Banco Comml Por Ord New

Welcome again. Welcome to Bank Millennium 4Q24 slash 2024 results presentation. Today's event will be hosted by Mr. Joao Brajors, our Chairman of the Board and CEO, and Mr. Fernando Bicho, Deputy Chairman of the Board and CFO. In the interest of time, we know there's a competitive event right after ours. We'll try to briefly present the results, and then we will obviously be ready to answer all your questions. Over to you, Fernando.

Thank you. Good afternoon. Thank you very much for attending this meeting. As usual, around this time of the year, we present the preliminary results of the previous year. And until the end of February, we will publish the audited financial results. So let me start with the main financial achievements in the fourth quarter and in the year 2024, starting with page number five. We had in the year 2024 a net profit of 790 million zlotys, which represents a 25% growth over the profit of the previous year. If we exclude extraordinary items, both negative and positive, in the last two years, we would have shown a net profit of 3.2 billion zlotys, which would represent a growth of 7% versus 2023. The result was supported by a strong net interest income which grew 7% year on year and in the fourth quarter grew 1% versus the previous quarter with a full year 2024 and also fourth quarter 24 net interest margin at the level of 4.35% excluding the impact of the credit holidays. Core income grew 6% year-on-year, also excluding impact of credit holidays. The reported cost to income was at 37.6%, adjusted by extraordinary items at 30.8%. The cost of credit risk was still low and better than expectations at 40 basis points over total loans, and the NPL ratio stood at 4.5%. We closed the year with solid levels of capital ratios. The core tier 1 at the end of December was at 15.1% and the total capital ratio was at 17.6%, which gives a surplus over the minimum requirements over 5 percentage points. In fact, the surplus would be even higher if we would take already into consideration the cancellation of the solo P2R buffer, which was previously at 1.47, and that was eliminated already after regulatory decision that was received already in January 2025. Also worth mentioning is the annulment of the P2G buffer that we also communicated to the market in December 2024. In this context, and reminding that in the third quarter we had already included in non-funds the result of the first half of the year, in the shareholders meeting of 2025, where we will propose the retention of the full year net profit of 2024, Assuming approval of this proposal and incorporation of the second half net profit into own funds, this will represent an additional positive impact of 90 basis points in the tier 1 ratio. Regarding Morel, we are fulfilling the requirements with a significant surplus and regarding the new long-term funding ratio, at the end of 2024 it was at 28% and still clearly on track to achieve the targeted level in December 2026. I will skip pages 6 and 7 that present in a snapshot the key profit and loss items and other key indicators of our activity as they will be shown throughout the presentation. And so I would go directly to page number eight, where we have just a final summary of the implementation of the previous strategy, 2022-2024, that was called Inspired by People. where, as we show, we have outperformed on the majority of the ambitions and most of them even delivered ahead of the plan. And this happened both on the commercial activity side, where especially we highlight The higher than planned growth of the active customer base in retail, and we closed the year already with more than 3.1 million active customers in retail against the target of 3 million. Also, the share of digital customers in the active retail customer base, which already crossed 90% and stood at 92%. the significant growth of the share of digital channels in terms of sales, which was already at 76% in the end of the year. On the financial indicator side, the net profit excluding extraordinary is much above also the target at 3.2 billion. Slot is the cost to income at 30.6 on an adjusted basis. And the return on equity corrected calculated over a conservative base, including all the FX losses that we booked in the past, still very high at 18.5%. And finally, the NPR ratio also below the original target and stood at 4.5%, and the share of FX mortgage loans, which dropped below 10% before deduction of the legal risk provisions, and which was the factor that triggered also this expiration of the P2R buffer that had been imposed in the past on the bank. Moving to page 9. Here we show the evolution of the reported net profit on a quarterly and yearly basis. In the fourth quarter, we had a net profit of 173 million zlotys. And without extraordinary items, it reached a record level of 904 million, which represents a growth of 20% versus one year before. On a reported basis, as I mentioned before, a growth of 25% of net profit in 2024. On an adjusted basis, a growth of 7%. On page 10, we can see more details about the evolution of the net interest income, which without credit holidays was still in an uptrend and grew 7% year on year in 2024. And in the fourth quarter, when compared with the previous quarter, the growth was 1%. We also had the final assessment of the cost of the credit holidays which triggered another release of provision of around 45 million in the in the fourth quarter so at the end of the year the final gross cost of the credit holidays stood at 113 million zlotys. For the improvement of the NII continues to contribute resilient Income coming from the loan portfolio, a gradual drop in the average cost of the deposits, and as a consequence, the net interest margin has been quite resilient and in the fourth quarter stood at 4.37%. On the net fee and commission income, there was, in the year, just a small drop of 1%. In the fourth quarter, the drop was a little bit bigger, of 5%, in which some items, such as cars, investment products, have largely offset some drop in the bank assurance commissions. Moving now to the cost side, the trends are the same as in previous quarters, so overall in the year 2024 we had a growth of total costs by 13%, year-on-year mainly fueled by the growth of staff costs by 16% and a slower growth of admin costs by 11%. On an adjusted basis the cost to income ratio was at a very similar level of the previous year at 30.8%. Throughout the year the number of employees was relatively stable, minor changes and there was a small drop in the number of total branches. And regarding the asset quality, we had a very good fourth quarter supported by sales of NPLs that generated pre-tax positive result of 74 million zlotys. And this has contributed to the fact that in the fourth quarter the cost of risk was close to zero. In fact, negative in retail and positive in corporate, but overall close to zero, and brought the overall cost of risk in 2024 to 40 basis points over total loans, which is almost at the same level of the previous year, which was 39 basis points. In terms of the quality of the portfolios, the sale of NPLs helped to decrease the NPL on the consumer lending side, but overall the NPL ratio was slightly better at 4.5%. Regarding capital, on page 13, We already mentioned very solid capital ratios, especially a quarter one of 15.1%. In the quarter, we completed another synthetic securitization transaction, which largely contributed to offset higher risk-weighted assets. I already mentioned the regulatory decisions regarding P2G and P2R, and the still incorporation of the second half net profit will add 90 basis points to the Tier 1 ratio. CRR3 will have an initial negative impact on the capital ratios and of course in the course of time we will provide those impacts and also to mention that of course we are already And considering the future introduction of the counter-cyclical capital buffer in the second half of 2025, which will increase capital requirements by one percentage point. the important is that this recent decrease of the p2r buffer we also expect that will have positive influence in the morale requirements later in the year so as you can see on page 14 we have now a substantial surplus of morale trea over the minimum requirement almost eight percentage points surplus And in terms of the other indicator that also we are now presenting on a regular basis, the long-term funding ratio, we continue to take the steps to achieve the regulatory required level by the end of 2026, mainly through the issuance of covered bonds, and we should mention that in 2024 our mortgage bank subsidiary already issued 800 million zlotys of covered bonds. Last but not the least, the liquidity position of the bank is very strong and apart from having an LCR at 370%, we have a very low loan to deposit ratio at 64%. Regarding FX mortgage, on page 15, We continue to have an accelerated pace of downsizing of the FX mortgage portfolio. So in Swiss francs, excluding FX impacts, the portfolio decreased by 26% year on year. And when we look at the portfolio deducting the FX mortgage legal risk provisions, it already represents less than 2% of total gross loans. Regarding the provisions, as we had previously announced already two or three weeks ago, in the fourth quarter, they were very similar to the previous quarter at 483 million zlotys. We finished the year with an outstanding amount of provisions for legal risk of 7.7 billion zlotys, and these represented 122% of the outstanding loan amount. Regarding the recent trends, in the fourth quarter 24, we had the lowest quarterly inflow of new court cases of the last three years. And at the same time, it stood below the number of settlements with clients, which reached 1,261 against the 1,191 inflow of court cases. the we continued the significant effort to reach amicable settlements with with clients overall since the beginning of this effort we reached almost 25.9 thousand settlements which is equivalent to 42% of the number of active agreements that we had at the beginning of this saga in the end of 2019. Moving now to the second part of the presentation regarding business results and starting with page 18. Looking at the full year numbers, we would highlight the solid growth of deposits by 9% year-on-year. Consumer loans grew 7%. PLN mortgages, 3%. Investment funds, significant growth of 35%. We achieved even higher liquidity surplus at over 42 billion zlotys from the commercial activity. And the loan-to-deposit ratio at 64%, as I already mentioned. On the other points that are worth mentioning is the number of active retail customers, which reached 3,148,000, of which 92% digitally active. In terms of sales, also both cash loans, mortgage and leasing had significant growth rates versus the previous year. More details can now be seen starting from page 19. Looking at the dynamics of the loan portfolio on a net basis, we had an overall growth of 2% or 4% if we exclude FX mortgage loans which have been decreasing at a very fast pace. And looking at the breakdown, we see that PLN mortgage portfolio grew by 3%, loans to companies grew 5%, and consumer loans by 7%. So all these three main categories we have already single digit, but still already growth. On the customer deposits, The 9% growth was driven by the 14% growth of retail deposits. while we had a small drop of corporate deposits, as we will see later on. And in investment projects, a very strong year with a growth of 35% overall, of which the growth of our Millennium TFI subsidiary grew by 45%, the assets under management that already crossed 11 billion zlotys. On page 20, looking some additional data on the retail side. The retail customer funds grew by 16%, mainly driven by the growth of investment funds, followed by a balanced growth both of current service accounts and time deposits. The mortgage sales grew by 22% year on year, although dropping in the fourth quarter. And in the cash loans sales the growth was 11% year on year with a market share above close to 11% in the full year with some drop of origination in the fourth quarter which is also partially due to seasonality. On page 21, we see a steady and solid growth of new customers and accounts of around 30 to 40,000 a quarter. So in the full year, we added 146,000 active retail clients on a net basis to our customer base. Also with solid growth on the micro business segment and of course then the number of current accounts is following this acquisition of customers with a growth of 180,000 current accounts and a growth of 64,000 accounts. On page 22, highlights of the several important figures from digital usage. We have now 2.9 million active digital users, which is a growth of 8% year on year, and they represent 92% of the active customer base. Of these, 2.65 million are active mobile app users, which represents a growth of 7% year-on-year. And last but not least, also a 38% increase in the number of BLEAK users, which stood at 2.16 million in the second half of 2024. Page 23 summarizes some of the top initiatives in digital in 2024 regarding retail, including the implementation of a currency exchange platform in June, the redesign of the app and the introduction of the BLEAK Paylater solution. And on page 26, the numbers about BLEAK with continuation of the significant increase of active users by 35%, number of transactions made through Gudi Cashback Service by 50%. Moving now to the corporate side, the year 24 marks a rebound in corporate activity as we made a growth of 5% in loans to companies on a gross basis, which contrasts with a contraction of 8% that we had faced in 2023 when we were still taking significant steps to improve the capital ratios and to reduce the risk-weighted assets. This growth was relatively evenly distributed between loans to companies, which grew 5%, leasing, that also grew 5%, and factoring, which grew 7%. On the company's deposits, they slightly dropped year on year by 3%, but actually the composition is better, as we had a growth of 7% in current accounts, while time deposits fell due to tighter price management. In terms of transactions with corporate customers, they continue to increase. We would highlight mainly the growth of 11% in FX transactions, as can be seen on page 28. And in terms of sales, the significant growth of new leasing sales by 24% year-on-year. Then pages 29 and 30 summarize a number of initiatives and developments that we have implemented for our corporate banking customers, which is also part of the effort to significantly boost our presence in the corporate segment, and this includes loans with different types of customers. guarantees and also different digital developments that are allowing us, for example, to have much more transactions and services provided through digital channels. The same effort is being done for micro business, where also different initiatives are being done in order to implement new services in terms of digital banking, including new value added services, cash loans and new processes. So we finish here the highlights of the results of the fourth quarter and full year 24. And now we will go through the questions. Thank you.

Thank you very much. Now it's more of a fun part for the audience and a bit of a heavy lifting for us. And as usual, I suggest you do the heavy lifting and I can take the light questions if there is any. Okay. I suggest we do FX because they are FX mortgage related because there are just a few and then we go over to the results. So in terms of FX mortgage questions. Let's do the technical one. How much of the 42.3 thousand remaining repaid loans were amortized before the end of the CHF EUROPEG? January 15, effectively.

We have the majority of the loans, of the repaid loans, were repaid until the end of 2014. So the exact proportion I'm not able to say, but probably around more than 60% or so of the repaid loans were repaid until the end of 2014.

Another technical question, which is actually fairly obvious. What would be the cost of all the 23,000 mortgages currently in court declared invalid and without the compensation for the use of capital? This is the scenario that is already embedded in the provisioning, right? So we don't know the cost, but it's provisioned already for its...

So I would say... It's the last question from... Very last question.

Okay, last...

So I would say in this way, the stock of outstanding provision that we have, which is, as I mentioned, at 7.7 billion zlotys, of course, exceeds the loss that we would have if all the cases that are in the court would be lost. As you remember from the methodology that we are applying, we are creating provisions not only for the loans that are in the court, but also for an estimated number of future court cases that still can come. So it exceeds the amount of the loss that we would have in case we would lose all the cases that are already in the court. I will not enter into the details about what is the amount that we have created for the potential losses connected with future court cases. I will not enter into this type of details. We are not providing these details. But of course, it's obvious that the numbers And it's even possible to derive partially the numbers, but it is obvious that the provision largely exceeds the amount of expected loss of the court cases in case we would lose 100% of them.

Okay, thank you. Now a more general question on Swissies. Could 2025 be the last year of material costs related to FX mortgages? And there's a similar question. Do you expect FX provisions to go down in 2025 after the government's new reform?

I will start answering and then João will complete.

I think it is visible from the current report that we issued today that there was a clear drop of provisions for legal risk versus the previous year. Actually, the drop was close to 30%. From this perspective, the provisions in 2024 were already significantly lower than in the year 2023 where we think that was the year of the peak. On the other side it also should be mentioned that at the same time we faced higher other legal related costs that are connected also with this problem which combined made the full impact of The costs connected with affects mortgage to decrease by 9% versus the previous year. So provisions dropped significantly, but overall the total costs, including legal court related costs and so on dropped by 9% year on year. So our expectation. And of course, we have to say that. Part of these provisions were driven by things, by developments that happened during 2024 that we had to provision for. Otherwise, the provisions would have been even lower than what we would have booked. Having said that, we expect, unless... Unless there is again some negative development on the legal front or any other extraordinary event, if the trends will continue, we expect to have a continuation of this decreasing trend, although the overall costs will still be material during the year 2025. But if nothing else will change, this should be the last year with a significant impact on the bottom line of the bank. So this is what we can say based on the recent trends, based on what we are already assuming in our methodology. We always have to leave this note that it is based on no further negative developments or surprises on the, let's call it, legal regulatory side.

During this process on Swiss francs, we have been always very clear, trying to not have very complex methodologies, not even creating models. So we always explained that we were assessing the reality and then we were projecting using the reality so it's as we were losing in the courts the probability of losing of course it's incorporated in the models as we have flows of court cases also we gain capacity not only to put this in the model but also to forecast future cases as our methodology have and we have been always being very clear also the amount that is lost in the court decisions needs to be calculated under the cases that we are having so also and these have been changing also during the time from from penalty interest for example from additional commission so also all of that have been changing we are very constant so we we we have been making provisions and also having discussed in a very regular basis instead of having once or twice big adjustments to the process. And even on our conversations with the analysts, we have been asking to avoid some metrics. If you remember not far away, there was this discussion of 100% of the book as if that would be relevant at all. And we were always explaining that this was completely irrelevant. This was completely irrelevant. And so it's... You know what we are doing. So we are keeping this view of the negotiations. Also in the negotiations, there was a lot of questions all the time. What was the formula? What we were offering? And we were explaining that we had... a team of negotiators that we were going case by case that we would negotiate before the court in the court after the court we were always helping and and believing that the amicable solutions was the best case to unwind all of this saga and this is what we have been doing but but mainly as fernando said we believe that our operational work is far away so there is still even with a new law if the courts are more of easier process faster It is impossible to change everything from one day to another and suddenly instead of five years to be five days. This is not possible. So, of course, there will be a time that we will have major decrease and one day even not financial impacts, but still operational work on that. And we believe that we are reaching the moment that we will see visible decrease of these financial impacts.

Okay, so sticking to, still remaining in this subject, there was a question about what is driving other modifications and what outlook do we expect for this line in 2025?

So this is partially connected with the FX mortgage agreements. So when we are booking the costs of the negotiations in two lines, depending on concrete characteristics of the proposals, part of the result is booked in FX results. Part of the cost is booking effects result. Another part is booked in result on modification and because of some acceleration of negotiations in the fourth quarter. That's why there was a bigger impact in terms of result on modification in the fourth quarter going forward. To be able to say this will largely depend on to which extent we will be able to keep the pace of settlements with clients and what will be the distribution depending on the type of negotiations that is being done. So generally speaking, we would say that it will tend to decrease, but we treat this as a part of the costs connected with the FX mortgage. And we say this because the number of active customers continues to decrease at a fast pace, although partially this is compensated by settlements during the court proceedings. So generally speaking, The trend should go down, but it's very difficult to project exactly how much down it can go because it depends on to which extent we will still be able to sign settlements with customers.

There's also a question about another source of risk, namely PLN risk. Would you comment? Question is, what do you expect the government slash supervision could do about the pending PLN legal risk?

So the question of the word expect and could. So expect, I don't expect anything because we react to whatever is going to be done, what could do a lot. So the authorities could do a lot. The question is if they're going to do or not. Okay. At the moment, the problem is not material. So today in the morning, Fernando said to the press that we had only three decisions, court decisions, and the three of them favorable to the banks. However, of course, this is a risk business at the moment, or at least an uncertain situation. Unfortunately, the spread today, mortgage credit in Poland have a commercial spread higher than 2%. In Europe, the majority of the markets have below 1%. And this is, of course, embedded the legal risks that today to make a credit agreement to consumers in Poland. And we are waiting to see a bigger clarification to be able to do a little bit more of mortgage as well. but i think that we will meanwhile also to dedicate more attention to business loans and this is also and according to our strategy but there is also a lower demand for mortgage loans so it's a mix between the market and also the lack of activity of the banks versus the uncertainty that they have to make mortgage loans. So it's a kind of a combination. But we were expecting that the change for the new index would be already done with the government already issuing bonds with the new one. and already with the legislation, with the conversion from Vibor to this new index, things are a little bit delayed, but we think that as everything will be done in the proper way, these risks could disappear or could increase, and then the banks also will take a position what to do. Because, of course, if we look about... percentage of mortgage or a percentage of loans of families versus GDP compared with the rest of Europe, of course, it's less than one third what we have here in Poland. So the possibilities to finance families, especially in an environment that with low unemployment and a visible increase of real wages is, of course, very big. So there is a huge potential of the market in terms of the credit part for families. But we need a better legal framework.

Thank you. Moving to capital. What would be the Basel IV impact in first quarter 25? And there's another question. One by one.

So, as in the current report that we published today, we are not putting yet the quantification of the impact because it's still not totally assessed. I can say that it is negative. But we will probably already, when we will present the audited financial statements, which will take place on the 24th of February, we will try to elaborate more on this. There is not yet 100% clarity on this. on the standards applicable. So we're just signalizing that it's going to be positive. It can be from a few dozen basis points lower, but I don't want now to quantify. What matters is that at the same time, in the until the end of the first quarter we also expect to have an increase of the tier 1 by around 90 basis points by incorporating the full net profit of the last year which in our case means the second half of the year because the first half was already incorporated in September So the incorporation of the second half net profit will add an estimated 90 basis points to our tier one ratio. So for us, what does it mean? It means that we still continue to To be focused on this target of having a tier 1 ratio around 15%, which was the one that we announced in our strategy, does not mean that every single quarter will be at 15%, but still the implementation of CRR3 will not jeopardize this target that we have clearly put in our strategy.

Now moving to results. Market share in mortgages declined further. Is this a bottom or would you scale down further?

Maybe it's a bottom, but as I said, we also would like to see some clarity. Looks like the working group is finishing about this new index, so it's... I also don't see, there is a huge potential, but of course the potential to be materialized we need also to see a different environment. As you know, we are not very much a product bank, so our driving force is customer acquisition. Customer acquisition is, as you know, every year we put 150,000 new active customers in our customer base, then through cross-selling and up-selling. Year after year, we increase the relations with these customers. In our calculations, it takes around four years to maximize the cooperation, but also, of course, the revenues that we are able to have with this relation. This is our specialization. We serve our customers on the transfers, credits, deposits, first with the current account then a time deposits and the savings later on with the investment fund and the pension product so it's this this is our our philosophy and also our way of working with the customers so as soon as as soon as there is room to do more mortgage we will be there

What other debt securities, apart from Govis, have you invested in and in what duration?

We have a huge excess of liquidity, both in Polish Zloty and in foreign currency. And so we, in foreign currency, especially in euros, we are also diversifying our bond portfolio by investing in several European Union government debt with relatively short duration, not higher than three years as a rule. So it's a way of diversifying also the securities portfolio because as I said we have now altogether between the Polish government bonds, sovereign bonds and NBP bills we have over 50 billion zlotys of excess liquidity invested.

It was a bit of a provoking question on the bond portfolio. Assuming the trend, in one to two years, the bond portfolio would exceed the value of the loan portfolio. Would that be your base scenario?

No, because meanwhile our strategy will start to deliver results and we will see a strong growth in our small-medium companies and with that we will have a balance. But it's obvious that... That one thing we will not do is that we serving the customers also to help them to save is a relevant activity of banking. So we don't need to use everything in credit. So it, of course, depends also the cost. But as you know, our major deposits, they came from retail. They came from mass market retail. So it's a composition of... current accounts, then a little bit of savings account and time deposits. And this needs to be done even if there is not a credit product to be issued. So if we receive these amounts, they are received in a cost that even if we buy bonds is still very profitable. So that's fine.

Thank you. Were there any costs related to branch closures in the fourth quarter?

No, no, no. It's not material, these kinds of costs. Since the beginning, we also explained that we would reduce branches by the trends of the consumers and not as a program to cost-cutting. As we have been progressing in our digitalization roadmap, We have been closing and we will keep in a very smooth pace to close branches. We call it thermalization of channels, so it's as our customer base is also becoming more digital and and needing less branches so we will adjust but there is not from one side the big cost but also there is not a big gain so it's it's a i would say is a smooth process even because you need to remember that with our ambitious incorporate also we will increase the corporate team then the writing team the the the compliance team to serve all of these customers so it's it will be a balance between the digitalization and optimization of retail although serving much more clients and low serving much more clients and more transactions and everything but in a more efficient way at the same time also being acquiring mid-size corporate customers across poland which of course will require a reinforce of the teams

Again, a technical question. What was behind bank assurance fee drop in fourth quarter?

I think I would remind that first in 2023 we made a transaction where we sold 80% of the subsidiary that provides agency services in terms of selling of insurance and this agreement started to be implemented of course not on the day when it was signed but sometime later so we knew that the commissions from bank assurance just by execution of this agreement in the future would be lower because we sold 80 of that company this is the number one number two also we need to take into consideration that we have also been adjusting to the new recommendation new guidelines issued by which entered into force in July 2024. This also implies some adjustments in the product and some adjustments also in the economics of the product that also had some impact. So, I would say that these are the main explanations that are behind this drop.

Remaining in the area of fees, what is your fee outlook for 2025?

It's still, it's flattish, I would say. It can be slightly down, slightly up, but here we will not yet show material change. Of course, with the future growth of the business, We expect that also the commission flow may improve with more transactionality, more lending activity and so on, but for 2025 the picture will be quite flattish versus 2024.

What was the volume of MPLs sold in fourth quarter?

was 180 million gross, more or less.

But the mix was different, more different than usual.

Yes, it was not only consumer loans, also some other loans, but essentially most of it was consumer loans. And as we mentioned, we had a significant pre-tax result of 74 million in the sale of the NPNs.

Okay, moving to the final part of questions, which are outlook related. The usual question, what is the outlook for NII and loan growth in 2025? What segments do you see as most attractive? As João partly already answered.

So maybe I will start. We have, let's say, a cautious but optimistic view regarding NII for 2025. Because from one side, we know that interest rates may go down and in our scenario we are assuming that interest rates in poland during the year 2025 will go down by around 100 to 125 basis points so we are incorporating these in our say forecasts but on the other side the let's say the the protection that we have already created against the fall of the interest rates and the volume growth that will gradually start to come will contribute for another good year in terms of NII. So this is our expectation. Of course, I have to say that the recent two quarters were even better than what we were expecting because originally we had expected that interest rates also would start to go down already in 2024 they didn't and so we we also of course benefited from from that uh the the there is also here a question regarding the the deposits costs if we expect them to trend down further yes it will but it will be the same gradual adjustments it's not let's say big moves that we expect here but if interest rates will go down of course the deposits costs will also trend tend to to go down cost of risk subject which did not appear frequently cost of risk remains below the midterm guidance and the reason why it should increase in 2025 There is always a reason that as we will change the mix of the loan portfolio, even if each portfolio cost of risk would not change, there would be a change overall for the bank. Of course, it will be something gradual. But as we will increase the share of corporate in total loans and we will decrease the share of mortgage in total loans, by definition, there should be some increase in the cost of risk. Traditionally, we always say that we expect cost of risk around between 50 to 60 basis points. Actually, during the last two years, it was much better. It was at around 40. The sales of NPLs were also relevant to put this cost of risk lower than... than expected but i would say that our base scenario continues to be somewhere around 50 to 60 basis points although for the time being the the outlook is quite benign and and can be further supported in case interest rates will start to go down there's also a question on the outlook for costs ideally opex meaning an idea without bfg So here we still assume that 2025 will be a year of double-digit growth on the overall costs. On one side, we will have higher regulatory costs because, as it was already announced, the contributions to the deposit guarantee fund will be reintroduced in the year 2025. We still don't know the final amount, but again, it was something that did not happen in 23 and 24. And on the other side, we have all the other dynamics of the costs, both on the staff and the admin costs, that will still put some pressure on the cost growth in the year 2025. At the same time, we know that In the next two or three years, we should face lower legal-related costs. So we know that there will be a moment where Part of the recurrent cost growth will start to be offset by dropping, let's say, legal-related costs. Again, we will have to monitor. This is very difficult to say precisely from which moment in time it will start to go down. But in summary, we still expect double-digit growth. But if nothing would change, and also with the inflation starting to go down again this year, we would expect that then 2026 will be already a year of single digits. And we cannot forget also that the strategy that we announced implies some additional costs and investments. So it's not possible to decrease costs at the same time that we have such an ambitious strategy.

and still on the regulatory framework there are also some indirect costs that the banks are obliged, and rightly so, to comply. So it's in terms of know your customer and team and in-land rates, proper mechanisms for the sanctions, in terms of reinforcement of cybersecurity, all now of the resilience of the operations from Dora and everything. So these are constants. backup systems to be able to be online to have these backups for customers and everything so it's clear that this will keep consuming investments and this is a process that of course from one side we try to to have more clean process, to have more lean systems, to reduce the offers as well, to have less products, less complexity, but of course this is a process that all the banking system will keep investing and will keep reinforcing especially in some areas of Europe that are more target and so they need to be more robust.

It looks like we finally, I mean, we got into the end of the question. And as usual, Fernando draws the last question, which he considers we did not answer. Okay, so there's a question about so-called free credit sanction. Question is, excuse me, let me find it. Could you provide update on SKD, so free loan sanction loans? How many, as of fourth quarter 24, what was the value of claims? How many final verdicts lost and how many won?

So in the audited financial statements that we will publish on the 24th of February, we will provide more details about the different litigations, including this one. So we will have there, let's say, the update of the numbers that we already published in the previous quarters. I can refer to, let's say, to the preliminary numbers. So please take them as preliminary because they They are still not audited. But at the end of December, we had around 1,300 lawsuits regarding this free credit sanction. And then from those that were already decided, which were around 124, we We won 106. So these are the statistics that I can already mention in advance. Of course, it's a topic that we are paying special attention. And we will be providing regular updates to the market each quarter about the status. But so far, these are the results. So we have this number of cases and around more than 85%, let's say, of those that finally decided won in the court.

And also it is still difficult to understand the rationale. So we can have a situation that the same contract, even the same comments, they have two different outcomes. So the same arguments, both sides, The same contract, the same argumentation, and then one judge with the same text decide in favor of the bank, and another judge, the same text, decide against the bank. So it's still very difficult to make any assessment.

i believe we gotten to the end of the list in in case you think otherwise or you think we failed in addressing the questions or explaining our numbers obviously do please call us and contact us otherwise it's time for closing remarks

okay this is the moment that i try to get you out of some ratios and some numbers of course your your job and we understand very well is trying to assess the valuation of the existing company and our job is to explain what is the intrinsic value of what the company does planning in the future So as you know well, we had in 2022 a very difficult year. So it was the year when the combined credit holidays, completely unjustified and unpredictable, no law, with the Swiss franc saga made us break the capital ratios and start a recovery plan. 2023, it was a year where we combined the execution of the recovery plan with all the actions, some more visible, like the issuing of moral bonds, some less visible as the daily management of risk-weighted assets in terms of corporate, but it was a time that we were executing the recovery plan, but simultaneously also going through our strategy and our commercial approach. 2024, it's a year that we are very proud because from one side we exit the recovery plan, it looks like it was a long, long time ago, but it was just before the summer. We finished the year delivering as it shows in the presentation the strategy goals that we had for the strategy of 2024 namely the profitability the the the growth in terms of customer base the digitalization roadmap even the risk parts with the reducing below 10 the the share of the swiss franc portfolio in the total credits And besides that, it's very visible how profitable is the business model of the bank. So we have 3.2 billion lotties as let's call it profit from the business. So when it's adjust from extraordinary items and this was achieved. So even this growth versus last year in the year where we had operating with 1 percent less in interest rates than 2023. So, this is extremely good. We launched the new strategy that we presented in October to all of you. We are now moving very fast on this strategy. A lot of things that we planned to do, they were already executed. migration of the companies, the small companies that were in retail, joining with the small companies that we had incorporated, building a new segment of micro companies that we are going to serve better and we have big expectations on that. all the improvements in terms of corporate, building new teams, but also building a new workflow of credit that will allow us to serve better our customers and also speed up the credit development in SME. And at the same time, also, as you know, the ones at least that operate in Poland, we also reinforce our value propositions for the affluent clients with the new account with a new offer very well received so we are i would say commercially we are presenting the results of last year but commercially we are already leaving 2025 with a very good beginning of the year and we believe that we will be able to to show during the next quarters also already some signals of the new strategy and the commercial activity that we are doing.

Thank you very much João, thank you very much Fernando. Speaking of the next events, you may know that our first quarter results release is scheduled for the 12th of May. We also will have a corporate event, namely AGM, which is typically taking place at the end of March. otherwise thank you very much for your time thank you very much for your interest as usual you're more welcome to uh approach us ask us questions and ask for different stuff hope to see some of you at many events that we intend to participate in the spring this year thank you very much