Mbank Sa Unsp/Adr

we are really happy to share our results today and let me start with the headline message the headline message is we are not just simply growing quickly we are growing profitably after nine months of 26 the evidence is there we have gained market share across all our key products we've delivered record earnings and we further strengthened our capital position i will begin with the balance sheet on slide four the figures The numbers on this page illustrate the strength of our franchise on both sides of the balance sheet. On the left-hand side, gross loans increased by almost 18% year-on-year to 164 billion. This growth clearly outpaced the market and drove further gains in market share. In the third quarter alone, gross loans increased by more than 10 billion. This was the highest quarterly increase in our history. The right-hand side shows equally strong momentum in customer deposits. Our deposit base grew by 19% year-on-year to 255 billion, supported by sustained inflows into current and saving accounts. So overall, this demonstrates the strength of our franchise and our ability to grow the business in a balanced and sustainable way. Slide five shows how this balance sheet growth translates into revenues and operating efficiency. The revenue chart on the left provides the clearest starting point. Total revenues in the first nine months reached 9.5 billion a record, slightly above the already strong level recorded a year ago. This was achieved despite a significant less supportive interest rate environment. The average NBP reference rate was around 1.6 percentage points lower than in a comparable period. Strong business volumes supported us to offset the resulting pressure on net interest income. and importantly, after reaching its low point in the second quarter, our net interest margin began to recover in Q3. The chart on the right shows that we combined this revenue resilience with disciplined cost management. The normalized cost to income ratio stood at 31.6%. And the key takeaway therefore is the strength and scalability of our operating model allows us now to generate record revenues even in a less supportive rate environment. Slide six brings us to profitability. Strong operating performance translated into record profitability. Net profit for the first nine months reached almost 3.1 billion, an increase of 24% year over year. And this is the best nine months in our history. The improvement was supported by the strong underlying performance of our business and also by the significant reduction of our Swiss franc legal risk costs. At the same time, we absorbed a relatively higher fiscal burden following the increase of the corporate income tax in Poland in 2026. But despite this headwind, return on tangible equity exceeded 21% from 20% a year earlier. And this brings me now to capital on slide seven. Growth only creates value if it is supported by a strong balance sheet. And who could know that better than we, We have been on a diet during our Swiss rank times. Our capital position remains solid with comfortable surpluses above regulatory requirements and ample capacity for further growth. Our capital position was supported by the inclusion of the part of the first year of the earnings and by the risk-rated asset relief of the generated securitization we completed in August. The 250 million Euro 81 issue completed in September was already reflected in our emirate position, but is not yet included in owned funds at quarter end. Once recognized, it would increase the tier one ratio by approximately to 14.5% on a pro forma basis. Overall, we remain comfortably capitalized, and this provides the capacity to fund further profitable growth and supports our intention to resume dividend payments. The commercial impact of this growth is visible on slide eight. The market share indicators show continued gains across all our strategic product categories. The strongest progress was in household mortgages, where our share increased by 1.1 percentage points in just one year to 9.7%. And these are not isolated quarterly movements. They really reflect the sustained strengthening of our competitive position and a tangible progress towards our ambition in 2030 of achieving at least 10% market share in every of our key products. And let me now move from the nine months overview to the third quarter performance in detail. NQ3 confirms that we are not only growing rapidly, but doing so profitably, efficiently and on the foundation of our very resilient balance sheet. And with that in mind, let me now turn to the P&L on slide 10 and explain the main drivers. Beginning with revenues, total income rose by almost 4% quarter on quarter to 3.25 billion. Net interest income increased by 9% to our record, 2.7 billion. The increase was supported by strong business volumes, disciplined deposit pricing, and improving asset yields. Importantly, and in line with our guidance, Net interest margin recovered by 10 basis points to 3.57% after reaching its low point in the second quarter. Net fee and commission income also reached a record level, increasing by 4.4% quarter over quarter to 594 million. Net trading and other income was slightly negative, mainly due to customer protection provisions, which I will explain in more detail on slide 14. Turning to costs, Operating expenses remain broadly stable quarter over quarter. Consequently, the reported cost to income ratio improved to 29.1%. Law and loss provision in February changes increased to 261 million, bringing the quarterly cost of risk to 67 basis points. And this increase was primarily driven by one single corporate exposure. And I will return to this topic on slide 16. At the same time, legal risk costs related to mortgages declined to 78 million. And all these together gives us a record quarter, a record net profit of 1.1 billion. Having viewed the P&L, let me now turn to the commercial engine behind it, new lending business. Starting with mortgages, the upper left chart shows the most important development on this page. Mortgage sales reach a record The share of fixed rate mortgages continued to increase from 59% in July to 72% in September. At the end of the quarter, fixed rate products represents around 48% of our outstanding PLN retail mortgage portfolio. And moving to the left chart, non-mortgage sales remain strong at 4 billion Polish Lodi. Overall, retail loan production reached approximately 31 billion in the first nine months, an increase of around 47% year over year. On the right-hand side, Corporate lending production amounted to 14.2 billion in Q3. The quarter-on-quarter decline followed an exceptionally strong Q2. On a nine-month basis, production increased by 19%, to 41.5 billion. Production increased across all major corporate categories and all client groups, so that confirms our growth is broad-based and scalable. And now, very important, there are two considerations which I would like to explain when looking at this expansion. First, we are not just pursuing volume at any expense of any value. Growth is concentrated in established client relationships and in businesses that meets our return and margin requirements. And the second observation is that this growth is highly scalable. Our predominantly digital retail and corporate processes enable us to absorb this materially higher volumes without the corresponding increase in headcounts. This strong production is now very clearly visible in the loan portfolio on slide 12. If you focus on the bar chart on the left, gross loans increased by 6.5% during the quarter and are almost 18% higher year on year. Mortgages were the strongest contributor, increasing by more than 10% quarter on quarter and by 24% year on year. Other retail loans also continued to grow, and as a result, our core retail portfolio, excluding the non-pro book, expanded by 8% during the quarter and by almost 20% year-on-year, reaching now $90 billion. The corporate loans increased by almost 5% quarter-on-quarter and by over 16% year-on-year, reaching $72.8 billion. And the market share indicators on the right confirm that this growth is really creating value for us. Regain share in household loans, PLN mortgages, and enterprise landings. Slide 13 completes the balance sheet picture by showing the development of our customer deposits and investment products. The chart on the left shows that customer deposits increased by 2.5% in Q3 to almost 255 billion. On a year-on-year basis, growth reached 19%. Retail current and savings accounts were once again the principal driver of growth. So these inflows support our favorable funding mix and help us maintain disciplined funding costs. And at the bottom of the page, you can also see the continued expansion of our investment offerings. Assets and investment funds distributed through mBank reached 18.9 billion, including 6.2 billion managed by us, by our MTFI. During the first nine months, MTFI's assets under management increased by 1.7 billion, driven by positive net inflows and also solid performance of our investments. Overall, the deposits and investment products confirm that our customer relationships are further deepening and provide strong and diversified funding base for our continued profitable growth journey. With loans and deposits covered, slide 14 links balance sheet expansion through revenue and margin development. So please focus on the income chart on the left. Total income increased by nearly 4% to our record 3.25 billion. The main driver was net interest income, which increased by 9% quarter on quarter to an all-time high. The most important development, as I already highlighted two times, is visible in the margin chart on the right. Net interest margin recovered to 3.57, reversing the downward trend of the previous quarters. The improvement was supported by higher average yields on loans and debt securities, together with a higher share of loans and interest earning assets. Net fee and commission income also reached a new quarterly record, up 4.4% from Q2. Payment card fees were the main contributor, supported by higher card usage during the holiday season. Net trading and other income was negative, mainly because of the special items related to customer protection. In tier 3, we recognized alone 112 million of customer protection related costs and closed with those bookings open risk in the field. This amount includes 65 million related to the ORCIC proceedings concerning modification clauses. We did not receive a fine yet, but based on fines in the sector recently received, we derived our expectations. Furthermore, we included 14 million relating to unauthorized transactions in which we found an active agreement with Warwick in Q3. So both cases are expected to be economically closed. We also recognized 33 million of legal risk provision related to free loan sanctions. And as this is a broadly debated risk in the sector, allow me now to provide our color of the risk assessment. Freeloan sanctions remain a source of concern for us and for the banking sector, and everyone is watching it very closely. However, our exposure is significantly lower than that of many of our peers. The loan portfolio that we potentially see affected represents today less than 1% of our total retail book. And there are a few reasons, but two I would like to mention why this is the case. The first one, we stopped originating the product in question in 2023 and we were among the first banks doing that. Second, our presence in the non-mortgage lending segment is smaller than our overall retail market share. And it is also important to look at the litigation track record. To date, we have won the vast majority of the lawsuits filed against us. Nevertheless, we have built legal provisions for potentially future negative viewings. And now, difficult to move away from this special topic to the central message back on the slide. We have seen in Q3 record net interest income, record fee income, and recovery of net interest margin. And let me now turn from revenues to the cost base on slide 15. Our priority remains here every time unchanged to fund growth and innovation while preserving the tight control of our cost base. And in Q3, operating costs remained broadly stable quarter and quarter despite our continued investment in the franchise. And looking at the main cost categories, there are two things not ready. First, Our personal expenses declined by 4.5% quarter-on-quarter, mainly due to the release of provisions for outstanding holiday entitlements, so a clearly one-off driven effect. Second, our amortization by contrast increased by 14.6%, reflecting fast amortization of selected systems. For the first nine months, total costs increased by 7.5%, or if you exclude BFG contributions, by 7%. and this mainly reflects higher personal expenses and continued investments in technology and security. Our strong revenue generation combined with this disciplined cost management resulted in a cost to income ratio of 29.1% in Q3. And for Q4, we expect a seasonal cost increase and we positively update our guidance of the cost to income ratio. We expect to stay below 33% cost to income ratio in the full year. From efficiency, let me now turn to credit risk on slide 16. In Q3, impairment losses increased to 261 million, so 67 basis points cost of risk. And this increase was driven primarily by a significant provision for a single defaulted corporate exposure in the construction sector. So no broader deterioration in the portfolio quality. and as a result, the cost of risk in the corporate segment increased to 89 basis points. Excluding provisions related to this signal exposure, the group's cost of risk would have been approximately 40 basis points in Q3, while the corporate segment's quarterly cost of risk would have remained below the Q2 level. On a nine-month basis, the group's cost of risk would have been around 10 basis points below the reported figure. The retail portfolio continues to perform very well with cost of risk remaining at 50 basis points despite sustained loan growth. So overall, despite the increase in Q3, the cost of risk remains below or through the cycle assumptions, and we therefore reiterate our full year 26 guidance of approximately 55 basis points cost of risk. This sound underlying risk profile is also visible in the portfolio quality indicators on slide 17. Across the page, the indicators point in the same direction. The group's NPL ratio improved to 2.9, supported by portfolio growth and the sale of impairment loans. Asset quality improved in both major business segments, and the Polish Lottie mortgage portfolio continued to perform particularly well. The NPL ratio for individual mortgages declined further. Coverage levels remained prudent. Total coverage, including stage one and stage two provisions, increased, while the coverage of defaulted exposures remained close to 50%. So these metrics reinforce our confidence in the quality and resilience of our overall portfolio loan book. Having covered the developments in all important account lines already, we skip the next slide and close the financial review with capital management, starting with slide 19. And the central message is that we manage capital proactively using our broad toolkit to support growth and optimize our capital structure. During Q3, we completed two landmark transactions. In August, we executed a synthetic securitization of 1.1 billion commercial real estate loan portfolio. This was the first CE transaction backed exclusively by a commercial real estate lending package. Across our six securitization, the cumulative reduction in risk-weighted assets reached year-to-date 8.6 billion. In September we successfully placed our 250 million euro 81 transaction and this was the first euro denominated 81 issuance by a Polish issuer. Demand was very strong and we were very happy, seven times oversubscribed and very broad allocation. And we hope to have opened the market for more Polish issuer to support the growth of the Polish economy in the end. The transaction was already reflected in MRL ratio at the end of September and its recognition in tier one capital remains subject to relevant approval process and is expected in Q4. The third element on the right hand side of the plans transition of the on the right hand side of the page is the plans transition to the foundation internal rating based approach. In September we received a non objection from the Polish FSA and the implementation therefore is planned for Q4 2026 and is expected to reduce risk-rated assets by approximately 10 billion Polish zloty in Q4. Collectively, these actions optimize our capital structure and expand our capacity to finance profitable growth. Turning to slide 20, you see that our capital position remained comfortably despite the 2% counter-cyclical buffer comes in at the end of this quarter. Risk-rated asset increased only marginally during the quarter as the impact of strong business growth was largely offset by the capital relief generated by our securitization. And given the recent volatility in global and Polish government bond markets, let me also provide some context on the sensitivity of our capital position to movement in bond yields. The average duration of our treasury bond portfolio is below two years, and shorter than the market average, which limits the impact of rising yields. At the end of September, the negative valuation of debt securities measured at fair value through other comprehensive income amounted to only 29 million and was therefore fully immaterial to our capital position. This limited sensitivity reflects the structure of the portfolio. Approximately 90% of the bond interest rate risk managed by us in the Treasury is held in portfolios classified as hold to collect. So in line with our intended investment strategy. And here our capital price therefore remains very robust with ample headroom to support business expansion and our planned shareholder distributions. And now let me summarize the financial review with our four messages of the quarter. First, growth. Loans increased by 18%. Deposits by 19% year-on-year. In Q3 alone, the gross loan portfolio increased by more than 10 billion, the highest quarterly increase in our history. This was broad-based and translated into further market share gains. Second, profitability. We delivered the highest net profit in our history. Record revenues, all-time highs in both net interest income, net fee income, and the rebound in the net interest margin. Third, strategy execution. We continue to develop solutions and services that enhance the client experience and simplify everyday banking while maintaining best-in-class efficiency and disciplined risk management. And fourth, capital capacity. Retained earnings, securitization, and the AT1 issuance provide a strong capital foundation for continued growth and future shareholder distributions. And finally, let me set this result now in the context of our full-year outlook. Following our strong performance in the first nine months, we expect full year revenues to be around 2% above the 2025 level. We expect the cost to income ratio to remain below 33%. We will continue to manage credit risk prudently as the business expands and expect 55 basis points cost of risk for the full year. And we expect business volumes to continue to growing faster than the market. So to sum it up, For this quarter, we enter the final quarter with record earnings and improving margin and robust capital position. And this gives us all confidence in delivering our full year objectives and continuing to create value for our shareholders. And with that, I'm now handing over to Marcin for the economic outlook. And afterwards, we are happy to take your questions.

Good morning. So we are now operating in a quite strong economy. GDP growth is hovering around 4%. We estimate that it's a little bit above the capacity of the economy, so output cap is positive. We are now close to the top of the cycle, so the next quarters are likely to bring a little bit less of economic growth. We estimate that even though this year GDP growth is going to amount to even 3.9%. Next year, it will be closer to 3%. The main reason for that is slowing investment activity and also slower consumer activity. But as for now, consumer confidence indicators stay high. We are not seeing any changes in the labour market, so labour market is very, very stable. Wage growth is amounting to 6% nominally, so it's also more or less consistent with price stability in the long term. However, recently the economy was struck with a cost shock driven by oil prices and most likely also in the coming months, food prices. And right now, this shock is going to elevate consumer price inflation Translating to Road of Price Pressures In that way, we expect MP's Monetary Policy Committee to increase interest rates by 75 basis points in order to keep core inflation stable. It is now running at 3%. Also in this quite strong economy, we are seeing that the monetary aggregates are strong as well. Credit activity is going quite fast. Thank you very much. Secondly, we are seeing also asset swaps that have widened recently, reflecting partially higher sovereign risk. And last but not least, we are seeing that in the international market there is more and more competition going on for capital, also from the part of enterprises involved in artificial intelligence investment. So this is also putting pressure on yields right now. In these circumstances, Zloty is under slight depreciation pressure. As I'm speaking, we hit 440 in the European Union. This depreciation pressure may be kept in the next few months. So this is also one of the reasons why we think that MPC is going to decide to increase interest rates just to keep this depreciation pressure in check. Thank you.

Thank you very much, Marcin and Pascal. And now we start our Q&A session. First, the first question on the current sensitivity of the NII to a 100 basis point change in interest rates.