Erste Bank Polska Sa

of Santander Bank Polska for the first quarter of 2024. My name is Agnieszka Dorobrzycka. I'm in charge of investor relations at the bank. This presentation will be led by Michał Gajewski, CEO, Maciej Reluga, CFO and board member. Wojciech Skalski, financial controller and also a board member. After the presentation, we'll have a Q&A, but you can ask your questions throughout the presentation. You can send them to my email, agnieszka.dogdyska at santander.pl. We will answer those questions after the presentation. Michał, over to you. Hi, ladies and gentlemen. Welcome back. to the presentation. I'll be talking about the slides I have in front of you. I'll give you the numbers so that you can follow. So again, welcome to the presentation of our results after the first three months of 2024. We have generated a solid net profit and this allows us to be fully optimistic about the year going forward. This is the beginning of the journey we have embarked upon. We want to help you achieve more. I am positive that thanks to the strategy, 2024 will be a great year for our people, our customers, and our shareholders. And I mean the social and financial dimension, despite the recurring systemic challenges in the sector. So let's start with the result. In the last quarter, we generated 2,100,000,000 gross profit. At that time, the tax burden amounted to 697,000,000. The regulatory cost totaled 280,000,000 on top of that. So in total, we had almost 950,000,000 worth of charges. In quarter one, we generated a net profit of $1,565,000. I'm moving now to slide seven with the highlights. As a group, we serve over 7.5 million customers, of which over 5 million are digital customers. At 700 Bank of Cologne, we have 5.9 million customers, and this includes 6.3 million 3.6 million digital customers, and we see those numbers going up nicely, and that includes also the number of our application users. Deposits up 7% year-on-year to reach $210 billion. Gross loan portfolio increased by 5% year-on-year to $168 billion. Assets up by 9%. to $280 million. Customer funds amounted to $230 billion. That's up by 10%. Slide eight with key financial results. I will be talking about the details later in my presentation, but I'm now presenting the highlights. Net profit 1 billion, 565 million, net interest income up 10%, fee income 729 million, that's up 10% year-on-year, up 3% quarter-over-quarter. Total income Income, 4.2 billion, that's up by 11%. TCR for the group, 17.81%. Return on equity for the group is above 20%. Our capital position remains solid. We're moving now to slide 10 to 12. We see the novelties in our offer. for our customers. So let's fast forward to slide 13, where we're presenting selected business data. Retail banking. We maintain 5.9 million accounts for individual customers. This is 5% more than a year ago. In quarter one, we opened 121,000 personal customers. Year on year, PLN accounts increased by 3.8%. FX accounts by 12.9%. Loans, mortgage loans up 52% to reach a total of 4.4 billion. That's 52% up, as I said, compared to the previous quarter and five times more than in the same period of 2023. What's worth mentioning, vast majority of those loans were granted based on fixed 97% of those loans were based on fixed interest rates. In the first quarter, we granted cash notes worth 2.5 billion, that's more than in the previous quarter, by 3.8% and more than in the same quarter of 2023. We still observe higher loan sales through remote channels. In quarter one, it was 71% of all loans. In terms of investment funds, we're observing higher numbers too. SMEs, In quarter one, we opened nearly 17.1 thousand business accounts, so more than in the previous quarter. The SME loans, they total 1.3 billion, so similar to the same period last year. Business banking, double-digit growth is from FX, trade finance, also incredibly credit and leasing income, we see very good performance. Corporate and investment banking, growth in capital markets, advisors for MAA and trade finance, all those lines going up nicely. Slide 15, we're moving on to the balance sheet. I've talked about the growth in loans. We have an annual growth of 5%, 2%, quarter over quarter. Leasing recorded a 10% increase. Customer funds, the pulse is going up by 13.1%. Billions year over year. Most of the growth we see on the retail part. The group enjoys an excellent liquidity with LCI much above 200%.

Slide 17, net interest income and margin. The net interest income was 3.4 billion, growing by 10% year on year. Quarter on quarter, the interest income increased by 7%, while interest expense increased by 1%. So as you can see on the slide, the net interest margin for quarter one annualized on a quarterly basis was 5.38%, and it's been stable over the recent few quarters. Now, slide number 18. Net fee and commission income, robust growth by 10% year-on-year and 3% quarter-on-quarter. Year-on-year, we really see good performance when it comes to asset management fees by 55%, the good growth in insurance fees by 30%, ethics fees by 14%, and account fees growing by 5%. Quarter on quarter, we also saw good results when it comes to credit fees and FX fees by 11.4% respectively. And we also saw the growth in fees on credit and debit cards, which reflects the activity levels of our customers. Now slide number 19, income, growth by 11% year-on-year up to $4.2 billion. Now slide number 20, cost. operating costs. In quarter one, these costs were $1.35 billion, so that's growing by 8%. And this is, among others, the result of the contribution to the resolution fund of $290 million, and that was higher than what we posted in quarter one, 2023, because it was $184 million. Let me also mention that we received a letter from the Banking Guarantee Fund, which was communicated to the market in our current report. And that was the letter on the final amount of that contribution. We received it only at the end of April. And we, as we said, we posted $202 million of funds And in quarter two, we will make the adjustments to match the requirement imposed by the Banking Guarantee Fund. And the adjustment will be roughly $48 million at the consolidated level. Excluding the Bank Guarantee Fund contributions, the costs overall would have grown by 7% year-on-year, primarily driven by inflation, salary reduced, and IT costs. And this is the cost of our digitization strategy. The stock cost increased by 6% year-on-year. Despite all those growth, the cost-to-income ratio of the group was low at 32.6%, and That's better what we saw in quarter one in the last year, which was over 50%. Site 21, provisions. The total provisions for expected credit losses at the consolidated level stood at 232 million dollars. And that was flat on what we saw in quarter one, 2023. the cost of credit risk was 0.70%. In quarter one, we did not witness any major one-off events that would impact the expected credit losses and provisions for that purpose. The key risk indicators, such as the cost of risk, the NPL assure, and the NPL coverage ratios, close to what we saw at the end of 2023. So we've been also observing the stabilization in delinquencies for individual credit portfolios. When it comes to slide number 22, let me reiterate. The banking tax and regulatory costs were huge, and they represent a heavy levy for us. and to our bottom line. On slide 20.23, when we are summing up our performance, we've already mentioned interest costs and revenue streams, but you can also see the costs related to legal risk. And in quarter one, these costs were $300 million, of which provisions of legal risk represented approximately $170 million loss. And there were also costs of settlements. And let me remind you, we signed nearly 10,000 settlements with regard to FX mortgage loans. And the cost of that was $9 million plus. And the legal costs, apart from that, other costs represented $126 million. So recapping, that was a good quarter. We actually maintained good net interest income and we increased our revenue stream. Our key income also increased. We can see that we have the business momentum. The sales volumes are robust, satisfactory, especially when it comes to mortgage loss. And when it comes to our business operations, I think, we think the whole quarter was really good. And now let's go to questions and answers.

Hi, this is Majira Luga. I hope you can hear me. Yes, we can. We have, we've got some questions already. Thank you for all of them. As usual, we will group them by subject. Some questions are related to Swiss francs, some to the cost of risk, other to capital, dividend, and the margin. Michal, can we start with Swiss francs? Yes, of course. I see three questions here. The outlook on provisions related to FX loans, Swiss franc loans. Are we now creating provisions? Are we in the cycle? What can potentially impact provisioning? Okay. Another question is similar. It relates to our expectations to provisions related to Swiss franc loans in 2024 and the modest approach. Third question related to the coverage. in 2023, the main assumptions incorporated into the level of coverage. So I've read all the questions. I'll let you start by answering the last one. In the annual report for 2023, we are indicating the assumptions behind the level. for the calculations, how we create, how we provision those loans, what scenarios we assume, what the sensitivity analysis behind the scenario is. In the first quarter of 2024, that model remained unchanged to a large extent. It was continued with the same assumptions. Of course, we have the development of last Thursday. It only happened at the end of the month. The decision of the Supreme Court. We are now analyzing this development. We have not received a justification in writing from the court. So, once We receive that once we have run the analysis of that justification. When we look deeper into the previous decisions in the same respect, the link between the two, we will then analyze our models and assumptions and verify how it impacts our assumptions, only then will we make the relevant adjustments. But in the first quarter of the year, we did not have to take that into consideration. So we used the same assumptions as in 2023. 78, no, it says here in the question, provision coverage over Swiss franc mortgages, no, it's 80%. On the portfolio, San San de Banco is 84. Slightly less coverage on San San de Consumer, just to be more specific. In terms of Kerry's other question, we're not giving you the guideline or the forecast. until the end of the year. The situation here is dynamic. We never actually provided any intensive wrist pranks. I think I have answered those questions. Martin? We have the fourth question in the meantime. The settlement, what are the terms and conditions of the settlement? Is it the KNF offer? Are you going to revisit the settlement terms and conditions? Well, the KNF offer is the starting point. We have an individual approach. We talk to customers. We treat them individually. We're talking to all the customers, those who have filed a lawsuit and those who haven't. We invite them to the negotiating table. Those are the negotiations between ourselves and the customers. So I can't disclose any more specific information. The KNF offer is the starting point.