Mbank Sa

Good afternoon, ladies and gentlemen. Welcome to our conference where we will present the results of mBank Group in 2024. The speakers today are Mr. Cezary Kocik, Chief Executive Officer, and Mr. Pascal Ruland, Chief Financial Officer. Also, Mr. Marek Rusztyn, Chief Risk Officer, and Mr. Arkadiusz Balcerowski from our macro team will be available for the Q&A session. Cezary, the floor is yours.

Thank you very much, Sasha. Good afternoon, ladies and gentlemen. Welcome to our conference call for the Q4 financial results. In today's presentation, I will walk you through our exceptional results in 2024 and share the outlook for 2025. Pascal will discuss the results for the fourth quarter. I would like to start with a message that 2024 was an excellent year for MBank Group. There are four major developments that I would like to focus on. First, as we promised, we successfully returned to the growth path. We increased market share in all the strategic products and served our clients in fulfilling their financial needs. Second, On the back of our powerful core business model, we deliver very strong financial performance with the highest net result in the history of M-Bank Group. Further, we considerably improve our capital position and we are now well equipped for our future growth. And last but not least, on Swiss franc mortgage front, we make a strong progress with signing settlements and future provisioning. We significantly reduced the remaining risk related to FX mortgage portfolio. Our strategic priorities for 2024 focus on expanding business volume. We increased mortgage loan sales by more than 150% compared to 2023. Mortgage loan volume exceeded 10 billion PLN. the highest level in mBank history. Sales were focused on our own client base. More than 70% of the volume was generated with existing mBank clients. We did not rely on government initiatives to achieve this result. Less than 15% of the sales volume was part of the so-called 2% safe mortgage loan program. Finally, close to 70% were in a fixed interest rate format, which is a priority for us. Moving to non-mortgage loan sales in our retail business, volumes increased by more than 30% and exceeded 11 billion PLN, again, a record high level. The volume of newly signed corporate loans agreements reached almost 40 billion PLN, a growth of 21% year-on-year. We generated increases across our customer groups and in particular in K2 segments representing medium and large size corporates. The results of our sales efforts are reflected in the growth of the loan portfolio by 7% year on year. We are seeing strong activity across all the client segments. The rebound of retail lending was reflected the annual growth of mBank's core credit portfolio of 10%, excluding Swiss franc exposures. This allows us to start rebuilding our market position. Consequently, mBank's market shares in the mortgage loans in złoty increased by 0.5 percentage point to 8.2%. Loans and advances to the corporate clients increased by 7% year-on-year. The highest increase was in the K2 segment, but the solid growth was also noted in other clients' categories. Dynamics of Loan in Corporate segment outpaced the sector's development. We improved market shares by 0.1 percentage point year-on-year. Our intention is to continue with this trend. I want to emphasize that growth volumes were not achieved at the expense of the lower margin. as we have managed to improve the margin on both, retail and corporate loans. Now, moving to the liabilities side of our balance sheet, here we also view, but selectively. We don't have to fight for deposits, as we have high liquidity with the loan-to-deposit ratio at 60.5%. We attracted many funds to the current account in both segments, But the growth was especially visible in current and saving accounts of our retail clients, which grew by 14% year-on-year. This is the best proof of achieving our aim to be the premier transactional bank. It also helped our funding costs and allowed to increase the deposit margin in 2024. These developments are reflected in our market shares. in current accounts of households and enterprises, which grew by 0.1 and 0.2 percentage points respectively. In 2024, our total revenues rose by 11% to 12 billion KZT, once again the highest level in the history of M-Bank Group. All the main resources and the main revenue source supported the growth. The key revenue driver, net interest income, went up 8% year-on-year or by 10% if we adjusted for credit holidays. This impressive growth reflects our effective management of credit and deposit margin in an environment of still high interest rate. As you can see on the right-hand side, net interest margin increased from 4.18% in 2023 to 4.35% in 2024. This improvement was achieved despite interest rate cuts in autumn 2023 by 100 basis points in total. Net fee and commission income also increased in 2024 and was higher by 3%. It was supported by an active client base, increasing number of transactions and volume of financial products sold, as well as selective changes in the tariff table. Moving on to the cost of the group, In 2024, operating costs increased by 10% year on year. The increase in staff cost by 12% was a function of wage increases and development of employment in the group. It was a result of expanding volumes and scale of operations. Material costs went up by 9% year on year, mainly driven by higher spending on IT, consulting and marketing due to business and regulatory projects. Depreciation increased by 16% year-on-year due to high investment expenditures in 2024 and in previous years, mainly in IT. Regulatory costs declined in 2024 compared to the previous years due to the lower contribution to the resolution fund of BFG. However, the dynamics of cost was lower than the dynamic of revenues. Therefore, we are proud of our excellent efficiency. The reported cost-income ratio of mBank remained below 30%. It even improved slightly versus last year. Going to our cost of risk, in 2024, net impairment losses and fair value change on loans reached 585 million Polish zloty and were lower than in 2023 by 47%. Consequently, the cost of risk of the group in 2024 reached 49 basis points compared to 93 basis points in 2023. This is well below our strategic mid-term guidance of 80 basis points. A significant improvement of cost of risk was driven by good portfolio performance and improving financial standing of clients, adjustment of credit risk valuation in connection with constructive macroeconomic environment, efficient management of collection and restructuring of the corporate portfolio processes, together with NPL sales transactions. and a lack of one of factors which adversely affected costs of risk in 2023. The resilience of our asset quality is confirmed by lower NPR ratio of 4.1 and the adequate coverage ratio of 71.4%.

On the back of all this development,