Santander Bank Polska Sa

Ladies and gentlemen, it's already 11 o'clock, so we're starting our conference. My name is Agnieszka Dobrzycka and I'm in charge of investor relations at Santander Bank Polska. I want to extend a warm welcome to the presentation of our earnings after the third quarter 2025. The presentation will be led by Michał Gajewski, Chief Executive Officer. Matej Reluga, Chief Financial Officer, and Wojciech Skalski, Financial Controller. Before we kick off, I want to remind you that throughout the conference, you can send your questions via the link, or you can send them directly to my email address. The presentation with our earnings is available on our bank's website. Now, Michał, over to you. Thanks, Agnieszka. Good morning, ladies and gentlemen. Welcome to the presentation of our earnings. Let me start with an important disclaimer. Just like in the previous quarter, today's conference presents results from continued operations. In the management report and the full financial report, you will find figures both from continued operations and from discontinued operations, which refer to SCB. However, let me highlight today's presentation focus solely on continued operations. Our gross profit from continued operations amounted to $6,414,000,000. Our tax and regulatory charges for this period totaled $2.5 billion. I'd like to add here that in the ranking by the Ministry of Finance for 2024, our bank placed in the top three among the largest CIT payers. in the entire economy, not only the banking sector. And this is important in the context of the ongoing discussion about additional levies on the banking sector. Let me also add that all top three taxpayers were banks. Net profit for the group reached 4,892,000,000 blocks of which 1,830,000,000 blocks were generated in the third quarter alone. Let's move on to slide seven. We served nearly 6.1 million clients. We see higher numbers of digital customers, app users after The nine months of 2025 client deposit totaled $221 billion and client funds, including investment funds, reached $249 billion. The growth loan portfolio stood at $165 billion loss and total assets amounted to $317 billion. On slide eight, we're presenting core financial results. Like I said, net profit 400, 4 billion, 892 million. Net interest income 9 billion, 549 million. Net fee and commission 2.2 billion, up 5%. Total income 12 billion, up 6% year on year. For Q3 alone, it was nearly 4 billion blocks. Our capital position remains solid. Return on equity, 21.6%, excellent liquidity, LCR of over 203%. On slide 10 and 12, we'll present the new features we've introduced to our offering. Just yesterday, We became one of the first to offer the SamsungPay digital wallet. We're continuously committed to providing a wide range of payment solutions and we remain a leader in the area with 1.3 million active cards in digital wallets. So, very impressive. Same applies to the number of transactions. For SMEs, we've enabled multi-currency support on business cards. We've also introduced improvements to the smart loan process. Let's move on to slide 13. Business data for third quarter. In retail banking, 4.8 million personal accounts We maintain at the moment that's up 2% year-on-year. In Q3 alone, we opened 113,000 accounts. In cash loans, we issued 9.3 billion PLN in cash loans. In Q3 alone, this amounted to 3.3 billion lost. 9% more year-on-year, and this marks a record-breaking quarter for cash loans which we were very pleased about. So mortgages, this has been the best period for five quarters. In Q3, sales were 3.1 billion. So similarly to previous quarters, most bulk of sales were based on fixed interest rate and the share of those loans in the total PLN portfolio is 48.6%. In the SME segment, over the first nine months of the year, we issued 3.9 billion lost in loans with 1.3 billion in Q3 alone. We're advancing digital processes and the volume of SME loans issued entirely online has increased to leaving continuously good results. 3.5 billion lost, a 17% increase year-on-year. In Q3, this amounted to 1.2 billion lost. Our e-loan at Prozutka product is selling increasingly well, and it is now available to startups too. In business and corporate banking, loan volumes increased by 8% year-on-year, FX income by 11%. Client activity in remote channels is growing. Now, corporate and investment banking revenues from capital markets rose by 56%. Treasury transactions up 15% year-on-year. Now, moving on. The activity I mentioned previously, this, of course, is driving the size of our balance sheet. As of the end of September, the gross loan book was $165 billion. Plus, on slide 25 in the appendix, we showed the sustained strong level of new loan sales. Across segments, as you can see, we see significant growth. And again, we're very pleased about, especially in corporate banking, 8% year-on-year and quarter-to-quarter up 2%. Strike 16 client funds, $249.5 billion. Deposits, 221 billion slots. Slight decline in deposits from individual clients. But 10 deposits on the other hand. So an increase in balance. The drop in current accounts was triggered by the drops in savings accounts. Corporate deposits at 2% increased, term deposits up nearly 8%, deposits from the public sector increased by as much as 5% this quarter, and term deposits and credit card balance also increased. Investment funds reached 23% increase year-on-year and 8% quarter-on-quarter. Now, profit and loss account. Net interest income and NIM, that's slide number 17. And net interest income was 9.5 billion zlot, which is 5% better year-on-year. In Q3 alone, the growth was by 0.5%. Year-on-year interest income increased by 6%. And let me highlight that net interest income in Q3 is the highest this year. And it's nearly as high as the record high quarter in 2024. And that's despite the interest rate cuts. Our NIM was 4.88% on continued operations. So the decline was really marginal. And let me highlight, that was despite the interest rate cuts. Slide number 18, that's net fees and commissions. On a year-to-date basis, they close at $2.2 billion, which is 5% up on the last year. In a quarter of a year alone, net fees and commissions were 3% higher than a year ago. We saw really nice growth in asset management fees by 18%, insurance fees, FX fees, and brokerage fees. Quarter to quarter, FX fees increased. insurance fees increase, and the asset management fees. Just like in the previous quarter, let me highlight that this is the follow-up of the bigger number of transactions done by our clients. We have not changed our prices at all. Slide number 19 outlines income. Personal income, $12 billion, as I've already said, growing by 6% year-on-year. let me highlight that in the first three quarters, the gains on our financial operations were much better than a year ago. In quarter two, let me remind you, thanks to conducive market landscape, we earned outstanding results under the trading and valuation. Of course, this was driven primarily by FX transactions and trading. In quarter three, Gains and losses on financial operations positions actually normalized. Slide 20, very important for us, operating costs. After three quarters, this is 3.6 billion slots growing by 8% year-on-year. As you might remember from previous presentations, this is driven by higher contributions to the Banking Guarantee Fund. Including regulatory costs, total costs increased 5% compared to the previous year-on-year. Of course, driven by inflation, pay increases and cost of services. Compared to the previous quarter, the cost in total increased by 2%. Administrative costs without regulatory costs grew by 4% year-on-year, but compared to the previous quarter, they declined by 7%. Stock costs, they increased by 5% year-on-year and 7% compared to the previous quarter. But this is clearly impacted by accruals for performance-driven bonuses and the focus we have for our performance this year. So the pace of growth in cost year-on-year for free quarters remained low at 3%. So as you can see, the pace of growth in cost is close to the growth in inflation. and we keep it under strict control. Loan loss provisions. The net balance of the loan loss provisions for expected credit losses was $439.5 million, much lower than the last year. But this was driven, first of all, high comparative base. Last year, you might remember, we expanded the criteria for classic bank exposures to stage two, and the impact of that was 125 million plus nearly. But the other reason for that is the sound and stable quality of our loan books. The cost of credit to risk, 33 basis points, is one of the lowest historical results in the bank. Other key risk indicators like the share of NPLs at 4% remain at a good level. We also can see the stable levels of positive payments and new entries to the NPLs. In quarter three, we did not record any one of major events. And as you can see on the next slide, we sold non-performing debts worth nearly $400 million, while the gain on that was $98 million. Slide number 22, banking tax and regulatory costs. As I said, in quarter three, the regulatory and tax levies totaled as much as $730 million. After three quarters hour, EBIT was $6.4 billion, while the tax and regulatory levies totaled $2.5 billion. Summing up our performance after three quarters, that's like number 23, you can see here all the key lines and figures. I will not repeat it. Let me just highlight the effective tax rate. In nominal terms, the corporate income tax is 19%. But we have many lines in our P&L without a tax shield, so the effective tax rate is now as set. So, summing up, I'm happy with business performance. We can see how active our clients are. Sometimes we can see even record high sales volume. We have really good quality of our portfolio. We have a number of transactions and a growing number of transactions made by our clients, mobile transactions and digital channels. So all of that bodes well. We are really looking forward here to the results of rankings by Newsweek and Forbes to be announced today. So we are always curious how we benchmark against others. And Agnieszka, over to you to the questions and answer questions. We've got the questions ready. Thanks, Agnieszka. I try to group the questions. So let It refers to the Polish government recently proposing changes to the bank's corporate income tax. What is your current estimated impact from these changes on the bottom line? What do you think about it? Do you have any strategies you could implement to alleviate this impact? Let me take this question. In reference to what I've already said, banks are the biggest CIT payers. Every course PLN is paid by banks. Last year, out of 10 top payers, the 10 top payers included six banks, and the top three are banks only, including ourselves. So, in my opinion, banks significantly contribute to the state budget. It's slightly surprising to us to make this sector the only one to contribute more, the sector that is contributing most, really. So there are many opinions about it. Some lawyers say there is a significant constitutional concern the additional CIT rate should not solely rely on one sector we contribute to the defense and military expenses maybe we'll have a separate conference about it but also other social initiatives education we pay our taxes in Poland we don't do any optimization abroad we pay taxes here So it should be stressed out that we share our profit with the state and with the Polish investors, including the pension funds. Let me remind you that over 23% of bank shares are held by office. That's over 40 million future retirees. And if you look at the stock data, that means return on assets or yields. The banking sector is not the most profitable. The Association of Polish Bank did the research on that. There are 12 more profitable industries compared to the banking sector. our sector ranks only 13th in terms of profitability and yet we already pay the highest taxes in the country so something very important that the nominal tax rate versus the effective tax rate there is a difference we pay more in terms of The effective rate. The nominal rate is 19%. So that would be an increase of 60%. Easy math. What impact this would have on our P&L. That's the comment I have when it comes to CIT. Okay, thanks very much. We have a few questions regarding net interest income and the volume. What is your current outlook on interest rate 2025 and 2026? What is the sensitivity to rate cuts? Well, we assume it will go down to 4% beginning of 2026. So there will be two cuts of 25 basis points. We don't quote cuts in November, but if it is cut, then of course, well, we forecast it will go to 4% in total. The market practices in deeper But we assume two cuts in total sensitivity. No major changes. I said the same thing last quarter. Without STB, 257 sensitivity if we have a cut of 100 basis points in a 12-month horizon. We present it on slide 20. You can look at our NAI. Rates went down 100 percentage points, and our income is higher. So a bigger size of balance sheet neutralizes those effects. And we are nearing the easing, the end of the easing cycle. What else? Expectations with regard to the growth in loans. We are optimistic. As our CEO said, we are growing retail mortgages. We expect the trends to continue. also in the business segment. And the growth in the business segment was 9%. So we think that in 2026, we will see growth in investments. And the growth in loans for businesses will be solid. And there's also a question in English. When do we expect pick-ups for large volumes? Well, we started the pick-up in 2024, so we are not complaining about the lack of growth. In quarter three, we can see the effect. But this is one of seasonal developments. Sometimes we have things coming into the portfolio and getting out, especially in CAB. But for CAB, all the segments show solid growth. That's about referring to this section of questions. Referring to costs, there are two questions, a general one and a detailed one. OITEC, the outlook for the growth in costs in 2026. Just to remind you, and by way of a disclaimer, our bank does not publish official forecasts. We can just treat it as some guidance. And as We followed this strict cost discipline and nothing changes here. We know how to keep it in place. When it comes to our fixed costs overhead, we can say that if we take a look at the inflation outlook for the next year, that will be the indicator of the growth, the band of changes. But we shouldn't forget that there will be costs related to the change of the owner, but we are not ready yet to give any precise figures. But I think that our next meeting, we will be able to tell you more. But that will be a separate category of costs for us because there will be non-recurring. Looking at the detailed question, Let's read it out. What part of cost represents the cost of IT employees? But that depends how you define it, IT people. I tried to take a look at that. And people who deal with technology in the common understanding, who work in the units, called the Digital Transformation Division, but there are also people supporting operations in the bank, and we wouldn't treat that as IT. That's roughly 15% of our staff costs. But at the same time, we should remember about two things. People with IT skills work not only in this division, but also in others. So we are not capturing that so that we could give you a detailed analysis. But the other thing is also that the bank supports itself when we need short-term or specialist support by contractors, IT specialists. When spending on this type of technological solution is that the Software development is capitalized, and then it's amortized properly. So it impacts on cost. So all of those costs are quite wide-ranging. Roughly, we can say 15%. These are the people who work in the IT division. Thank you, Wojtek. And the section... about foreign currency mortgages. But we can actually boil down the answer to answering future risks and the expectations of provisions. Now, once again, Michal Gajewski, let me answer that. First of all, we believe that our provisions are adequate. The coverage ratio is 154% on average. We are reviewing parameters in our models, and we will have such a review in quarter four. All the time, we keep supporting the settlement program. At the end of September, we sign more than 11,000 settlements because we think that this solution is the best for clients and for us as the bank. And that will be my comment to it. Cost of credit risk. What do you think will be the normalized cost I don't know what you mean in terms of normalized, in what horizon, but to give you some guidance for the future, we do not expect major changes here, either in the profile or cost of risk. And that's been mentioned in the presentations. And in the months to come, it should stabilize. You might remember that in our strategy, we had KPIs and the cost of credit across the cycle was from 70 to 90 bits. And that was given for consolidated data with SCB. And on slide 24, as I said, the last quarter, the difference was in the order of 10, 15 bits. So you should really adjust that band by this. But at the moment, we are at this point of the cycle with such macro outlook now and for the next year that we cannot see any dangerous signals. So when it comes to credit risk, we are optimistic and we expect stabilization. There are a few detailed questions about deposits, hedges, and NII. Let me start with a few questions referring to a decline in current deposits, but 4% in retail. What is the reason, the outflow? Is there any impact on that triggered by the owners change? But when it comes to the decline in current deposits, our CEO mentioned that. And it's stated directly in the presentation and in our report. And you have the figures there. Current deposits in Poland include savings accounts. And the decline in current deposits in Q3 was driven by the decline in balances and savings accounts. Because in quarter two, we have special offers. When it comes to the current accounts, just for daily banking, we can see positive trends there. So this was a one-off driven by savings accounts. And the explanation of that is in the presentation and The report, corporate deposits, they increase. And there is a question about it. Why interest expense declines in the same time on those deposits? How does it happen? The deposits are growing because the good relationships we have with our clients and the interest expense declines because our, because interest rates are high. Because the better, that is the percentage to But the extent of percentage, we reflect the interest rate cuts. So we reflect this interest rate cuts in repricing our term deposits. So that's several percent. So that's better. And that is the reason for the decline in our interest expense on deposits. And Moving on to the next question about strategy, we will continue the strategy for term deposits while for current deposits, including savings accounts, we assume they will be growing. So our deposit strategy remains unchanged. Just one more detailed question about hedges. Was there anything exceptional happening in quarter three? Not really. And I think, maybe as I do not understand that question, so if you have any doubts, please contact Agnieszka Tłuszczewska and we'll get that clarified. But our strategy assumes that at this point, some hedging positions for swapping the flow things to fixed rates, and we are renewing them and rolling at lower rates. But otherwise, our strategy remains unchanged, and each quarter, the share of fixed-rate loans and total loans keeps growing, which has the effect on the one side of our hedging strategy, and on the other hand, this is the follow-up of the percentage of loans represented by fixed-rate loans in the total sales. So we haven't changed our approach. No questions. I think we've got three left. Will there be a wider marketing campaign in the fourth quarter to support the loan volume? No, the volumes are going up. They're beating the market. So I don't think we need any action. to boost production. All right. Now legal risks linked to unauthorized transactions. There is A similar question, whether the bank will take action to verify whether the potential change in terms of the CIT rate is not in breach of the Constitution. Well, here we're talking to the Association of Polish Banks about it. That's the forum where we discuss it. No decisions have been taken. yet in that respect. Unauthorized transaction, maybe let's take that separately. We don't have provisions in the third quarter for potential lawsuits in in that respect nothing like this happened we don't have any development in that respect to change our perspective regarding the legal risk versus the previous quarter At the end of the question, lower credit fees. What was it driven by? The line includes the brokerage cost. We have a higher retail lending book and it is stimulated also by a network of brokers. And those costs, of course, encumbered that line in our financials, hence generating the drop. Any other questions, Agnieszka? Now we've exhausted the list. If you have any questions after this call, of course, we'll be happy to take them and send them to my office.