Erste Bank Polska Sa

Ladies and gentlemen, welcome. My name is Agnieszka Dowzycka. I'm Investor Relations Director at Ersta Bank Polska. I want to welcome you all to the presentation of Ersta Bank Polska earnings after the first half of 2026. Presentation will be led by Michal Gajewski, CEO, Maciej Reluga board member in charge of strategy investor relations, and Bernhard Leder, board member in charge of finance and accounting division at CFO. Bernhard Leder joined our board in June 2026. Before we start, Throughout this call, you can ask your question using the link available online. You can send me your questions directly to my email, but you can follow the presentation on our website. Good morning. Thank you, Agnieszka. Just like Agnieszka said, Bernhard is our new CFO. I have an immense pleasure of welcoming him. And let's start the presentation. So we have just completed our first full quarter operating entirely at Arista Bank Polska. It has been a very intensive period of introducing Our customers to a new brand and for ourselves because we're positioning the new brand on the Polish market. In my opinion, and I'll tell you why I think so, the customers and the market welcomed this change. And I have evidence for that brand Awareness ratios keep growing steadily. After just eight weeks of marketing campaign, we achieved double-digit brand awareness for Airstar among Polish customers. At the moment, one in three Poles recognizes the Airstar brand. And let me remind you, in January, at the outset, Our focus now is continuing to build both brand awareness for the brand and consideration for ASDA to fully leverage the acquisition potential. And we see after the results of the second quarter, the acquisition is going up. Our ambition remains the same. We want to be the best bank for both customers and shareholders. And already today, in terms of market caps in the WIG20 index, the number one privately owned bank listed on the World South Stock Exchange were number two among all listed banks and number three in the WIG20 index. So this reflects that the market's appreciation of our business model and the quality of our customer service. We built our competitive advantage on solid foundations above all efficiency, security, We were named the best bank in Poland for customer experience by Euromoney and this is very important. It drives us forward, it drives our acquisition but also the loyalty of our customers well this is an earnings call so let me move to our earnings starting with the net profit in the first half of the year 2.2 billion this result was affected by the CIT which increased by 40 percent year-on-year In the second quarter alone, net profit amounted to 1 billion 173 million, up 14%. Now let's move to slide number four. We now serve more than 6.1 million customers. Our digital customer base has grown to 4.1 million, up 5.7% year-on-year. 3.5 million customers actively use our mobile banking app. This is an increase of almost 10% year-on-year. In the first half of the year we acquired over 300,000 customers. I will elaborate on that further. throughout the call. As of the end of June, customer deposits stood at 246 billion, up 11%. Total customer funds reached 279 billion, an increase of 30%. Gross loans up 8% year-on-year to 177 billion. Total assets up 3% to 323 billion. Billion, quarter on quarter, that's an increase of 6%. Slide five, key financial results. I've already mentioned 2.2 billion, the net profit up to the first half in the second quarter alone, 1,173,000,000. Net interest income 6,164,000,000 of which 3,102,000,000 was generated in the second quarter. Net fee income after six months was 1,539,000,000 up 5% year-on-year. In quarter two, the net fee income was 768,000,000. This is 5% better than in Q2 2025. Now, quarter on quarter, net fee income in Q2 was slightly lower than in Q1. And that's because Q1 was record-raising in decline. I will talk about the reasons for this. Total income amounted to $8,052,000,000, up 1% year-on-year despite a 2% decline in interest rates over the past 12 months. In the second quarter, total income amounted to $4,057,000,000, which is broadly in line with the level recorded last year. We have a strong cap year position, return on equity, 19%, Of course, we are observing the runoff of integration and rebranding expenses, but this is a very good investment and we remain among the sector leaders in terms of efficiency. LCR at the end of June was 195.5%. and some business data for segments starting from slide six. We're pleased to see continued growth in digital payments. In the first half of the year, they increased by 18%. 17% year-on-year. Now, in the first half of the year, the number of newly acquired retail customers increased by 17%. Number of flat teaming customers by 15%. This is our affluent segment. And SME customers by 11%. This is a very important segment for us where we have a very good customer proposition that is fully digital. Now, retail customers. So we have 49 million accounts for individual customers in PLN. That is up by more than 2% year-on-year. And during the first half of the year, we opened 256,000 accounts. By the end of June, we had originated 8.1 billion cash loans, up 35% year-on-year, and the second quarter loans It was 4.2 billion. You can find more comparative data on slide 26. New mortgage lending amounted to 6.7 billion in the first half of the year. In the second quarter alone, that was 4.2 billion. Now, retail investment funds totaled 32 billion plus Very solid growth, 24% year-on-year. And we see the first effects of our new customer proposition, the new solutions we're now offering to our customers after we rebranded. The market share is now almost 10%. In SME, we opened almost 60,000 new business accounts. In the second quarter loan that was 57.3 thousand account and at present we have more than, well we have 690 over 690,000 customers in the FME segment. We provided 3.3 billion in loans and that was 22% more than a year ago. We're still enhancing our digital processes for FME customers and they're very much appreciated by this segment. In terms of loan growth, five fold. The volume of loans granted fully online through our fully self-service process increased by more than fivefold. Business and corporate banking, we have an increased credit limit loan volume. and we're happy to see increased activity in remote channels. Very good feedback regarding our online solution for corporate customers. CID was very happy to receive Euro Mining Award for Best Investment Bank. This confirms Our number one position, we see impressive growth in that line in lending. The most robust growth, 24th year on year and 10th quarter on quarter. So very good growth for investment banking. Now, balance sheet. Slide 9, starting with gross loans. Just like I said, gross loans amounted to $177 billion, up 8% year-on-year, and 3% compared to the previous quarter. This is driven by new loan originations, mortgage lending, cash loans, Two-digit growth. Now SME portfolio including Leasing and Factory. Strongest performance, as I said, in the largest corporate segment. The portfolio structure as you can see in the slide is well diversified, mortgages accounted for 32%, corporate loans 29%, CIB 15%, other retail loans 13% and FME for 11%. It's a well diversified portfolio. It's very important to us that this is a profitable portfolio. We grow dynamically in a profitable manner. Slide 10, Customer Funds. and the dynamic growth of the deposit by total deposits exceeded 246 billion after the first quarter batches up 100% year on year and 8% quarter on quarter. This of course impacted our total assets and the retail side deposits increased by 4% year-on-year and by 1% in the second quarter within that current account balance is due by 4% and 10 deposits decline by 8% quarter-on-quarter. The strong growth in the second quarter was driven by corporate deposits up 21% year-on-year and I'm talking about current deposits and term deposits here. I also mentioned the strong growth in investment funds. 24% year-on-year, 7% quarter-on-quarter.

Net interest income, let me start with that, $6.2 billion, 3% lower year-on-year. And the quarter-to-loan, it increased by 1%. Well, of course, year-on-year we had that 3% lower on a half-yearly basis. There was a number of factors to that. referenced the negative adjustment of the NII by 71.2 million primarily due to the European Court of Justice judgment on non-interest cost finance from the loan. The net interest margin too was 4.39%. But like-for-like, excluding the European Court of Justice judgment, It has not changed compared to the previous quarter. Now, slide number 12. Net fee and commission income has always been our strength. In the first half of the year, it totaled 1.5 billion zloty, which is 5% more year-on-year. In quarter two, the net fee income was stable, yet impacted by temporary factors. Let me explain why it was slightly lower compared to Q1. We had a special offer addressed to the SME segment. Without the impact of that, we would have seen another record high quarter. In Q2 alone, we acquired nearly 40,000 new customers. and as I said we have more than 600,000 customers in this very profitable segment. What I mean is SME. The net fee income was first of all driven primarily by credit fees which increased by 22%, asset management fees which increased by 33%, insurance fees which increased nicely by 13%, and effects fees which increased by 6%. You can see the quarterly recurrence in our performance and that's been sustained. That is why we have a predictable bottom line And this is very important, especially given the interest rate cuts cycle. And this is an important element of our income diversification. Slide 13, income. For the eighth consecutive quarter, our income totaled roughly 4 billion zlots. We are pleased that despite major interest rate cuts, Our income remains high. In the first half year, we exceeded $8 billion in total income. This is 1% better year on year and 2% quarter on quarter. I've mentioned how interest income and non-interest income impact our position. Income from other operations also showed a very strong performance thanks to higher gains on financial operations and dividends. Trading income and revaluation nearly doubled, growing up to $254 million, which reflects our operations in the ethics and derivatives markets. Now let's talk about costs, slide number 14. Total costs were $3 billion in the first half of the year. Of course, there were a few factors impacting that. The main driver were the costs of integration and rebranding that we communicated before. but they also give us good acquisition effects. But this is also driven by high contributions to the bank guarantee fund. Rebranding costs in the first six months totaled $175 million, of which $67 million in quarter one and $108 million in quarter two. Integration costs, $107 million in the first half year, 25 million of which in quarter one and 83 million in quarter two. And we sustain our declaration when it comes to cost across the year. Quarter on quarter excluding those additional costs, total costs were lower than in the previous quarter. Our cost to income ratio. On a like-for-like basis, it was 28.7%, excluding integration, rebranding, and bank policy fund costs that we saw in the first half year. Slide number 15, credit worth provisions and the quality of our portfolio. On the consolidated basis, the non-balance of provisions for expected credit losses was $150 million. In quarter one alone, it was $105 million. The cost of risk was around 35 basis points. The quality of the portfolio was NPS at 3.6%, and that's improvement compared to the previous year when it was 3.9%. We have Good performance of loan portfolios. We also can see the good results of the sale of NPR portfolio. In quarter two, we saw the portfolio worth nearly 180 million, which gave us the gross gain of 65 million. Line number 16 is the summary. So, in my view, we have close strong performance As you can see, we have not been focusing only on rebranding and integration, even though it takes some of our attention, of course. But we continue to grow. We are active in business. We acquire new customers. We implement new solutions when it comes to products and services. We do not put our investments on hold. We keep our cost discipline. and we have the capacity to absorb the additional costs while growing. The quarter to Elon was stronger. We have the gross profit of 1.9 billion, which is 5% higher quarter on quarter. The net profit totals 1.2 billion, which is 14% higher. I keep talking about the impact of corporate income tax at each conference. But you have to be aware of that last year it cost us $1 billion in corporate income tax. In this half year it was $1 billion and $480 million. The effective tax rate was 39.7% in this quarter. and in the corresponding period it was 24.5%. Total income was higher than a year ago thanks to robust interest and non-interest income despite depression on Net AI. Costs were mostly driven by the cost of integration and rebranding. But this was well invested money while the cost of risk stayed low. In my opinion, we had really good Business activity when it comes to the acquisition of new customers. In the first six months, we acquired more retail customers in a higher number by 17%. And we also increased the number of platinum customers and SME customers. We keep working on delivering our ambition, which is to be the best bank for customers, employees, and shareholders. We built our new brand on strong foundations and the strength of the group. And we are looking forward to the future, to the coming quarters. That concludes my presentation and now the floor is yours. Maciej has prepared the questions.

We have received a lot of questions and I'm trying to put them into categories. The questions we had so far, they actually touch on all the aspects of the P&L and different aspects relating to the balance sheet. There are also some questions about regulatory and legal. We of course encourage you to ask more questions, but we'll try to address the ones we've received already. And if you want to specify something, let us know in the communication. We have a question, Michal, that's for you. Your impressions of working with the group after the first polsa, and do you see any new areas for growth? As I said, this was the first culture operating entirely as Ersta Bank Polska and the first impression is that this is a financial group that really understands this part of Europe, that understands the market, that has huge ambitions for grace and support in the growth. I feel fully supported and I appreciate the quick decision. I appreciate this cooperation. I have very good impression They are very good at identifying further growth opportunities. We have very good cooperation with the other countries within the group. We've been having some very inspiring conversations regarding building a new strategy. So I can assure you that my first impression is very, very good. We see that also this is reflected in our financial performance. Not only financial performance, but also if you look at the customer acquisition, we don't only concentrate on the integration project or on our internal agenda. But as you see on the presentation, we still invest heavily in the future, in the acquisition of new customers. And we do what we've always been doing. We want to generate profitable growth. We don't want to only focus on enhancing the market share. Thanks very much. The second question is also related to the rebranding. In terms of the cost of rebranding, can you tell us the proportion of the cost that was a one-off and which will become a fixture in your cost base? In terms of the one-off, in terms of the investment, it was very specific before in the earnings call. We mentioned $250 million for rebranding for 2026 and we followed the plan. The distribution by quotas is very similar to what we've already communicated. And this is a one-off. because this amount included the physical rebranding of branches. Anything else you'd like to add, Michal? I think this is a very big investment and the results of this investment, they are well beyond my expectations. We are very data-driven. So we measure awareness, consideration. So we have very specific measures for that and we see growth here. The marketing strategy is elaborated together. We have the lessons learned from other markets in the Central and Eastern Europe. It is of course very much focused on building brand awareness and not only on product campaigns. The brand values, ethical business, responsible banking, This is very much the heart of the group and the strategy. The four pillars related to financial health, regular saving, cost management, building, investment capital, and Insurance Cover for our customers. Those are new elements that are very inspiring to us all that we're developing together with the group and we're very much using the experience the group has in the remaining countries of the group, especially Czechia. We see the first very good results, especially in asset management. Our new offer related to regular investment. And let me just remind you that we made a leap to democratizing the investment services. And this all exceeded Well, the market response exceeded our expectations. Customers can start investing with as little as 10 blocks and over 10 hundred customers per day start investing. Over 15% of transactions are to amount above 100 blocks. This low threshold to start investment It proved to be a very good idea. So to make reference to your first question about my impressions, we're very much inspired by the group and the implementation of the strategy in the Polish market brings very good results. Another question is about loans, first in terms of volume. and then credit margin. Credit dynamics. What sort of dynamics are you expecting further in 2026 and then in 2027? We expect the same, well similar dynamics as we're observing now. If I were to say our forecast for long growth this and next year about 7%, 7.0% I present 2027 slightly lower. This is due to the investment peak will be at the turn of the year and then the dynamic will be slightly lower. But we are optimistic about the structure of growth in 2026 and 2027. and I think the macro environment will still be supporting this. And we'll come back to this when we talk about the risk charge. Now, credit margins. So you and Michal, two other Polish banks commented, I'm not going to comment on what the other banks commented, but they said the pressure on credit margin is phasing out. Do you experience that? You mean the competitive pressure, right, to... What is this? Is this the observation of the banks made or what is this remark? We have to ask the author of the question. Well, for us, we're always consistent in terms of credit margin and we remain consistent. Some banks, maybe we thought this, maybe their shareholders actually commented it wasn't the right way to go. We, in the second quarter, we saw that the crisis margin pressure was there. We'll see about the second half of the year. We have another question from someone who followed the performance of other banks.

One of the banks commented that it is expected to improve in the second half of the year. Are you as optimistic as they are, Bernhard, to answer this question, please?

Yeah, of course. First of all, also hello from my side and thank you Agnieszka for welcoming me on this call. Generally, you saw that the net interest income started to reverse and to develop positively in quarter two, so we saw an increase in net interest income, and this despite of the charge of the European Court of Justice ruling, which amounted to around 71 million Polish zlotys. On the meme specifically, we saw also this European Court of Justice ruling amounted to 10 bps charge on the meme. But generally, without that, we were about flattish. And this also reflects the stopping of the decrease of the interest rate environment in general. So this is one factor playing on the meme. On the other end, Michal already mentioned in the presentation we saw a very good volume growth on both sides of the balance sheet which of course was then supportive to NIM development and then if you go a step deeper in the structure of the interest rate blocks in the balance sheet saw a further increase of our investment books due to the very strong growth of deposits. So this contributed positively on the NRI. And where there also was a slight increase in the duration of the whole-bill collect book, which also contributed positively. So to sum it up, yes, there is A reversal of the trend on the mean to be observed.

Thank you, Bernhard. Another question, once again, is addressed to you, Bernhard. The question is about the outlook for fees, net fees, and there is a specific question What was the reason for a weaker performance when it comes to fees in Q2? But I think that's already being addressed by our CEO in his speech. And we were talking about the special offer for the SME. That is heading, Bernhard, over to you.

Yeah, right. I only can confirm. Generally, I would say fee is the strong suit of Erzbank Polska, but the bit weaker second quarter in that respect. But I want to remind you that we're still on a positive growth path year on year. was due to the already mentioned promotions on the SME and micro segment, which is a segment where we unanimously believe it's really worthwhile the investment. So generally, fees are a focus point of ourselves, continue to be a focus point, and if I want to point your attention to still some quite impressive growth figures, So fees on asset management are up 30% year-on-year, guarantee fees up 32%, credit fees and brokerage fees also solid double-digit growth year-on-year, and foreign exchange fees around mid-single digits up year-on-year. So I think general trend very positive. little bit attributable to the investment we made into future earnings.

Thank you very much. The next question refers to asset management. Michal? and Erste Group indicates asset management as one of the growth areas post acquisition. Have you taken any specific steps? And there was also a question about the change in the business model of the TFI. In the communication, you increased that the takeover of the control by an entity from Erste Group is to enhance the implementation of the new model. What will be the specific changes and how is it to impact the sales and interest and fee income? Is the new distribution model means that the remuneration for ISTE group will change for the sales of investment funds? And should it actually drive the growth in fee income? We keep working on that model, of course. We can compare to other countries in the CEE, especially compared to the Czech Republic, we can see that the performance might really grow. And we have the huge knowledge on the part of Earth Group, and we have the huge knowledge of our neighbors, how to do this business. The first action in this area that we've taken, which I've already mentioned, are those actions related to democratization of investments. And we already can see the first effects, tangible ones. But in the long term, this is related to four pillars of financial resilience or financial health. which are the element of the overall group strategy and it's not only about regular savings but also regular gradual building of investment equity and there is a huge potential and the group actually can actually contribute a lot of new solutions which will also have a positive impact on our financial performance. And that's the assumption that we work having in mind. All those actions are to lead to the growth in our business and profits from that business. Okay. Thank you. Maybe When it comes to the last part of that question, does it mean the change the bank is remunerated for the sales of investment funds and whether the share or fee income should grow, I would say yes, I would give you a positive answer to the both questions, but that will come at a later stage. And let me highlight what we reported in the current report. Because of this reason, TFI will cease to be consolidated on a full basis. It will be just an associated entity. So we will not really see the impact. But I think that this is quite clear in the context of our communication. And all this will happen once the transaction is concluded. Bernhard, I will ask you to respond to this question. Do you sustain your outlook for costs? That is 250 million of costs of integration in the branding and the organic growth in costs of 4 to 5%. That's the first question.

Thank you for the question. With regards to the 500 million total cost of integration and rebranding for this year, yes, we are on a very good path. I think also very consequent in what we guided on when we will spend these amounts during the year. Yes, generally it's the maximum cap for This year and our message here is still valid. And, you know, generally cost for outlook for the second half, I think we have exerted a very strong cost discipline. So business as usual costs are very well under control and I think we are very positive that we will come out at the figures, so we got it.

Thank you. There is an additional question. about the allocation of costs within Erste Group. Could you present us the target model of settlement with Erste Group for central services like IT, marketing, and so on?

I think generally we continue to be part of the group. Sorry, it's just a different group. Sorry, should I continue? Agnieszka?

Bernhard and Maciej were still reading the question.

Alright, sorry, sorry. I couldn't hear. Okay. Please give me a sign when I should continue.

Please continue.

Okay, thank you. So we continue to be a part of a group. It's just a different group. We're now part of ERSTE group. So there will be a typical cost allocation principle, which I think is not different to any other groups. With regards to the next year, it's maybe a bit too early to make a forecast what the concrete Thank you very much. Whilst we are at the same time, and Michal was referring to it, further strengthening and developing the brand in the country, so we will be only in our second year of the new brand, so this might have an effect on cost. and of course, but this is common to everybody in the market, we will also take a close look on the labor market situation and benchmarks and definitely will make adequate decisions regarding SAF costs. Of course, costs will correlate with income side and we are strongly determined to continue to deliver very strong cost of income efficiency and performance.

Thank you. Another question refers to the cost of rent. which actually performed better than Gaiden is 40-50 basis points. Is it a recurring level? Yes, of course. The macroeconomic landscape has been very uncertain, especially at the beginning of the year. For the time being, the macro landscape is actually developing very nicely after the first one. The second one has been really good. The second half of the year seems to be solid. So if we rounded up our 37 basis points, 35, we would be close to the guidance. But if the macro landscape continues to be good, we could be within the levels we've witnessed in the recent quarter. As our CEO said, There is nothing more is happening even if we have a one-off case slipping down and then our portfolio spending across the different segments has been good and stable. So we do not envision any major changes whether this roughly A little bit below 40 or a little bit above 40, but we don't see any real threat. Now there is the question about regulatory things. There are a few. We will address them in blocks because they refer to, let's start with the anti-monopoly office and the proceedings related to unauthorized transactions. Have we actually created any provisions for that? No. And other banks have provisions of 90, 100 million of provisions in retail banking. But we plan maybe But if we plan to create provisions, we would have done it. So, maybe comment on that, please. At the moment, the Bank is talking to the ORCIC, to the Anti-Monopoly Office, to the Anti-Composition Office, on potential decisions that they might take. We've been analyzing the expectations of ORCIC and and we are waiting for their proposals. For the time being, we have not created any provisions. So we will see eventually what will be, how it will be finalized. Some of the banks some banks before decided to create this adequate decision. So the differences between banks results from the decision. The other thing is the European Court of Justice judgment. And there are quite a few questions, but the first one Apart from the adjustment of their interest income, have we created any special provisions for customer complaints? The second question, have we created the provisions related to the pre-credit function? No. What is the risk of claim litigation? Have you seen the growth in the number of claims? What might be the case law that would In 2024, we have not been charged interest on the non-interest cause. So long before the judgment of the European Court of Justice, we stopped

to charge the interest. It's not because we had a crystal ball and we predicted this particular judgment. You know, the provisions of the Polish law said that, well, and the Consumer Credit Act, the provision of war kick that was released in an opinion or the opinion of the Polish regulator, the KNF. The European Court of Justice judgment was not consistent with those positions. But still, we stopped to charge those. We now have 375 For 742 cases, after the judgment of the European Court of Justice, 80% are in favor of the bank. So those verdicts, given what we lose, are actually given in one The court where probably the judges apply the recent ruling of the European Court of Justice. That particular ruling did not apply the free credit sanction. It only related to not charging interest and the non-interest cost. We don't have data that would indicate to a dramatic increase in the number of complaints or lawsuits. I don't want to speculate whether the legal offices are preparing for that but there is one more opinion according to which this judgment cannot be applied on retrospectively and also according to our policy regulations we were actually allowed to charge interest well Summing up, we think that the provision level is adequate and this was actually agreed on with our external auditor. Now the market share in cash loans where you apply interest on the cost of insurance, that's 25%, but like this is in line with what we have, that we haven't been charging that for two years. We have two last questions. Does the board anticipate Santander to sell the remaining part of the shares? Does the group anticipate Santander to sell? Well, we need to ask Santander about this. Does the group Plan to implement individual investment accounts. Yes, definitely we think highly of this product. Agnieszka, we don't have any more questions unless you received any in the meantime. No, I have no more questions. Okay, thank you very much. We've managed to do the call-in. Thank you, bye-bye.