Santander Bank Polska Sa

Good morning. My name is Agnieszka Dobrzycki. I'm Head of Investor Relations at Santander Bank Polska. I'd like to welcome you at the presentation of financial results of Santander Bank Polska for the first quarter of 2025. Today's presentation will be presented by Michał Gajewski, CEO, Maciere Luga, CFO, and Wojciech Skarski, the Management Board member in charge of the Financial Accounting and Control Division. Before we start, I'd like to remind you that during the presentation, you can ask questions through the link online and also by sending the email directly to my email address. So now let me hand over to our CEO. Good morning. Michal Gajewski speaking. Welcome at the presentation of the financial results after the first quarter. We have had good months, both in terms of financial performance and implementation of our strategy that brings tangible benefits to our customers, employees, and shareholders. Moving on to the results. In quarter one, we generated the profit before tax of $2.3 billion, while our tax and regulatory charges were over $1.1 billion. The group's net profit was $1.7 billion. Let's go to slide seven with general operational data. Just to remind you, As a group, we provide services to over 7.5 million customers. The number of digital customers keeps growing. Currently, in the group, we have 4.5 million such customers, and 3.7 million of our customers use our money banking application. In Santander Bank Polska alone, we have 6 million customers, and as I said, the number of digital customers has grown by nearly 7% year-on-year. And we have a double-digit growth in the number of mobile banking customers by nearly 11%. Customer deposits grew by 13% and amounted to 237 billion zlot. The growth from portfolio year-on-year grew by 8% to over 182 billion zlot. Customer funds totaled 314 billion zlot and grew by 12%. Customer funds totaled 262 billion lots growing by 13%. In slide eight, you can see key financial results and the key items, as I already said, the group's net profit in quarter one was over 1.7 billion lots. Net interest income was 3.6 billion lots up by 6% year on year. Net fee income totaled 748 billion and grew by 3% quarter on quarter and year on year. So the total income was $4.4 billion, that's up by 7% year-on-year. Our capital position remains high. Return on equity for the group was 19.5%. And we have excellent liquidity. The consolidated LCR was over 209%. Slides 10 to 12. You can see our activities across all business segments and new products for our customers. But I would like to go straight to slide 13 to talk a bit about selected business data. Let's start with retail banking. We operate 4.8 million accounts for individual customers. up by 4% versus the previous year, and we opened 113,000 personal accounts in Polish slots. Cash loans, very good. Sales performance, 15% more than in the previous year, 2.9 billion lots of cash loans. Mortgage loans. We sold mortgage loans worth 1.6 billion lots It's a weaker result than the previous year, but we know that the market has been much weaker than in the previous year. When it comes to mortgage loans, it's worth saying that almost 97% of new sales was based on an adjustable fixed rate. So the total share of loans with an adjustable fixed rate in the entire PLN mortgage loan portfolio grew to 44%. And just to remind you, in December 2024, it was 42%. In quarter one, net investment fund sales was $500 million. Tandem TFI fund assets at the end of quarter one were about $24.3 billion. So our market share is maintained at the level of around 10%. In the SME segment, we opened over 20,000 business accounts, much more than in the previous year. We have also good performance in terms of SME loan sales, 1.3 billion slots. Lease sales also recorded very good performance, 1.2 billion slots to SMEs. When it comes to business and corporate banking, we have also double-digit growth. New credit limit sales up by 22%. Credit volume grew by 12%. FX income was also very strong. In the corporate and investment banking, we have a double-digit growth, 23%. in the ECM services. And we also recorded a significant growth of 12% year-on-year in the treasury transaction. In slide 15, I have already talked about loans. In this slide, you can see individual business segments that... contribute to an increase of 8% year-on-year and 1% quarter-on-quarter in gross loans at a consolidated level. Customer funds, slide 16, just to remind you, our customer deposits increased by 13%, which amounted to over 237 billion slots at the end of March.

Now slide number 17, interest income and margin, and this In Q1, the net interest margin was $3.6 billion, growing by 6%. In Q1, we had the slight decrease. Year-on-year, the interest income grew by 8%, while interest expense increased by 11%. The net interest margin in Q2 annualized on a quarterly basis totalled 5.14%, despite the slight decline is still high. It was negatively impacted by the growth in the balance sheet as a result of the inflow of deposits with lower margins and the slight decline of income on assets in foreign currency assets as a result of lower exchange rates. Slide number 18, net fee income. We record here growth, which makes us very happy. The net fee income totaled $748 million, growing by 3%. Year on year we saw really good growth in provisions for management fees, for asset management up 14% insurance fees, and brokerage fees which grew by 80%. I also mentioned that we had the good growth in account fees in quarter one by 11%, which is driven by the number of transactions made by our clients. So this growth is worth noting. especially as we have not changed our prices at all. So this is all driven by the level of activity of our customers. Total income, site 18, it is $4.4 billion. It's growing by 7% year-on-year. On a quarterly basis, the income is flat. Site 12 presents operating costs. In quarter one, the cost total $1.5 billion was growing by 40%. But this is the result of higher contributions to the Banking Guarantee Fund. To remind you, in the last year, in quarter one, we paid contributions $206 million in that levy. Well, that's the growth. If we compare to the previous quarter, the total costs having excluded the regulatory costs decreased by 2%. Of course, these costs were driven by inflation and the salary reviews. The staff costs increased by 7% year on year, but despite that, the Operational effectiveness ratio, that is the cost-to-income ratio of the group, is 34.8%, and for the bank alone, it is 34.3%. So it's a really robust one. Slide number 21 outlines loan loss provisions. It was a good quarter. The net balance of loan loss provisions on a consolidated basis was 252 million dollars. A year ago, it was $232 million. The cost of credit risk is 60 basis points. The net balance of provisions in quarter one was 9% lower than the net balance a year ago. And this is the effect of continuing good quality of our loan portfolios. We also sold part of our credit receivables worth nearly 500 million blocks, and the gain on that transaction was 18.7 million blocks. The risk indicators remain at a satisfactory level in our opinion. The non-performing loans account for 4.3 of the total portfolio, and there were no one of events that would have an impact on our net balance of loaners' provisions. Side number 22 shortly summarizes the banking tax and the regulatory costs. And as I mentioned, the regulatory costs both are 1.1 billion in quarter one. So to sum it up, slide 23, we think that quarter one was a really good one for the bank. We kept our interest income At the good level, we improved the net fee income. As I said, we are particularly happy with fees earned on the number of transactions our clients make, transaction fees, credit and insurance fees. And let me reiterate that it was without any changes to our pricing. And it makes us optimistic when it comes to the activity levels of our customers. When it comes to our business operations, We recorded good sales volumes, which indicate further development opportunities, and they are, they bode well. So that's my presentation, and now let's go to the questions and answer session. We have some questions. We have the first question, and Miha, would you like to start? The first one, when it comes to the Swiss francs and the adequacy of our provisions for Swiss francs exposure, let me remind you that at the level of the bank, It says 137 and 126% for the group. In our opinion, this is adequate and sufficient level. It is worth stating we've also been tracking the number of lawsuits You might not remember, but at the end of the last year, the number of shoes was 21,537, and now it's 21,519. So the number is lower than at the end of quarter four. So this is a clear decline. Okay, that's about Swiss francs. While the question referring to our minister of regional funds and the windfall tax on banks, we do not comment what the politicians say, especially in the election campaigns. We will not be commenting on what the minister said, macroeconomy. But the one question refers to potential impact of trade tariffs on both loans and the quality of assets, as well as other I'm just sorry for being so chaotic, but it was just an English question. We are not changing our macro scenarios. And let us remember that the negative potential impact of the trade war, we have a positive impact of changes in the fiscal policy in Europe, especially in Germany. So we cannot see any changes, and probably the risk is down. When it comes to corporate lending, for a few quarters, there has been quite a decent growth that we've recorded. And quarter one is always a bit weaker. And this is because we are optimistic about growing in upcoming years. quarters from the risk perspective angle we wouldn't like to suggest that it should be worse and we expect that this relatively low level that we recorded in the first quarter will continue there shouldn't be any major changes we should be within the ranges indicated in the strategy. Another macroeconomic question refers to the outlook for interest rates for the coming years and the size of change in the recent three months. And there's also a question about the changes in U.S. talents will have an impact on us. Our view on interest rate change in the short term because Since the last conference of NBP's governor, Mr. Zlapinski, the cap shifted. And we might see even the first caps next week in May. And first we expected that in July. But the caps overall, we have not changed our outlook for the level. So it will be rather sooner than much more or more in that deeper cut. So is the risk for the growth materialized earlier in the day inflation and, uh, also was different than we might see deeper cuts. But, um, our, uh, in-house view is that interest rates will, be a bit higher than what is priced in by the market at the moment. But let's wait for another conference for the decisions taken by the Monetary Policy Council in May. And let's see what's next. We also have a question about NIIR and the sensitivity of the net interest income. And there were a couple of questions about indicators, NII and the sensitivity of the net financial income. Every quarter, we provide the statistics on the share of fixed rate loans in also law. And as you know, for a couple of weeks and quarters, our strategy of reduced sensitivity has been pursued. At the end of 2023, the share of loans with a fixed rate was in the order of 30% at the end of March. It is 52%, so it's over 50%. And it has been growing bit by bit, quarter on quarter, for the recent couple of years. Of course, this is the result of a couple of elements. There is a bigger share of fixed-rate loans sold in currency, and it's also the result of our strategy of hedging against the interest rate cuts. And we do it via IRS. As a result, the sensitivity to interest rate cuts to date is a little bit, about 300 million dollars, 320 million. And I am talking about the cut of a hundred basis tax cut against the fixed balance sheet value. In the meantime, there are more questions.

A growth in loans portfolio. So I, have mentioned how the portfolio grew in quarter one. Uh, today we are not providing you with any forecast, but we have the pipeline of loans. Uh, we have a lot of credit agreements that we've been signing. So the demand is, um, of course we, um, I expected that due to the EU funds and public-private investments, and we can see also the same in the leases that the demand has been growing. We have been a strong leader in 2024 in this area, and we aim at keeping that top one position. And I think that in this area we have a competitive edge over other banks. When it comes to our position with respect to the purchase of Santander by Erste Bank, I can only repeat what we published in our comment. Bank of Santander confirmed that a few entities have been interested in buying Santander Bank Poland and that Bank of Santander is in talks with Erste Group. But of course it has been also highlighted that it is not certain whether the agreement will be reached. So that's the only comment I can make today. If you want to read more, please refer to the uh to our communication and there was a question about the outlook for the bank for 2025 it is very good despite the turmoil in the worldwide economy we think that the polish economy is resilient and polish consumers and polish businesses are able to manage their businesses also in uncertain times. And we think that this translates into positive outlook of the financial sector. So let's get back to interest rates because there have been a few questions about that as well. The long-term funding ratio, how much is it? At the end of March, it was 44%. Next question, what is the SOT NII? Slightly above 4, 4.40 more or less. Has our hedging strategy changed given what is priced in by the market? And one more question about deposits. What's the cause of an increase in term deposits? Has the bank implemented any special offer? So now maybe hedging strategy. Let's start with that. I told you what we've done in the first quarter. Our strategy remains flexible. So we are continuing that, and the scale of our activities depends on what happens on the markets. and we are very flexible in that matter. Growth in deposits. As Michal said during his presentation while discussing NIM, we had an increase in term deposits. We provide services to our customers in line with our offer. There was some increase and of course those term deposits are a bit more expensive and all of that leads to a lower margin, but we have not made any special offers. We had a special offer for savings accounts, but this contributes to Interest income. And this contributes to better relationship with our customers. Do we have anything else? Sensitivity, once again. Do we have any more questions, Agnieszka? No, I cannot see any more questions. I think that... You covered everything. Okay, so thank you. Please read the report for more details or contact us if you have any more questions. And have a nice long weekend.