to see some of you in person. Any closing remarks?
João Brás Jorge: What can I say, is that we are very positive about the execution of the strategy and quite happy with the results that we are presenting. We maintain a little bit the same concerns, so let us talk it in a very open way. Normally in banks, everybody is concerned about credit risk. Of course, growing in the portfolio as we are growing, credit risk is a concern, but is our lowest of the concerns in terms of risks. We have, of course, market risk concerns, mainly by geopolitical risks. What can be the impacts? As we know, especially in a bank that is extremely liquid, means also market positions and hedgings in the markets, and disruptions that can happen through geopolitical reasons are always concerned. It is obvious that is a concern.
João Brás Jorge: And of course, less common in a lot of countries, but more common in Poland, the legal risks. We talked about free credit sanction. The situation is still complex to understand, but potentially is still a big risk for the sector that we have concern. We have been working the best possible to re-comply with the Polish Bank Association, and also the solution that have been appreciated by the Financial Ombudsman. We are executing all of that and trying to address all the customer concerns about that as well. We made the migration of WIBOR to POLSTR. We have been also seeing all the positions, but also for us, the risk was not eliminated. It have not been materialized, but it still exists. These are the concerns. Of course, from another side, looks, as Fernando said, that the margins pressures are stabilizing.
João Brás Jorge: We do not see the competition to further going down. It is still competitive but looks stabilization. Market rates, it is a question mark, but the downtrend at least looks like stopped. Of course, we keep having very strong economy, increase of disposable income and no unemployment, so the conditions are extremely positive for banking. We see a huge potential for keep growing our volumes. We need to manage, of course, the costs, risks, and also the allocation of capital. But we are foreseeing a very positive next quarters and years for Bank Millennium. It looks like a good time to be invested in the bank.
[Company Representative] (Bank Millennium): Thank you. In the meantime, I checked our share price. It is up almost 5%, so it is a nice token of appreciation. Hopefully, it stays this way. Thank you very much again, gentlemen, and thank you all the participants, and see you in 2027. Thank you very much.
