Alior Bank Sa Unsp/Adr

Good morning. My name is Dominik Prokop. I am the Head of Investor Relations. Welcome to this conference presenting Allure Bank's Q3 2025 results. In the first part, the results and the trends will be presented by all your board members.

Piotr Żabski, CEO, who will present the main trends and discuss the business performance. VP Marcin Ciszewski, who will speak about risk and VP Zdzisław Wojtera, Speaking about financial results, right after the presentations, we will move right into your questions. Before I hand over to our CEO, Piotr, I urge and encourage all of you to ask your questions even during the presentations. Just like every quarter, this will allow us to smoothly segue into the Q&A. Thank you and over to Piotr. Good morning and welcome to yet another presentation of our quarterly results. Yesterday the supervisory board approved our results and it is our pleasure to present them today. To present our Q3 performance and the results year to date. Before I move to the highlights, I'd like to first talk about our strategy that we announced and published in March. The third quarter continued to pursue our strategy. And in summary, we came close to saying that we are well on track implementing the strategy. The strategy is based on three pillars growth, scale, stabilization of results and operational excellence, which you will see in our numbers. Operations. Just a few highlights and facts I'd like to draw your attention to. This year, year to date, our revenues reached 4.5, more than 4.5 billion zloty, including NII at 3.87 billion. year-on-year stable with lower rates, of course. Our net commission income grew. That's the other leg of stabilizing our results. So that has materialized. In Q3 alone, we have a drop in NII due to the lower rates. But we have made up for it by growing our and fee net fee and commission income which is our strategic objective. Hence the net profit in Q3 amounted to five hundred sixty three million and year to date one point six seven nine billion lossy. And we have achieved all that with a very good return on equity close to 19 percent. Well in line with our strategy. My comment over that period of time we also recognized 50 percent of last year's profit in our equity and so we are even more proud of our ROE as equity is growing. Speaking of risk we have very good readings 124 million cost of risk and the ratio is 0.72, less than 0.8. That is our target. Down 0.2 percentage points year on year. NPL stood at 6.29%, down 0.81 percentage points in the past 12 months. So we are well on track in line with the trajectory of eliminating the problems that burdened us over the past few years. I've mentioned equity. Our capital position is solid with a big surplus. Our ratios Tier 1 and TCR remain very strong well above the regulatory minimums and that surplus allows us to continue with our strategy of growth. Speaking of growth, just a few highlights, a few facts. As you may recall, our strategy relies on relationships, growing the number of relationship customers who are the future of this bank. That number grew by 100,000 year on year. The number of relationship customers is the biggest growth we have seen in this regard over the years. 1.68 million.

Sorry.

We have 1.68 million customers, 98,000 more than at the end of Q3 2024. And the number of mobile app users was 1.59 million, 15% up year-on-year. Our deposit portfolio grew 8% year-on-year to more than 80 billion zloty. And our assets grew, especially mortgages. We are proud to say this. The increase was 111% year-on-year to 1.3 billion of new mortgages in Q3. The share of our portfolio of mortgage loans in the portfolio is now more than 30%, which ensures some stability. in our portfolio. This is a long-term, well-secured portfolio at good margins, so it is a stable factor working for us in the coming periods. Another success we are proud of regarding liquidity, we issued MRL bonds that Marcin will discuss in more detail at a very good margin, 1.5% with a lot of demand. So something that's something we are also very proud of. The next slide presents more details of our activity across the bank. Assets grew 7 percent year on year and we are very close to a special mark 97.7 billion very close to the mark of 100 billion zloty. We'd like to get the next quarter The volume of deposits was growing faster than loans, specifically up 8%, that's more than 80 billion zloty. Performing loans grew 6% to 63 billion zloty. At the bottom of the screen, you can see two lines with some readings for Q3. The top is the top line and then year-to-date in the bottom line. Cost-to-income ratio was very strong. Costs increased, affecting the portfolio due to inflation. And I think Zdzislaw will focus on that later on. But as you can see, the growth of this indicator is lower than the growth in costs. NIM, net interest margin. The interest rate cuts are materialized here.

Are we very high as I said both in Q3 and year to date.

Cost of risk very low as well in both terms. in Q3 and year-to-date better than we expected in line with our strategy. And the NPL and capital ratios are very strong. Most importantly, in a downtrend, this continues. Let me now move on to our main two business lines. First, retail. That's the top left-hand side of the slide these are the assets of our customers that grew 12 percent here on here we are very happy to see that growth basically every line has improved year on year on the right hand side you can see the gross loans to retail customers by Real estate loans in yellow and other main consumer loans up 6% overall. In the bottom part of the screen you can see the breakdown of that figure. We are happy with the growth of non-mortgage consumer loans up 21 percent year on year. The sales have stabilized over the past few quarters but we have maintained the dynamic growth. So growing scale is part of our strategy. We are very much doing that. Last but not least in the bottom right hand corner you can see the efforts we've made to sell mortgages. which grew by more than 200%, 2.1 times bigger. That is our production and sales year on year. The sales grew to 1.3 billion in Q3. So our market share is much bigger than our overall share in the banking industry. Customer relationships and relationship customers part of our strategy. The number of relationship customers grew by more than 100,000 or close to 100,000. 1.68 million. The best numbers we've seen ever in this regard. Relationships are very important for us. to stabilise our performance and to prop up the second pillar of our strategy. Our customers are using the mobile app more and more. The number of mobile app users has been growing, more of that later, but I'm happy to say that customers who do not hold accounts with us but only have instalment loans or cash loans, they have a reason to use our mobile app. That number grew by more than 200,000 customers year on year. The relationship customers, about 50% of them, are using the app that's five percent more than last year and we also see a five percent point increase in the number of end-to-end customers that is people who start the relationship with us in the mobile app and they only use mobile banking now very briefly about our mobile app that's one of the key factors of Our performance mobility is a key focus for us. We want the bank to be available, the entire bank and only bank in the app. We have improved that. We have improved our ratings and we have a very good NPS, very good customer ratings. Even before what you can see in the bottom of the screen in Q4, we will present a new version of our app, which we are building on the new technology provided by Kotlin, a multi-platform with new processes. which rely on state-of-the-art technologies. We are working with Eximi and that's supported by the latest CRM. As a result, we have launched a number of new functionalities. Repayments for installment customers, for instance, those customers who do not have an account but have an installment loan are now actively banking over the mobile app and they are using a number of other functionalities as well. And that's even before we have presented our new app. This is happening in Q4. Now let me move on to our business customers. We see stabilization in the performance and in the portfolio. The portfolio is stable even though new sales would suggest that the portfolio should be now growing. At the bottom of the screen, the yellow bars, you can see the total credit limit granted up 34% year on year, which has not yet fully produced complete results. On the right at the top you can see that we are phasing out the loans in the non-performing portfolio. So this works both ways. But we are very happy to see that new sales are growing and these will soon outweigh the termination of bad loans. So the portfolio should start to grow. What we see in some of the segments, maybe not in micro, because this segment has been stagnant over the years, is now only starting to bounce back. But I'm speaking of this small and medium enterprise segment. The new sales there are growing by a double-digit number. year on year. So a solid growth in new sales not across all segments yet but in the segments where we want to be a bigger player. That's where we are being very very active. So the portfolio mix that we are that we have now and our target portfolio mix are very different. So the results are not really comparable year on year.

As far as business customers are concerned, they obviously deposit assets. There's an increase of 5% there. They keep banking online, even though there's been a very recent the launch of a business app. We've now been having a campaign about that for the past few days. I'll talk about it later. What we are very happy about is the activity in the leasing sector, lease and loans portfolio. good start for our business customers the portfolio grew by eight percent by three percent in the last quarter the lease and loans market has seen some stagnation this year so the eight percent growth is really very

satisfying.

On the right hand side, you see the growth in the new business. There's been a growth of 21% year on year. We are very strong in a few areas, especially vehicles up to 3.5 tons or machines and equipment. So we have a considerable share in those market segments.

about this part of the strategy.

We want to leverage our brand. We want to refresh it, and we therefore continue further activities in that area. There is a new look in our cards. There is an e-conto business. As you can see, a slightly reversed banking model for business customers, where we give them the possibility to conduct the company in the mobile app with our banking in the background. Obviously, there's a new model of functioning. I invite everyone to visit it. You can manage both your warehouse and your invoices directly from the app, and it is all combined with the actual account. We also want to follow the route of trying to reach new segments of customers. That is why in the last column on the right, you can see that we have joined the Inside Seaside Festival as the main partner. We want to be visible there at the events of that particular festival. And another aspect of our strategy we want to refresh our target group we want to extend into younger people that is why we have a dedicated offer to to to that group we've started collaborating with anita lipnicka and the problem music band we have issued a new video with a piece of music dedicated to that group. And there's been a good pickup in that target audience, a growing interest in Aliot Bank. So we find this direction of development to be a good... and we will be reaching into new segments in that particular way. So that is all as far as business results are concerned. I will hand over to Marcin to tell you more about credit risk. Good afternoon, everyone. I will begin with the capital ratios. Our position is very secure, as has been mentioned by Piotr. There's a big margin quite above regulatory requirements, 4.9%. billion is the amount the Finance Committee has given access. And at the end of September, there was an introduction of a new buffer, the capital buffer. And nevertheless, at the end of the quarter, liquidity ratio is 17.5. We also grow our liquidity MLRA in the fourth quarter. We have placed another position of our bonds at the tune of 450 million. Senior preferred it's called and the margin of those bonds goes down. It is one point five percentage points above the six month FIBO with considerable over subscription at the end of the quarter. The ratio was seven

was 20.75%.

The liquidity ratios are above the regulatory minimums. As regards LCR, it was 214% and NSFR at the level of 146%. Moving on to the Let me start with the non-performing loans ratio, which at the end of the quarter was 6.29%. In that particular quarter, we did not really sell any new loan NPL packages. But we did identify a default at a big customer and the mining and steelworks industry. But that is a one off event which had an impact on the NPL. and COR levels. But we have managed to bring that into order and we still maintain the strategy where the cost of risk should not go above 0.8. And after clearing the field from these negative events, it would be at the level of 0.7. We maintain our strategic assumption, whereas by the end of next year, the NPL ratio should go down below 5%. Moving on to the next slide, we can see some important information at the business slide, there's a growth there. There was that one of negative event, but in case of the retail customers, it is quite flat, but a slight increase compared to the previous quarter. At the end of the second quarter, we sold an important package of loans, which did not happen in the third quarter. In the fourth quarter, there will be another package sold and a revenue will be credited, which will impact both NPL and the cost of risk ratios. Thank you very much. I now hand over to Zdzisław. Good afternoon. Let me tell you about the financial rewards. Let us begin with our income. The objective was to stabilize the revenues this year, especially in the environment of decreasing interest rates. 125 points dropped in one half of the year. Comparing year on year results, we are at the same level of revenue. Also, in quarter on quarter terms, they are very similar results. If we look at the net profit, There are a few one-offs that need to be taken into account and which represent the differences between the quarters. Let us look at the second quarter or the first half compared to the third quarter. As Marcin mentioned, in the second quarter we had a one-off which was the sale of the NPL loan package which increased our profit for the second quarter. If we compare the years, the third quarter of 24 and the third quarter in this year, were still before the principle of spreading out the cost of the quarter. So the costs in the third quarter were very low. And then in the fourth quarter, we had to report more costs, considerably higher costs, which resulted in the result of the third quarter of last year to be quite high. So these are the ones which explain the difference. and other conditions, we still deliver a considerable result above 500 million in each quarter. In the next slide, we see the breakdown of our income statement. The first yellow column is the quarter. Then the second yellow column is the cumulative results, one to third. water. And the first position, we will discuss them in the subsequent slides because we dedicated additional slides to these specific positions. If we look at the costs of activities, which we keep to control very well, and there is a dedicated slide to that, so I will discuss those in detail later. Two important bits of information for you is the fact that when we use the Conservative approach, we have created 47 million of additional reserves for mortgages in currencies. and additional 19 million for the so-called free credit cost. We keep observing a growing increase of new cases in the third quarter. And so we had to react. But this is our very conservative approach. Nothing that could raise any Concern is happening in terms of currency loans loans. This is a margin of our activities, really.

And so the currency loans is a very small part of our activities.

There are two events which we included in the third quarter, which impacted the net result, 563 million zlotys, which translated into a very good profit of 19%. percent in quarterly terms and over 19 in cumulative terms. Cost-to-income ratio is also very good considering the scale of our activities. 36.9% in quarterly terms is a very good result. The next slide is addressed to the interest income. I talked in the part about revenues. This is obviously a very important part of it, especially at the lower part. You can see that between the second and third quarters we had a slight increase. Looking at three quarters of this year, there's been a stabilisation of the result. And we expect that in subsequent quarters we will observe a gradual improvement in the result according to our strategy. So on the one hand there will be a low interest rate environment and potential further decreases of the interest rates. But the volume of our income profits and commission and margin will help us improve the interest result and the profit. If we look at the

commissions, the interest margin.

We started with 620 and ended up at 561 for this current quarter. Two important constituent parts are important. The dropping interest rates, of course, but also the change in the structure of sales were the important part of our balance sheet. are the mortgage loans, which have a lower margin and income, but can allow us to plan a stable income stream for the subsequent years. And these two elements impact the result where you can see the dropping interest margin what can we expect in the next quarter well there will be further drop about 10 base points that is what we can expect as far as the next quarter is concerned however the interest result should be at a comparable level and will subsequently improve

And one final point on the loan-to-deposit ratio. You can see that our lending picks up, steps up, and so the curve is now turning north from 78% up to 80%, which shows that our loans are simply growing faster than before. NFC, the Net Fin Commission Income, as we said earlier, When presenting our strategy, this item is of special importance for us. We want to grow it and we cannot grow it unless we work overtime. This cannot be done overnight. We have to offer better quality to our customers. And step by step we can see results. NFC grew 5% quarter on quarter and 10% year on year. with a significant increase in Q3 alone in FX transactions of our customers. The summer holidays, travels helped to boost FX income. And then we have another important line sales of insurance in the group. That's good news. What are we anticipating in the next quarter. It may be difficult to copy the Q3 numbers one to one but I think we will balance somewhere between Q2 and Q3 numbers with positive growth over the year. And my final slide talks about our operating expenses. I've already mentioned that if you look at the numbers starting in Q1, net of the BFG contribution, our operating costs or management costs, general expenses would be 540, then 550, 565. And we expect that the total operating expenses net of the BFG charge should be up six seven percent year on year in 2025 which proves that we keep costs well under control and our cost income ratio remains strong at the 37.9 on a normalized basis net of the credit holidays and that's a very good and solid result looking at the scale of our activity. In Q3 we saw a very positive contribution to the net profit in q3 2024 to be specific this is when our costs were still relatively low then in q4 we booked very high costs with a significant increase this is why that line is not straight now We expect to keep the costs stable quarter on quarter in a transparent way. And we are well on track. So it will be much easier to anticipate all your banks costs quarter after quarter. Thank you. And over to Piotr. Well, to summarise, let me go back to the strategy once again.

As I said, our three pillars to growth scale.

And you can see that we are growing. Our assets are growing and so are our liabilities. Our lending and new sales are growing. The portfolios are improving. So we are growing scale. especially proud to say that our number of customers has been growing. We attract new customers. They recognize our efforts. We are refreshing our target group. It's going to be younger. We get results. Our customers are banking with us using mobile and digital solutions. The second pillar stabilizes our revenue. We are very proud with the increase and the share of NFC in our income mix. We are growing sales of insurance for instance that stabilizes our figures and that's quite an impressive result I'm sure. Third pillar is operational excellence. And it's also bringing results. The cost to income ratio is very strong. The increase in costs is well below the market average. We have fully implemented the agile model business model and we work in tribes to provide even better solutions and better performance for our customers especially digital solutions as we said in our strategy after q3 our bank is thriving we are well on track with the strategy And that's all from me. Thank you very much for listening to this presentation and we open the floor for your questions. Excellent. Thank you very much. Moving on to your questions. What provisions for the CHF portfolio are you expecting in Q4 2025? in 2026? Well, as you know, it all depends on how fast new cases are opened. I'm sure in Q4 we can expect a slightly higher number, maybe similar to what we reported in Q3, but we expect that in the coming quarters these numbers will definitely be lower. If I may comment, our CHF portfolio is disproportionately lower than those of other banks so this is a fractional number really thank you another question what were the reasons for the positive impact at 14.8 million in your cit in q3 2025 in other items of the income tax? Well, as you remember, last year we said we were closing down our activity, our branches in Romania, and this year we started to clear the losses from the wind-up of that branch. So that is the positive impact. Next question. What is the scale of the impact of the proposed CIT adjustments that are expected in Q4 in deferred assets? Yeah, this is perhaps not that intuitive to some of the market participants. A higher tax rate expected next year means that the banks will be disclosing some additional impact on the net profit this year. I don't want to speculate. At Alior Bank and in all other banks subject to the new tax, the impact will be positive this year, which is paradoxical, I know.

But...

We've heard very different comments on this draft law. There may be an alternative draft proposed. So we don't want to disclose any numbers. But that would be the impact of the new tax strategy. We would have to look into it and present a positive result this year, which will be relatively high. Thank you. The next question. What is the WFD, the long-term ratio at the end of Q3? It's fairly stable at the bank, 40.54. Thank you very much, long-term financing ratio. Next question. The increase in the corporate loans portfolio in Q3, was it affected by any one-offs?

I think we are well on track of growth.

As you may recall, our strategy says we want to shift the focus and we are interested in the micro segment. This year the micro segment has been stagnant with no growth at all but little growth in small enterprises and double digit growth year on year in large customers. Well, I must say that Alior Bank is playing in this market in proportion to its size. We are not a leader or trendsetter, but we are focusing on different segments than we used to. And so the growth you have seen may not be very impressive, but the segments we want to be a strong player in are now producing double-digit growth. Thank you. Next question. Why did your bank assurance income grow quarter on quarter in Q3 2025? That was partly due to a higher cost of provisions against insurance repayments that we set up in Q2 and partly due to better penetration of insurance that is bundled with products we sell. Thank you. What NIM are you expecting in Q4 2025? How will NIM perform in the next quarters? As I said, we are expecting a drop of 10 basis points or a dozen basis points in Q4. The annual average NIM next year is expected to reach 30, 40, sorry, to drop 30, 40 basis points.

Thank you.

Why were your NPLs growing so slow in Q3? As I said during the presentation, one customer, a large customer, was defaulted They defaulted in Q3 as a one-off, but we maintain our expectation for the NPLs to go down for the entire loan portfolio by the end of next year to less than 5%. Thank you. Next question. Why did the number of relationship customers grow year on year? 40,000. Was it new mortgage customers or customers using installment loans? What products can you offer to the new 40,000 customers? Well, our definition of a relationship customer is quite broad. Customer who banks with us day after day. An installment customer has a single relationship with us. An installment loan, so that's not covered by the definition and not covered by the growth. So we are looking at the number of customers who are actually banking with us. And there is no good answer to that question, really. We are... playing a number of different instruments like an orchestra and all these instruments play together. We are refreshing our brand. We are entering new segments launching new products launching new campaigns reaching out to new customers communicating with them in new ways improving our mobile app. We are now working differently with distribution production. So all of that is now starting to contribute to the performance. Of course, we are continuously working to develop new products, simplify our processes, improve the time to cash and many other ratios. So it's a set of many different factors. which we started to develop as we joined the bank and that we have addressed in the strategy.

Thank you very much.

Next question. Any of your strategic objectives to grow the loan portfolio, grow your NFC or your net profit? Is any of those more difficult for you to achieve six months after you presented your strategy? Yes, I think after three quarters, We are in a different place and depending on the segment. So the situation differs segment to segment. We have great achievements in selling mortgages better than expected really. In other segments we are growing less fast than expected but again in most of them above the market average. So it depends. And as I said before Our loans may not be growing as fast as we would like them to. Our mortgages are growing faster than we expected. Installment loans are well on track. business customers. We are changing our trajectory and reaching out to new segments. So in those segments where we want to grow, we can see sales grow by double digit figures. It will definitely be difficult to improve the net fee and commission income now that interest income is falling, NIM is falling. It will be difficult to grow the margins. We need to regroup. We need to reorganize our processes and products and build up the customer base of relationship clients who are not only producing an AI but also NFC. In all these segments we can see some challenges. As of now I think we have addressed. challenges across many different strategic initiatives that we have defined now a tactical plan. We have aligned the bank with the objective of delivering solutions very fast. The agile business model we applied in Q3 was implemented 100 Teams in several tribes are working to develop even better solutions for our customers. So we have seen some deviation from plan, but I think we are managing them quite well. Let me also mention leasing, which is also delivering double-digit growth year on year.

Thank you very much. This is all the questions asked. I want to thank everyone for your participation.