Alior Bank S.A.

I'd like to thank for the first few questions that appeared on my tablet. But as traditionally, we will answer the questions after the presentation. We will quickly make a presentation first. So as you've noticed, and as we've already communicated to you, we don't have the so-called provisions for COVID as for quarter one. So we may say to a large extent that it is the last quarter before But I'd like also to focus on COVID and effects of pandemia, which are seen in our net earnings and in sales and in net profit. So, well, you will see it within the last two weeks, its impact. So for the presentation, I will not focus on this slide because it's a sum up. So the net profit of 73 million that we inform on. And as for impact of ECJ, this is just shown for your convenience so that you could see how much. It impacts this ruling, impacts our earnings, and without the effect, most of the trends are positive. But now just quickly showing the next slide so that to have more time for many, many questions. So net financial profit, 73 million revenues year to year. Slide drop, as you can see here. So a large part of that. drop connected with the ruling of the European Court of Justice, as for general administrative costs, a large drop also connected with BFG falls, and these contributions, because of these contributions, thanks to the structure of our deposit, and as compared to other banks, our contribution to the resolution fund was a bit smaller this year, so we may say that some measures taken already in 2018 now produce effects so the remaining costs we might say have been kind of a plateau so we fully control costs as for the cost of risk we see an increase mainly in KII segment and we will talk about it more so the major issues is that quarter one of that year also had one of effects connected with the so-called ECL revision released due to calibration of the model so that the first quarter of previous year was extraordinarily good and now quarter one here is sort of normal without visible effects of the pandemic. Some just major ratios. NIM, as you can see, is very high. It still remains at a very good level. So in quarter one, we can't see the effect of the drop in interest rates, which we will discuss later on. So without this ECJ, we will be able to maintain NIM at a very high level of four points of an S for C2. Our situation is similar without the effect on the revenue side connected with ECJ. This ratio would improve as for core ratio is 193 1.93 so it is below our guidance which was 2.0 of course by the end of the year the level of 2.0 as you may guess today in the context of the pandemic would not be realistic but we would also discuss some kind of sensitivities here so i would say of course right at the beginning that we are not able to say precisely what the level of risk would be here this year. We may say about some analysis of sensitivities related to this result and our reality. So our credit volumes in our segments. Here you can see the picture which is partly from before the pandemic and partly it takes into account. So the last two weeks of March we saw a significant fall resulting from the beginning of the lockdown and the effect of normal activity of customers at our branches. So that was the greatest effect, but objectively the results for quarter one are still very good, so micro sales at the level above our plan, good mortgage loan sales and we hope to maintain it in the following quarters, relatively good new lease sales in quarter one and we expect a big fall here because looking today at the situation that's the sector's hardest hit so that would be drop in sales in new cars it has already dropped and leasing sales may also drop by even 70 percent so these values in the future would be much assault so new sales would be like that so loans new space were also a affected by a drop in activity within the last two weeks and that was also related to the measures of hours connected with a kind of more restricting credit policy to have kind of loan cash loan so that to take into account the clients of that could become higher risk clients and we took action so that to accept improve acceptance ratios so now capital ratios at very high levels as you know that's the effect to large extent of mainly lowering capital allowings capital requirements by three percentage points today it's 2.2 billion of provisions above the threshold so as for liquidity ratio here on this chart you can see that when we entered the pandemic period we had very good liquidity up to even 150 percent so we might say that objectively we were well prepared for the situation because liquidity was even above our standard expectations and due to the lowering reserve and the ratio would be below 170% that gives us the basis for lowering costs of deposits in the future and we did it throughout the whole year and you will see it in our performance, our results and then We still have very good basis for lowering costs of finance in the following quarters. Now remote channels development that was very important element on this quarter and for photo already it's all your bank's own method thanks to which We are able to remotely, fully remotely without any physical contact with the climate to verify his or her identity and the signing of the contract, which is very useful functionality these days. And we have also authentic and authentic and electronic signing. These are two solutions connected with electronic signature, mainly for entrepreneurs at the moment. But obviously, these solutions will be to a larger extent implemented for other clients. The Polish Post enabling cash payments and 1,300 outlets of the power. We are very happy with the awards that we won and for customer services we had very high positions in 2019 and we are the leader of sales that's important for the future as regards BGK guarantees. Today's conditions, these guarantees are important for the support of the whole economy so this is definitely our competitive competitive advantage because we can do it and it is part of our let's say dna as for innovativeness as thomas shinitsky was granted an award so once again i'd like to congratulate him that is for implementing blockchain and it was used practically thanks to which bank saved many millions of watches on letters sent to the clients. So we do it now fully electronically. We don't send it, say, physically. letters to customers. Now, section two, COVID-19 impact on banks' operations. So, of course, as remote work is concerned, you hear at each conference that banks and other institutions now use remote work. We did it earlier, but this increased nowadays because earlier we used it, we might say, sporadically in practice. Now, Most of operating and support functions which are not on the front line as regards the contact with the customer have been serviced remotely. As for the contact with the customers, it is important that during the pandemic we should be able to maintain very high operating efficiency. We gave some numbers here that opened our own branches, and we ensured all measures that are necessary, that is personal protection equipment. So 94% of branch offices were opened. As for contact center, We increased these connections and we are very efficient here, so I'd like to thank our workers at the first front line, so in our branches and in partnership outlets and branches, because indeed our employees met the expectations of the clients who needed this situation also help so as for our communications activities very soon as the bank marketing were able to improve communications or really to transform it from the product oriented one to the one more based on the needs of these times that is banks from home and that is promotion of all remote channels. So for people who are interested in it, please check Facebook of our, let's say, Wise Granny. That's mainly for our Polish, of course, customers. It's a very interesting person who really supports us as regards electronic banking for seniors. So other very charitable, charity activities here as regards our logic in most of the cases, in addition to increasing support for health care, which we did not support before that, so we transferred some funds for the hospital in Szczecin that became the infectious disease hospital fighting against COVID. They did not have equipment for the additional tasks, so we are very happy that we were able to help them. And we also have some other organizations that we cooperated with like health center for children, we bought some tests and we also bought other equipment and other materials for other organizations that we cooperated with before and also laptops so that to enable students and learners remote learning. So now we would discuss a credit and it would be Marek Szcześniak who would do that. Thank you. In the first half of March, we started taking actions in the direction against COVID, including measures under sectoral dialogue coordinated by the Union of Polish Banks. Here, from scratch, introduced new measures. processes for credit vacations. So we proposed to the customers two variants. So the first one is a deferral of capital interest installments for three months, and the other was a referral of principal capital repayment for six months at of 30th April in total, the share of this credit vacation in the Allure Bank portfolio is 11%. So on slide number 14, you see the results. So the share is our leasing company, it's 23%, whereas in Allure Bank, in particular segments of this portfolio, the result is about the average value of 11%. Thanks to other upgrades of the process, our effectiveness, I mean the capacity of the process is very high, much higher than the inflow of new applications, and this inflow of new applications very quickly is diminishing is being lower and lower so in the last week of April it was about 1,700 applications as compared to the peak week of week three of March where we had over 22,000 applications so over 40% of all applications that were handled by earlier bank. As for the profile of clients applying for this credit vacatio legis, so in the majority These clients that have applied for that, for this kind of location, have not lost their sources of income, which shows on the slide, the chart on the right-hand side of slide 14. where we present the share of particular clients who lodge their applications for the so-called repayment holidays at Allure Bank based on the classification at the end of February 2020. so just before the effects of COVID and these are in majority regular clients classified under basket one and in some segments the share of basket one is over 90 percent and in all segments it is much above 50 percent and we are also observing how this profile of clients and is changing and how the inflows of their salaries into accounts is changing and here in the majority the situation of those clients did not change significantly so the first Conclusion here could be that as regards to so far applications for repayment holidays are in majority of cases preventive action taken by customers, but this is the population generally of higher risk that the remaining part of our credit portfolio Now, could you comment interest rates? So, how impact of interest rate cuts? After these cuts, the bank implemented the estimate impact on quarterly results would be about 75 up to 85 million złoty. Of course, it is based on some guidelines as to the possibility of lowering rates on the deposit side as well, which we are doing and we are continuing these activities while observing of what's going on in the market. So in quarter one, we can see some element of impact of interest rate cuts through rate cap on the loan, and this is about 5.8 million zlotys on net income, so over 7 million zlotys of impact on interest income. So as a bank, we are taking measures so that to prevent this kind of erosion of income so on the revenue side we improve the effectiveness of cash loan by increasing the share of commission or increasing the share of insurance or cross-sell and then the sales of loans. We are discussing here just new portfolio so that would be just see when we have new sales and kind of saturation of our portfolio with new sales. So we are adjusting our offer all the time. You're not surprised I did because we did it effectively last year as you can see by the cost of financing and these activities will become more dynamic in the following quarter as for other elements we are looking also at the costs that we see some potential for savings in the logistics costs or fleet, vehicle fleet or the operating costly rentals. And of course, bank is always keen on automation, on building online processes. So here, natural effectiveness would appear because of these activities. So going further now to operating operations, I would briefly discuss it because the whole section shows that all activities that we took to build a lasting relationship with clients are connected with increasing improving the quality of services lead to better relations and we become the first choice bank and all these activities produce effects and objectively we do deliver here. So now the retail clients increase 170,000 year on year and we are very happy that the quality we see on the right hand side here, the ratios by which we measure the activity of our customers, the new customers that open our accounts have new transactions. That's the increase by 60% plus recurrent inflows that show that the client really makes transactions. And here we also have seen 67% cash loan sales in remote channels. So, objectively, at the background, again, of the quarter one, we see that there were demand and some reducing risks Actions taken by us decreased the volume of cash loads. We see because this channel, because of its effectiveness, would increase its share, but we see also good increase of mobile applications users, 60% year-on-year. The savings account and online accounts increased by 60%. So they are good results, which are the basis for seeing that. the digitalization and remote sales is developing quickly in the bank and was developing before so we were very well prepared when the pandemic uh appeared so nps now own branches and partnership outlets so we Here, the results are very good, but I'm very happy that it increased by 11 percentage points year on year. So, as you can see, it's a very high increase, because in the last years, it is a record increase. ratio and at a very good level and we hope it will still increase and we are also now simplifying communications which is helpful so we have this number here this is 180 now so these are all communicates letters documents that were adjusted so that we have a simpler communication with clients so that the clients understand what our expectations are. Also, they just understand that what you want to communicate. Plus, improvement of the processes, quality increases this NPS ratio. So this is really high. So now micro clients, we are above 200,000 customers. So we have in quarter one, so many active clients. So we are very happy with that. We are happy also with with online acquisition and issues connected with total transactions. So in the next quarter, we will perhaps show you the same or maybe different ratios because of social security insurance, some of the customers would be exempt from paying these contributions, hence in April the ratio would be much lower, but we see on a year-on-year basis that activity of our customers, that the number of active customers of ours grows much faster than the total increase customers, so we are very happy with it because we want to have active clients, customers, so that they buy more products. And this micro slide, which we always say, not much changed, but one important news is that from April, as regards these micro segments, we are in a situation where coverage by guarantees would increase by 100% because it is an compulsory element on our part since April. And on the other hand, the very way of the construction of guarantees in the near future that is extending the period and increasing the coverage ratio at the same time exempting by BGK from the fee for guarantee. And this all leads to a situation that the product really It is good for us because of cost of risk and capital load. As for these MSP, small and medium-sized enterprises, we are happy with the ratio of customers using Bank Connect. service that's the system that makes our customers connect to our electronic system by their systems that is by mainly accounting systems of theirs and that's why they are more connected with the bank it is more convenient for them to use bank services so that was really helpful and it increased by 200 percent so this is very good dynamics of using the tool now as for The sales in the previous quarter, we announced that the sales, according to our projections, should be about one billion quarterly. You, I guess, remember that. But because of the pandemic, the last week of quarter one, the sales did not fully achieve this figure. But we are pleased with it. results anyhow, but it is connected with several drivers. Part of the customers did not sign credit agreements by checking their situation, the justification of their investment, by analyzing generally the situation, the circumstances, So part of these situations are also due to our credit decisions. That is, we just held up or deferred some transactions for the next months and part were due to natural situation connected with the fact that customers just kind of postponed some transactions. And we see that in April these sales should be good, but even today we must take into account the impact of the pandemic on investment projects of our clients and that's why the risk the assessment of risk credit is kind of more goes further and takes into account this aspect as for mbgk guarantees you know that we've been a leader in this area for a very long time so and as we see this fund of that clients are very interested in working capital so the pool of 5.5 billion which would it would find an investor finance over 6 billion credit so this is the product that would be growing significantly soon of course after assessing credit worthiness we will saying that it would be a safe and profitable product and would build a credit balance. And finally, as regards this operational part, it's important PFR shield some statistics now connected with, of course, Elior Bank. We were one of the first three banks that was operationally ready to start to enter the program. So this very program, as you observe, of course, PFR communications is on unprecedented scale, very quickly constructed from taking the decision to have such implementation by the bank and the PFR took to weeks and it was really very fast because after two weeks first payments were made and that was necessary and this is impressive hence i would like to thank the earlier banks team that is taking part in the project so they did a very good job indeed but as regards the effects we had already 329 million of funds that reach our customers so the program would have very great importance for saving entrepreneurs and jobs and indirectly it would improve the situation of the bank connected with the fact that the database of bank customers would be more solvable now.

Good morning. As regards the results, Christopher has said a few things already, but I want to stress a couple of key things. The interest rate result is quite good and it keeps a good trend. The margin is very stable. And in the first quarter, as I said, of this year, we have seen an interest performance over 7 million zlotys. So that is not corrected, adjusted against the dynamics. So it may even be more than that. And the whole result reached in the first quarter, we have about 30 million of... of the good result net. But there have been some rapid changes in estimations concerning the rates and the exchange, current exchange rate movements or the share prices. Now, fees and commissions. Here, the FX are... had an impact on this result. So this is because some of the transactions involving currencies were making a small positive increment for several months. At the end, it is being valued against the average rate exchange rate, but then 30-gross jump was seen in the middle of last March, so that's what reversed the trend, and the result on fees and commissions shows that now. But that was just once and no more a one-off effect. There are some other effects showing up, effects of the crisis, because there were very rapid changes in the expectations that results in some 7 million zlotys than the pricing of the visa shares that we have in our portfolio in connection with the crisis. prices changed by about 8 million zlotys. So altogether, this has made this 30 million zlotys net. The costs of operating costs, the overhead costs have not changed. Risk costs will be discussed by Mark later on. But before COVID, things were just average prices. Now, what happens in the field of volumes? Quite comparable to the previous quarters of the year, good growth in the retail segment, year-on-year in business segment. Well, that shows the situation that we discussed in the previous quarters. On the deposit side, we have decent increases on the individual customers. Long-term financing is being attracted to this bank, and liquidity is okay. But we are largely financed by the business segment, and the credit volumes growth is is as expected. Well, it could have been better, but the last two weeks of March, especially in the business segment, showed some slowdown. Interest result. Well, perhaps we should mention... a very good interest margin and a very significant drop of financing costs, 17 base point year on year. In the second quarter, we will probably see even more dynamic change in this field. Provisions? Well, that has been changed by the FX transactions in the recent times, but that was just a one-off event. Now April and May brought things to normalcy. The cost of the bank, the bank is paying, are all the time at quite a stable level. if we not mention the BFG. We have shown here a line of the normalised overhead costs without the provisions that we were discussing in the third and fourth quarter last year. So these costs are very stable and we are going to keep them under strict control in future and, of course, looking for more optimisation. Now, credit risk, Mark. In the first quarter of this year, the credit portfolio balance grew by nearly 1 billion zlotys. Two-thirds of this change was in the individual customer portfolio, where we could observe a growth of the housing loans on the business side, In the first quarter this year, we have seen more sales, and consequently the micro-business transactions grew too by some large corporates, dropped a little bit by 0.4%, but all that is in line with the bank's strategy adopted today. because it was speaking about increasing the share of low-loss products in the In the housing segment, on the business segment, we were working on the concentration, we were reaching better tickets and better collaterals. As regards the other parameters which describe the quality of the credit portfolio, MPO, is very stable in the individual client segment in the first quarter, 1% point growth. And on the business segment, the coverage that is the MPL portfolio coverage by the credit risk write-down has also been very adequate and stable. The cost of risk has improved clearly, quarter on quarter, from 2.39 to 1.33 on the whole portfolio. In the individual client portfolio, segment, we have been close to the forecasts as well as in the business segment. The next slide, slide number 34, shows the quality of the new lending operation. We have two core products. That is The cash loan for the individual customers and the micro segment and the quality here has been stable and good. And this trend has been improving since 2017. And the very early indicators which can give us some expectation on the next half of the year is also optimistic. This slide shows this quality by the default rate and that is why the last generation which is measured here tells us about the lending action quality. Now the next slide It presents the structure of our credit portfolio. In the first place, the business client portfolio by industry and in relation to the current situation. From the viewpoint of the sensitivity and In other words, the expected resistance to the COVID impacts on further prospects resulting from the economic slowdown. So our new crediting policy will rely on the... On the different industries, we are going to update it very readily to accommodate for the new developments and to accommodate for the new risks. risks related to the pandemic we are validating all this also by comparing it with the in the behavioral way we are looking at the incomes on our clients accounts by industries And as you can see, this division into the high, small and medium risk is validated very well against the change in the turnovers changes. These values show how the turnovers have been changing since April this year against February. And that's the same group of clients. And the low-risk industry showed some increase by 0.1% in April. For the medium risk, it's down by 11%. And for the high risk, the decline was by 41%. And the next slide shows We show the structure of our whole business portfolio and our biggest exposures, top 100, in the context of this model I've mentioned. So here I must say that in the whole business segment, 73% of the exposure is classified as low risk. 12% of the most sensitive industries. A better situation even better situation is found in our biggest exposures because the top 100 of the whole business portfolio the low risk is 83% and 83% from the point of view of our regular portfolio. So this structure and the second and third graph is seen very clearly. Only 3% of these exposures, the biggest ones, are now considered as high risk because they are most sensitive to the current situation. then you can see some more information about the role of credit vacation to different groups of the low high and medium risk and split into the micro and other business clients and the last line says about the collaterals in every segment. It's over 50% at this level. And in the high-risk industries, it's very high. So after haircut, it is fully recoverable. And that is also the effect of our measures taken in 2018, in which we came up with different structuring, higher collaterals, and on the micro segment, the whole sales in the last year included very high BGK guarantees. And the next slide, number 37. I'm showing you a similar point of view at the structure of the cash loan portfolio to individual customers. 79% of the exposures are considered to be low risk. Let me explain. The individual clients are being allocated to these different clients. risk groups. These are individuals running their own businesses and individuals who make their incomes by having a work contract where the employers are also low risk. And this category also includes all incomes of such incomes like retirement, pensions and permanent allowances, such people like law enforcement, people and other uniformed services. All that is because of the COVID situation. And the last slide in this chapter shows you the main lines of changes in our lending policy in last March and April. Of course, these changes that have taken place have reduced the accessibility to our lending action in relation to the COVID situation, but we are trying to keep these changes, which are quite comprehensive, we try to keep them in line with the scoring models, with the incomes. And we pay more attention to the current situation rather than the result of the previous years. We are also having different requirements in collaterals, like the life insurance. People who want housing loans are being evaluated against a little bit different criteria. The characteristics of this COVID-related risks is much different than a, let's say, normal economic slowdown risks. And they hit on different industries in very different ways. parts of the market are suffering strong blows and others are not. So the changes we are introducing in our lending is not very much typical product by product, but it refers to segmentation of the market, and that allows us to keep our modals updated and quickly introduce new solutions. I think at this point we can start questions and answers. I have a lot of questions already here on my tablet, so I can just answer them one by one. But I must mention one thing. my great thanks to all who have been involved in the issue of the credit holidays some processes were built from zero from scratch but there are many other people at the front line too who were working for these credit holidays so thank you for that now answers and questions simple questions i will answer in a simple way when more elaborate ones will be done okay let me read them in in english questions and answer session okay so first is have you booked an additional covet 19 united provisions in q1 as we have said In the cost of risks, the first quarter, we have not yet done that because there were no objectively good assumptions for it. But as regards the impact of the COVID on our performance, well, the direct effects about 30 million mentioned by Tomek, not to mention things like lower sales, etc., The second question is rather difficult. Well, you may think that we are not showing the guidance because there are a lot of variable factors in our environment and some values like a precise sale of our credits. It would be difficult to precisely define and tell, but that will perhaps be better discussed by, commented by Mark. In the second quarter, we will face this challenge of estimating the COVID provision. Right now we've been talking about the resistance of our portfolio but during the first quarter we could not responsibly and precisely say what would be the guideline value because the main parameters main assumptions for such an estimation were not precise enough. There is more and more information now incoming. First of all, information about the size and profiles of clients who would seek those vacations and suffering some financial problems. The second issue is the issue of the macroeconomic scenarios and also of the resistance of different industries and the COVID impact on the industries and individual customers. So these macroeconomic scenarios are much more adequate today than they were a month ago. So I think during the second quarter, some mechanisms, not regulatory, but more practical mechanisms introduced by banks will help us to develop more consistent assumptions and Therefore, the provisions made by banks in the future will probably also make the results more comparable between other banks rather than if the provisions were done in March.

And then I will ask our moderator to ask questions online via conference. So one more question about ECJ ruling.