ING Bank Slaski

Good morning, ladies and gentlemen, to our press conference presenting business and financial results for Q2 and the first half year of 2020. The presentation will be held by Brunon Bartkiewicz, the CEO, Bożena Graczyk, in charge of finance, and Rafał Benecki, the chief economist of the bank. At the conference, we also have Iza Rokicka, who's in charge of investor relations. I'm Piotr Utrata and I'm the bank's spokesperson. Thank you, Bruno. Let's start. Welcome, ladies and gentlemen. On this sunny August morning, let us recapitulate the first half year and the second quarter of the year. We know that we are just yet another bank to present Q2 results now. Our colleagues from other banks have surely answered a lot of your questions already. In order to boost the appeal of this conference, we divided it into segments, also including questions you asked at other conferences. So, after a short introduction, Rafał will present the perception of economists of the macroeconomic environment. He'll share some thoughts and observations with you. Then we'll talk about customer behavior, which will lead us to results. We think that our results won't raise many questions, so will try to elicit some questions from you. We like questions. And time spent on them. So after discussing some general matters, Ms. Graczyk will guide you through details. And then we'll look forward to your questions, if you have any. So firstly, In Q2, well, the light motive is the COVID-19 pandemic. So in our bank too, we have two priorities in relation to that, the safety of our resources and the interest of our customers. I think in both cases, we achieved satisfactory results. The bank. participated in virtually all programs of support for economic activity and employment. On page four of the presentation, you have basic credits, moratoria and anti-crisis shields elements listed. As you can clearly see, the moratoria government programme was started relatively late in the second quarter, so we have no data on that to date. Let me just tell you that the interest in this government moratoria programme has been moderate so far. In March and April, though the interest in the bank's moratorium programme was very high. For this reason, I think there's no need for us to discuss special elements of business continuity in the bank over the pandemic period. The period is still going on, by the way. Of course, the bank had to react to all adjustment programmes, like the interest rate cutting and many other aspects we had to address. And I think we did, and we were quite good in that. Of course, the adjustment process is still going on. For instance, in relation to interest rates, the adjustment period is somewhat longer here, also because of the customer communication capabilities. We have to inform customers in advance about any matter. And we also have certain provisions for adjustment to macro data, but we'll address the detail of that later on in the presentation. Well, it adds up to the whole area of operation of financial institutions over the pandemic period. And I think it's pretty much clear. We'll wait for your questions in this area now. So, to this end, Rafał. you have 10 minutes max for macroeconomic data. COVID-19 triggered deep recession in the Polish and global economy. There's a great deal of uncertainty about how long this slowdown will be and how deep it will be. Our assumption is minus 4.2 percentage points and plus four and a half next year. We think that among factors of adverse influence on this year's GDP, they include a typical shock. COVID-19 caused a major shock and considerable deterioration of natural stabilizers of the Polish economy, like firstly, internal demand. Usually it was less volatile than the rest of GDP. This time it was not the case. And then the internal demand among our main business partners. It was a major stabilizer to date, but this time not. So it massively deteriorated the Polish export and GDP rates. Another element of adverse influence on the situation is the virus and less spending appetite. In the second slide, you have our research showing the behavior of Poles in the area of spending and saving against the backdrop of other countries. There's a great deal of cautiousness. Also, this uncertainty considerably deteriorated investments, so investments area will suffer a lot this year. But among positive factors, we can see a good starting point before COVID. The Polish economy was well balanced with a current account surplus. It was not leveraged, which was quite a considerable element for such a shock. Also in Poland, we have massive anti-crisis programs. In the first slide, we can see them against the backdrop of other programs in Europe. At the start, the grant part was the biggest in Europe, with over 6% of GDP. In the grant part now, Germans are more in the vanguard, like the UK, but still the program is very big, and it considerably limited the drop in employment and bankruptcies. It boosted the liquidity, which allowed for some flattening of the slowdown curve in 2020 and 2021. In the second slide, we can also see a panel of 13 countries and our research on saving and spending behaviors. In all those countries, we asked respondents about how the spending changed in the COVID period. We can also see their attitude to saving. Quite interestingly, the Polish consumers decreased their spending and increased the saving. Quite interestingly, in the first epidemic wave, the saving scale was smaller and the anti-crisis programs were quite big. So by and large, with lower affluence of the Polish economy, In the slowdown period, there's no flattening of the consumption, not as much as in other countries. Households try to spend less, which affects the GDP with over 4% drop in consumption this year. In the third slide, we... discuss our analysis of impact of anti-crisis programs. These are just preliminary estimates. We used some data based on certain assumptions, but preliminarily, we can see a GDP decline limited by two to three percentage points. thanks to the spending of 132 billion within the anti-crisis shields. So far, we've got about 100. This is our estimated impact of anti-crisis shields on the economic growth rate in Poland. In the next slide, we are discussing the European Reconstruction Fund. We assume that over 2021-2024, we'll have plus 6% grants from the fund in Poland, which should boost our GDP by about 4 percentage points. This is considerable support altogether. In our region, Poland is among the biggest beneficiaries of the European Reconstruction Fund. Altogether, the European Reconstruction Fund plus new European budget will give 7% more EU resources than in the current EU budget. But the trouble is that the money will start flowing as of mid-next year, so throughout the next six months we'll have to be on our own. When it comes to opportunities and threats for the second half of this year and next year, speaking of GDP, this year is still volatile. The risk is balanced or lower. We have no data, full data for the quarter, but this is the difference between our forecast and the central bank's forecast. where the central bank is quite pessimistic about the second quarter of the year. When it comes to 2021, the risk is on the higher side. Also, because we'll have EU money and the Polish economy has a good starting point for reconstruction because of the pre-pandemic situation and large programmes started in the pandemic period. We also think that at the turn of the years, there's fair chance to see the COVID vaccine coming. There are 160 research teams working on the vaccine as we speak. Some are quite advanced. So it is fairly possible that at the turn of years, some vaccines start appearing. And if they do, it might be a great factor of supporting the situation of our business partners in 2021. Speaking of GDP again, the major indicator now is the epidemic state. We can see the second wave coming. going away in the U.S., but coming in some European countries like Spain, Belgium, Romania, and maybe Poland. So if the second wave grows, it will be a considerable risk factor. As we know, after the first lockdown wave, we could see a minus 8 to 9 percentage point from the GDP. This was the cost of lockdowns in Poland and abroad. So this time around, this impact might be smaller but still painful, possibly. So when it comes to 2020, the risk is balanced on the lower side and then on the higher side. Speaking of our view on interest rates, we think they will remain unchanged. We can compare them to the universal rates. where if you go beyond it, the monetary loosening effect starts working. And we think the reversal rates in Poland is quite high, which means that the rates are on the low level in Poland, which means that they shouldn't be lowered any further. But there is still data coming and showing the concern about the strong exchange rate. Like in 2008, if we had a weak exchange rate, every element of the budgetary policy acts stronger. Hence the whole rhetoric about interest rate cutting. We assume that it won't happen, but in the worst-case scenario, there might be a certain signalling cutting facilitating the weakening of the PLN, but this is not our basic scenario. The Monetary Policy Council will rather further support budgetary programmes, continuing the already existing, which will be the issue from BGK and PFR. If need be, as I said, at the turn of year, up to the moment of EU money coming, we'll have to only count on natural situation unfolding and possibly new programs. So clearly, the interest rates remain unchanged with strong rhetorics about the cutting and possible for the cutting in the second half of the year, but this is not our basic scenario. QE will be of, say, American size, 8% to 9%. Speaking of our view on unemployment, we expect a growth of 7.7% at the end of this year and 6.6% next year. we can see a major effect of employment storage. So companies try to keep their employment at the same level at any cost. As a result, the unemployment rate is not growing as fast as we could historically expect. we assume that there will be some layers at the end of this year and possibly at the end of next year. And then we might see some unemployment growth more this year because of the situation and maybe less so next year because of the rebounding economy.

Thank you very much. Let's go back to the previous slide. I'm sorry. So let's go back to slide number five and six. Thank you, Rafał. We have seen that you're interested in the change of customer behavior, and we will provide you with some information in that respect. So we can sum up that pandemic COVID-19 is a kind of catalyst of customer behavior that we've been observing for a longer period. But the effects of this catalyst causes that some trends speed it up, and in some points we can see that they are heading towards the breaking point. include all that in our strategy and we take into account the number of visits of customers in our branches the number of transactions made in our branches and in the total number of transactions what is important is it is always the cash operations, cash transactions, and cash transactions in our branches dropped after first quarter, because in March we could see some panic on the market in terms of PLN and FX transactions. In the second quarter, it was also reflected in the results and we can see that people stop using cash withdrawals and they don't deposit cash and they this transfer is routed towards ATMs. This traffic will probably come back as our concerns will release, but probably it will be not a drastic change. So we can safely say that more or less year on year, the number of cash withdrawals dropped significantly, over 30% for sure, which speeded up the pace of that decrease and if we were to increase the mid-term, five-year term, the cash withdrawals is expected to drop from about 22,000 a day to about 7,000 a day, so it's one third of the initial amount. What is important, what is interesting, COVID-19 showed that cash transactions will no longer be popular. We can see less withdrawals at ATMs and that trend has speeded up significantly. Now in our ATMs, our customers, ING branded ATMs, can observe much lower traffic today than it's about 190,000 transactions per day. And five years ago, it was about 300,000, 320,000 transactions per day. So we can see that people stop using cash, which changes the profile of functioning. So then COVID-19 was the catalyst of that trend. We can see a significant increase of e-transactions of any kinds from e-pull-up, to cash transfers, and within these bank transfers in the retail portfolio, we can see a drastic increase of the number of transactions and the share of mobile transfers. In first quarter 2019, in comparison to first half of the year 2020, we can see the increase in the number of mobile transactions by 15 million, so from 41 million to 56 million. And as of today, it means that about 29% of share in the total number of mobile transfers. transactions because non-e-transactions are a rarity. This share is 29% and we can safely say that it's a strengthened trend because last year in the underlying period this share was about 24% so we can state that we can see a clear trend and at the end of this year one third of all transactions will be mobile. So these are some trends. Another important trend is a drastic increase in the leveling of debit cards transactions because as the traffic is headed towards e-commerce and we can see increasing number of transactions made by other methods like BLEAK, for example, we can see some leveling in terms of the number of debit card transactions, which has increased significantly over the last five years. Next slide shows other trends. We're not talking about million or billion of transactions a year. In terms of corporate transactions, the trend is the same. towards higher digitalization. You can see the figures, and it does not concern only transactions, but also services, opening bank accounts and so on and so forth. So all this data, you can see it on the slide. And I think that that gives you a clear picture of trends that we've been observing for several years. They become more and more visible. We don't have to go back to mid-term and long-term data. They are visible from quarter to quarter. So let's pass over to the most important details about our results. I don't think that they come as any surprise to you. I could see, I could hear your first comments. Let me sum up that before the cost of risk our result year on year for the first half of the year, went up by 8% and a significant increase of the cost of risk. I think that Bożena's comment will provide you with some other information. We will talk about some strengthening in terms of IFRS 9 and adaptation to macroeconomic factors which we are observing and this is the element of unexpected that Rafał was talking about. This is the data that we include in our cautionary policy. Other elements, I think, are quite clear to you, so the Bank is still delivering on its strategy in terms of tactical activities, of course, and we will continue in that respect in next quarters. We will have to adapt to the interest rate which haven't been adopted yet to our results which results from the longer period of informing customers before we will implement some cuts in the deposit part. I think that next in the balance sheet part, there are no surprises as well to us, the element, this coincidence of inflow of PFR subsidies to our business customers and corporate customers, which is translated into their better repayment capacities. that decreased their demand for further financing. We can see also the situation with the repayment capacities due to this inflow. On one of the first pages we mentioned that PFR funds its 9.3 billion PLN, so it's a huge amount of money which was earmarked by our customers for repayment of their loan and credit obligations. What is also visible in the first half of the year and the second quarter, because it is the second quarter which is responsible for the overall performance, we can see an inflow of funds which landed on the bank accounts of our customers with simultaneous low credit activity in the second quarter, which is based on this huge and which stems from this huge inflow of money. Some of this money is deposited on the accounts and some of them is earmarked for loan repayment. What is the result of that? The bank has to do something with that money when using all available instruments. And this is bonds and securities, which is a solution here. And you can see that these are also state treasury bonds and PFR bonds, which are quite obvious instruments. Using the instruments of the National Bank of Poland is also popular. That affects the shape and that shapes our balance sheet. We can see a shift in the paradigm of the functioning of economy. and the functioning of the bank, we function in a triangle between the bank's customers and state treasury, which affects the situation. As Rafał said, the role in the first wave of lockdown, so the cut of interest rates, was the first thing and now we will see that this position will be even strengthened because of the public investment in order to boost economic activity. So these are elements which and the manner how we adapt to the new situation On the market, it's a significant shift in our operation and in our approach, and it doesn't concern only Poland. We can observe the same situation in all developed countries at the moment, but for Poland, it is quite important. As a result, our market share is, of course, this scheme has been disturbed a bit after the second quarter 2020, which is outside of the normal trend because of this PFR program. It doesn't surprise. some spending activity has been suspended. We could see some withdrawal from the investment funds in the second quarter. It also is visible on the slides. So we will not treat them as a permanent trend. But we updated the whole scheme in that respect because the sole traders were included in the corporate segment according to the recommendation that we launched. I think that this presentation is becoming too lengthy, so maybe we will provide you with the slides on our activity and now we will move over to the results themselves because I think that they are of your interest despite the fact that they are boring and good as usual but there are a lot of elements which are new because of the pandemic and because of the COVID. As far as in the first quarter, we couldn't see any effects of pandemic. In the second quarter, we can see some of COVID activity in the profit and loss accounts. So it doesn't come as a surprise that our net interest in income is lower. by 33% than the year before. After the first quarter, it was 583 million. It dropped by 26% year on year. For sure, at this moment, we have to point out that despite the significant cut of interest rates that we could see during the last four months and growing regulatory costs, our result, as Bruno said, because the provision Balance sheet is higher than 8% and this is a success that should be stressed and we owe it to high increase of revenues. What stands behind the drop of our profitability is the risk-cost, the change of macroeconomic outlook. In this quarter, we estimate that due to the macroeconomic outlook, it increased our cost of sales significantly by 128% and that stems from the functioning of IFRS 9 and the construction of our models and this is a result of quarterly modification of macroeconomic parameters which shows high volatility and uncertainty. At this point, let me stress that according to our policy, we updated our portfolio provision. We increased the cost by 10 million, including 7 million, which was reflected in the cost of loan risk and the rest in the operating cost. This increased of provisions, CFH provisions, because we have about 55 million of these provisions, which represent about 6% of FX mortgage loans. Which is worth stressing here, we have to stress the operation efficiency of the bank. Income to cost is 42.5% in the second quarter and 41% after the first half of the year. Our ROE adjusted by the provision included in the capitals was 10.7% is 2.2 percentage point less than a year before. This drop was announced by and expected by us and taking into account how we present our ROWI because this is an incremental presentation for last four months. It is highly probable that in the Next quarter's ROE will also be under the pressure of quarterly changes in the financial result and in the profitability result. When it comes to the net income, net commission income, net interest income, we can see a series of interest rate drops which cost that our result dropped by 5% and it's 1.99 billion. Nevertheless, due to the fact that we can see increasing business volumes year on year because deposits went up by 23% and loans in this difficult surrounding 9% year on year. it showed positive dynamics year-on-year by 4%. And net interest income grew by 9% after a year. When it comes to our net commission income, it is 37 percentage points less year-on-year and this This margin is due to two factors. It is due to interest rate drop, which was reflected in the results after the second quarter and stems from a growing share of our bonds. which is due to over liquidity that we're observing in the structure of our balance sheet. Let me stress that our securities portfolio in our balance sheet increased by 19 billion PLN, which represents 55% from the end of 2019. These two elements are a natural consequence of a pandemic and its aftermath that affects us. Let me point out the results showing our average cost of financing in the second quarter. It is 12 percentage point higher. This change is due to the decrease in the corporate portfolio. One change was implemented in the first of on the 1st of April and 2nd on the 1st of June. As Brunon Bartkiewicz mentioned, we are expecting further interest rate drops on retail portfolio and the first change was implemented on 1st of July. It was from 57 to 55 percentage point and the second one will come as of the 1st of September. We have to mention our loan to depot ratio, which dropped by 82%. I don't know if you are aware, but last time we recorded such result, it was in the second quarter of 2016. What does it mean? The hard work of four years with the strategic objective to increase loan to depot ratio which before pandemic was about 90% during last four months, it decreased down to this low level. It is due to our overall liquidity that we are observing in the corporate segment and on the retail portfolio, but it's a systemic overall liquidity which is reflected and results on the overall performance of our bank and other banks, which are clearly visible after the second quarter of this year.

Clearly, the natural consequence is boosting our investment, especially in deep benches and government bonds, also due to the financial results of banking tax. Let me just mention a new phenomenon the banking sector will show, in particular in the fees and commissions income. It started showing as of Q2 this year, and it is a positive or negative result of the so-called credit liabilities modifications. I mean changing the repayment schedules. In the second quarter, it's mainly an effect of credit moratoria. IFRS 9 requires the comparison of the credit NPV before and after the modification, and the difference is shown as a one-off difference in the P&L. In this past quarter, it was minus 7 million PLN for our bank. Of course, depending on the volumes of payment deferrals as part of the government moratorium, the result will be for sure negative because it will mean losing the interest payment over one quarter. So far, it was a marginal phenomenon, not visible in the P&L, but after the first and the second credit moratorium, it will grow. Speaking of the details of our fees and commissions income, in the second quarter, it amounted to 344 million PLN. It was lower by 4% quarter-on-quarter and 3% year-on-year. As you can see, In the breakdown, the drop is mainly because of the lower fees on credit products. The graph is showing that the seasonality of income also matters. The income is much higher in the first quarter and much lower in the second. On the other hand, there's COVID-related negative dynamics of the corporate loan portfolio, which dropped by 5% and lowered the commission. In the second quarter, we also have slightly lower commission on FX loans. It's due to two things. Somewhat lower customer activity on the FX markets because of lower trade exchange and, on the other hand, higher stability of exchange rates. So, with smaller volatility, we had lower result in this position. Also, please note the fees and commissions income half year on half year. A major contributor to the growth of our commissions were lines related to capital markets, in particular the brokerage activity. Thanks to high activity of our customers, it considerably boosted the income. Let me just stress that our customer assets on the brokerage accounts grew by 50% quarter on quarter and in the second quarter we opened 117,000 new brokerage accounts and it was the second largest result on our market. We also saw a major growth in insurance income, which is also considerable for commissions. and commission income. The said income is directly proportionate to the retail value of our credit portfolio. Continuing with expenses, the cost in the second quarter amounted to 641 million zlotys. After the first half year, it grew 7%. 9%, sorry, the regulatory cost, as we already mentioned in the previous quarter, grew by 19%. The on-costs are quite flat in this past quarter across all categories. Half year on half a year, we saw 7% growth. in costs as a result of primarily higher personnel costs and pay rises, as we signalled during the previous conference, and the cost of regulatory development as well as IT projects. Also, it's worth mentioning that in Q2 expenses we see savings on lower marketing costs, business travel and event costs as well, but also due to additional expenses related to protecting the bank and its employees against the epidemic, as well as IT costs. Speaking of expenses, let me point out that the pandemic caused a lot of gyrations and the profitability of the banking sector us included, but it won't stop us from pursuing our projects, be it regulatory or development-related. Over the last four months, we might have changed the pace of the projects and the priorities, the priority weights, but not much has changed. Now, continuing with cost of risk, the right in the second quarter was 309 million zlotys, including 150 additional right related to macroeconomic parameters. As you can see in this slide, over the past two quarters, we opened 296 million provisions. directly related to potential aftermath of the pandemic, whereas 25 million pertains to retail and 271 million are corporate segments. As you know, every quarter we've been reviewing macroeconomic scenarios. If you wish to learn about our assumptions we used for measurement of potential aftermath in our models, please be advised to consult the notes in our financial report on that. Well, what more can I say? We already know all about uncertainty discussed by Rafał and his intervention, where we might It might seem that the situation as of late June was more stable than after the first quarter, but there's still a lot of uncertainty which can translate possibly into volatility of the economic results according to our models in the quarters to come. But no matter the credit portfolio behavior and macro indicators, in this past quarter, we performed two managerial adjustments as a natural element of the volatility and uncertainty we are living in. As you can see, our models are built based on the history of the portfolio and customer behaviour, so they might not have captured all elements we are experiencing now. So what are the two adjustments? On the one hand, we raised the provision costs by 13 million PLN in this quarter. This is a provision on the portfolio covered by credit moratorium. It is because we assume that naturally enough, after the wrap-up of the credit moratorium, some customers will restructure. And as I mentioned before, although EBA guidelines allowed us not to move the said credits to stage two, still following the situation, the portfolio behavior, and anticipated all risks, we set up 13 million provisions. On the other hand, considering the major influx of resources from PFR, protecting the liquidity of our customers, we lowered the corporate provisions by 42 million PLN in order to reflect the large scale of support programmes which should naturally boost the credit risk understanding of our customers. So, Taking out the macro indicators and managerial adjustments, as you can see in the slide, the cost of credit risk across all segments doesn't seem to show any negative trends, and as such is quite comparable to the cost of risk we had before. Now quickly about the portfolio quality. The share of irregular loans in the portfolio, naturally enough, after all that happened and after the reduction of the portfolio grew up to 2.3, it's still very good quality, considerably better than the banking sector average. And it also showed the direct relationship between macro indicators and the structure of the loan portfolio. You can see a Stage 2 share in gross portfolio. It grew considerably, especially in the corporate segment. Currently, the share of corporate loans in Stage 2 is 14.8%. and grew by 5.5 percentage points over the last quarter. And just like in the previous quarter, it's a very direct result of adjusting the macro indicators. Mainly GDP dynamics impacted the PED. The negative PED pushes loans from stage one to stage two. On the other hand, the provision coverage, the provisioning ratio in stages one and two has dropped. about pushing loans from stage one to stage two, the said loans are still very good quality. So we can talk about some fresh cases with very low PDE levels for Stage 2. That's why the provisioning ratio has dropped. When it comes to Stage 3 provisioning ratio, we cannot see any considerable changes. The situation is still safe. Speaking of capital adequacy, RTCR considerably grew in Q2 up to 17.7. And it is because of two things. On the one hand, the profit share and lack of dividend, 92 basis points. But on the other hand, RWAs, And let me just mention three main phenomena which had impact on the situation this past quarter. This past year, we changed the methods into the standard method of risk calculation. It caused some savings. But looking at advanced methods and certain changes over the pandemic period, it allowed us to change the risk weight for euro securities from 20 to 18%, which means about 1 billion euros. savings. We also used SME supporting factor, which lowered the mean weights for the portfolio, for the whole portfolio, which generated some savings. Having said that, TCR is at the safe level of 17.5% as of late Q2. Thank you very much, and we are now looking forward to your questions. Well, despite the interesting times we live in, we try to live a normal life without stopping any projects and addressing the situation of our customers. Please be advised that you can ask your questions directly through the InfoStrefa link. We already have some questions asked. Let me try and group all the questions according to the topics. Let's start with the net interest income and the impact of commissions on the said result related to prepayment on cash loans. It's in line with our expectations. The impact is quite small. As you remember, our guidance was the impact of 30 to 40 million on the net interest income within one year, and it well fits into this schedule. Continuing this topic, do you keep the previous guidance on the dropping interest rates and its impact on net interest income and net interest margin? Obviously, as you remember, In the current report, we listed the impacts between 295 and 305 million PLN. It was based on our knowledge back then, considering the uncertainty and the profitability curves. Frankly, it's very hard to backtest it after the next period. As a matter of principle, we still assume that this is the same impact we discussed in the previous current report. The CEO pointed out that the adjustment to our dropping interest rates will happen over the next quarters, mainly in the passive side. deposits mainly. So is there a potential to up adjust the interest margin? And could you please also comment upon that. Well, Bojan already commented upon the stage two of reduction of saving accounts interest, which, as you know, is the major element of our, and the stable element of our balance sheet. Please note that dropping interest rates result in drops of the margins. But my understanding is that the question is mainly about upping the margin on lending. I think it's way too early to comment upon that, especially that you know and you can see that we are now practically in the breakthrough stage. So as of very high growth of lending by the first quarter of this year, dropping in March, drops in the corporate side and weakening of the growth rate in the second quarter. And according to what you know and what you'll see, clearly. Late June and July are a different story now. So there's one more question about the net interest margin.

When do we expect some downturn on the interest margin? We will not comment on that because the margin shapes the prices and the future. We can see some questions with regard to net commission income and whether we are willing to change the fees and charges. schedule. No reasonable bank will not say that they don't predict and they will not affect the fees and charges schedule. So let's pass over to the operating costs. the number of branches dropped by another 3% quarter-on-quarter, given a decrease year-on-year? What is the perspective in mid-term? And also, with regard to these questions, what will be the consequences of behavioural change of our customers that we've mentioned? Are you going to liquidate part of branches? Ladies and gentlemen, I will quote some public data. For about eight or nine years, we are informing you that we are reducing branches and we will cut the number of branches until the year 2020 and we implement and deliver on that plan year on year and it will be clear to you And secondly, the number of branches is adopted to the business models functioning on the market. But of course, we will not comment what will be the target value because this is an element and some trends are temporary So please do not force us to give that answer because everything has been transparently and clearly put down in the papers and we don't want to hit headlines. I commented on the number of transactions. It is quite precise so let me emphasize that when we talk about branches or we talk it's a far simplification because we assume that this is the same economic entity set up for the same business objectives and it's not true over last 20 years we've been under transformation of our branches and their adaptation to our business objectives and these business objectives have been constantly changing so please do not talk about the number, total number of branches because the number of branches translated to the layoffs and the effects, employment effects. No, this is simplification and it is not our objective. The function of our branches, as in any other sector, due to the change in the customers' behaviors and due to the market surrounding, of course, it will happen and it will be speeded up because of pandemic and because of the COVID-19, which acted as a catalyst. But we are not going to comment on concrete plans in that respect. because they have not been defined yet. In terms of costs, what share of headquarters employees are at home office now and are you going to redefine the manner of working? Currently, for branches, for headquarters, we don't use that word, headquarters. But we treat them as branches outside of territorial branches. It's about 29% of employees who are on home office. But we came back, we increased the number, 29% of employees work in the office, so 71% are on home office, but starting from the 13th of July we increased the number of employees working in the actual office, in the so-called headquarters, from about 9%. And in the middle of the pandemic, of the lockdown, it was higher. We had a zero phase, then the first phase came and now we are in the second phase of adaptation of business models. And the second part of this question, whether we assume that home office work will become a permanent element of our operations, we say yes. Does it exhaust the topic and the question, Iza? I think that at this point it is sufficient. So if there are any other questions or any other aspects that you'd like to mention, I'm open to all these questions. So that's all in terms of operating costs. Let's go to the risk costs. what level of the cost of risk is expected in the second half of 2020 and whether we expect the increase of the cost of risk after the grace period for repayment of loan will stop. I think that everything is in the presentation. So let me ask another question. What are your expectations in terms of the portfolio quality in the second part of 2020 and in 2021? We mainly expect that the cost of risk will be higher than expected. Is there additional risk of increasing of cost of risk in 2021? I'm afraid and I sadly have to admit that our policy in terms of disclosing data with regard to the future is quite clearly defined and operating, functioning well for a dozen of years, so I will not disclose any information. Then the volumes now. decrease in retail loans in the second quarter is deeper than the market average according to the NBP data. Are you going to boost this appetite for consumer loans? The new sales in mortgage especially seems higher than the market average. Does it stem only from the drop in demand or ING limited it in any way? What was the level of acceptance of credit applications in comparison to data before the pandemic. We are not publishing this data, but when you are observing, I will not refer to our data themselves, but to the market data. I think that all of you can see that in the second quarter, we have a group of banks which limited its activity in that respect, and the second group of the bank which didn't follow them. When it comes to this activity in the second quarter, you have to be patient and wait for the market reaction. The bank adapts its operations flexibly to the level of uncertainty and the scale of uncertainty present on the market. The bank has been doing so anytime and will continue to do so. At this point, you get excited about the element with regard to the retail market, and I fully understand that. But on the other hand, you are not excited about the information disclosed about two years ago that we limit our activity because of the coming recession. and we follow different regimes in that respect. But let me point out that the level of adaptation to the market surrounding is constant and ongoing and commenting that with regard to the period as short as one quarter is not a good measure and it's not a good base for any conclusions. Our lending activity was, we needed them because we wanted to increase loan to depot ratio, which was commented by Bożena. So in mid-term, the conditions or the challenges, of course, will remain unchanged. From the perspective of one quarter only, it is impossible to jump to any conclusions about anything, in fact. So once again, with regard to loans, what is the bank's approach to financing the sectors which were the most affected by pandemics? For example, restaurants, travel agency, international transport, theatres. event and concert companies and sports clubs, what is the outlook for volumes for the second part of the year and which sectors will be driving force on the market. I think that in our documentation you have all information disclosed and that gives you a deep insight into our plans, not to go to details among the segments that you enumerated in your questions. I think it is worth stressing that our level of exposure to those sectors and several other sectors that we can imagine is quite low generally. So, it is on the table. It is included in our presentation. Page 55. And I think that it is quite informative and we are not going to disclose any other information. present, we disclose this data for you to draw conclusions from that. Of course, it is obvious that we are keeping ourselves up to date and there are some sectors which we consider as too risky and when it comes to financing of hotels, for example, which were ranked highly on our list or several types of restaurants the level of uncertainty and the difficulty in constructing any Idea about their credit worthiness causes that we Do not put burden on this We don't do not increase exposure to this sector. So we follow the principle of to be ahead of the market and to predict so in terms of hotels or restaurants, which are not chain restaurants in particular. I think that these sectors will not be preferred by us and they are not preferred by us as long, and they haven't been preferred by us as long as I can remember. And as you probably know, I have a good memory. So we almost exhausted the list of questions. So if anyone is interested in anything, please let us know. And if our answers were imprecise, you are invited and you are free to ask about anything. And another question with regard to PFR. If the corporate deposits increased and it's visible also in our banks, can we jump to a conclusion that support from PFR for companies is sufficient or it's just a short-term result? help is significant, whether it is sufficient. To be honest, it depends. Sufficient for what? And everything depends on the formulation of assumptions and definition of objectives, on delivery of that. I think that time will show whether they are sufficient and for what they are sufficient or not, but as the question is imprecise, it is very difficult to provide you with sufficient answer. Sufficient not to reduce employment in companies, we will see. And let me go back once again to operating costs. The majority of reporting banks surprised to the upside when it comes to operating costs in administrative and the cost of employment. And can you see a place for yourself there? The bank has been implementing long-term strategy and increased remuneration of employees and we haven't changed that policy due to pandemic because we focused on mid and long-term perspective and we didn't want to adapt the cost of operations to short-term phenomenon which we observed. So we exhausted the list of questions. We give our audience another three seconds for any questions if they haven't been asked yet. No questions. I'm surprised. Everything was clear. So no questions. Thank you very much for your presence.