Mbank Sa

Good afternoon, ladies and gentlemen, and thank you for joining NBank's conference call covering Q4 and full year 2025 results. Joining us for the presentation are Cezary Kocik, Chief Executive Officer, and Pascal Ruland, Chief Financial Officer, who will walk you through the group's financial and business performance. Following the presentation, we will move to the Q&A session, which will be joined by Marek Rusztyn, Chief Risk Officer, and Marcin Mazurek, Chief Economist. So now I would like to hand over to Cezary Kocik, CEO of NBank.

Good afternoon, ladies and gentlemen. Welcome to our conference call for Q4 financial results. In today's presentation, I would like to walk you through our outstanding results in 2025. By Pascal, we discuss the results for the fourth quarter and outlook for 2026. 2025 was a year of a strong performance across all key dimensions. Our four major developments that I would like to focus on. First, we achieved faster-than-the-market growth of business volume, which allowed us to further strengthen our market position. The expansion of the loan portfolio was driven mainly by a very strong acceleration in mortgage loan sales. On the liability side, we recorded a significant increase in deposits, supported by a stable inflow to transactional accounts. As a result, Both loans and the deposit base increased at a double-digit rate, 10% for loans and 14% for deposits, clearly outpacing the market and translating into market shares gain. Second, 2025 was the best financial year in mBank history, with a net profit of 3.5 billion PLN. We also delivered profit before the tax, exceeding the level of 5 billion PLN, supported by record total revenue of 12.4 billion PLN. Importantly, the revenue growth by 4% was achieved thanks to higher net interest income despite interest rate cuts during the year. Net fee income also contributed positively. This was reflected in our material improvement in return on tangible equity, which increased to over 20%. It confirms the high quality and sustainability of our earnings. Third, in 2025, we continue our efforts to strengthen our capital base. NBank's own funds increased by 19% year-on-year. reaching over 20 billion PLN. This growth was driven primarily by a full earnings retention, which allows us to organically build capital to pave the way for continued growth. In 2024, we were the first bank that executed the broadly distributed 81 capital bonds out of Poland. In 2025, we were again in the forefront of the market, being the first to issue Euro-denominated key to instruments from POA. Consequently, our capital ratio remains safely above the regulatory requirement, the one ratio exceeding the minimum by 4.3 percentage points. Finally, we made a very strong progress in reducing legal risk related to Swiss Franc portfolio. We continue to keep a very strong pace of settlements with Swiss franc borrowers. As this reminded, our key priority. The number of concluded settlements increased by 31% year on year, reaching more than 32,000 cases. At the same time, we observe a consistent downward trend in the new and pending court cases. It led to a lower cost of legal risk related to SwissRank portfolio of 2 billion Polish Zloty, less than half of the amount booked in 2024. We are clearly on the right track to close this topic really soon. I'm also very proud of the progress that we are making in our digital journey. In 2025, we introduced a number of new solutions for clients. But I will mention two of them. Digital Mortgage and the Smart Payment Ring. In 2025, we completed two phases of the Digital Mortgage Rollout. Initially, we enabled our existing clients to refinance their mortgage loans from other banks. In the second phase, The offering was further expanded to include more complex scenarios, such as financing purchases on the secondary market. Importantly, the entire process is conducted end-to-end in the mobile app, with credit decisions available in only 15 minutes. Moreover, mBank was the third bank globally to introduce smart payment rings. The device was developed in cooperation with Niceboy and Mastercard. It combines contactless payment with health and activity tracking, supporting our broader focus on clients' financial and physical well-being. In line with our 2026-2030 strategy, full speed ahead, we aim to achieve market shares exceeding 10% in key products by 2025. In household loans, our market share increased from 7.8% at the end of 2024 to 8% in December 2025. If we focus specifically on the mortgage loan, the increase is even more pronounced. Our share moved from 8.4% to 8.7%. even though our FX mortgage portfolio was shrinking fast. In household deposit, we also improved our position, increasing our market shares to 8.6%. It was driven mainly by strong inflows into current accounts, as we are a truly transactional bank. Our market share in loans to enterprises remains stable year on year at 8.1%. despite higher levels during the year. The corporate portfolio decreased in December as a result of lower utilization of the current financing by our corporate clients, the trend we observe every year. What is more, in Q4, we observed a decent level of annuities that was visible in a total engagement, but has not yet converted into balanced utilization. The drop was only temporary, and the level of corporate portfolio is already raising again in January and February. Market sharing deposits from enterprises stabilized at 10.3%, remaining close to our strategic threshold. Now, look how the sales of loans performed last year. In mortgage lending, it was another record-breaking year for EMPR. the sales went up 38% year-on-year to 14.7 billion. The increase was recorded in all our markets, Poland, Czech Republic and Slovakia. Fixed-rate mortgages dominated new production, accounting from 70% to more than 80% of the monthly sales. As a year-end fixed rate loans represented 54% of our outstanding PN mortgage portfolio. Sales of non-mortgage loans grew by 21% to 13.7 billion, another record high number.

Finally, in corporate

So I would like to apologize for our technical problems, which we solved, but it took us some time. So I will continue starting from the slide number 10, because I believe that that was the moment where we were cut off. So coming back to our presentation, in the mortgage lending, this was another record-breaking year for Empire. The sales went up 38% year-on-year to 14.7 billion KZT. The increase was recorded in all our markets – Poland, Czech Republic and Slovakia. Fixed-rate mortgages dominated new production, accounting from 70% to more than 80% of monthly sales. As of the year-end, fixed-rate loans represented 54% of our outstanding PNN mortgage portfolio. Sales of non-mortgage loans grew by 21% to PLN 14.7 billion, another record high number. Finally, in corporate lending, we saw a clear acceleration with new sales up by 23% to PLN 14.9 billion. Growth was balanced across all client segments, supported by higher demand for working capital and investment financing. The strongest momentum came from structural finance, particularly in the renewable energy project, fully aligned with our strategic priorities. The results of our sales efforts are reflected in the growth of our portfolio by over 9% year-on-year. Our core retail loans excluding FX mortgage loans, expanded by over 13%, driving the market share increase by 0.5 percentage points to 8.1%. Our market share in mortgage loans in Zloty increased even more by 0.7 percentage points to 8.9%. At the same time, loans to corporate clients increased by over 7% year-on-year. Now let's have a look at development of mBank deposit. Total deposit base reached 229 billion Zl, up 14% year-on-year. The main driver was continued inflows into current account and savings, which grew by around 20% year-on-year. This reflects steady growth in active clients and strong transactional activity. giving us a very stable, low-cost funding base. Corporate deposits also grew strongly, rising nearly 10% year-on-year, supported by healthy business activity across SMEs and large corporate clients. As shown on the right, this performance translated into higher market share in household deposits, while in corporate deposits, Our market share declined slightly in pricing optimization, but remained safe above the strategic 10% threshold. Let's move to key P&I items for 2025. Total income reached the highest level in M-Bank's history of almost 12.5 billion Polish zloty, up by nearly 3% year-on-year. Net interest income rose by 4.5%, supported by higher loan and deposit volumes, a larger bond portfolio, and effective interest rate management. Our net interest rate margin declined to 4.05% by 30 basis points compared to 2024. The decrease reflects main, lower average yields on the loan portfolio and lower rates on central bank's placement. driven by interest rate reduction by 175 basis points during 2025. Net fee and commission income increased by 12% year-on-year, driven by higher transaction volumes, a growing client base, and stronger product sales, as well as two minor one-offs.

Moving on to the costs.

Our operating costs increased by around 13% year-on-year. Personal costs were 10% higher year-on-year. This was a function of employment, which rose by 230 FTEs, as well as salary increases introduced in 2024-2025. Material costs increased by 11% year-on-year, mainly due to higher IT and security expenses related to the project and price increases. Marketing spending also rose because of the communication activities linked to the implementation of our new strategy. Depreciation increased by 11% year on year, driven by our continuous investment into IT software. Additionally, in 2025, contribution to bank guarantee found almost doubled due to end of relief from payments to the deposit guarantee scheme. Turning to the right of the slide, despite the higher cost, we maintain excellent efficiency level. The cost-to-income ratio reached 31%, well within our strategic threshold of 35%, showing that we continue to operate with a very efficient cost structure.

Going to our cost offerings.

Our cost of risk remains low, reflecting the high quality of our loan portfolio. Loan loss provisions were up by nearly 30% year-on-year, mainly due to the strong growth of the portfolio, defaults of the individual exposure in the corporate portfolio, and a very low base in 2024. Our cost of risk in 2025 rose by 58 basis points, but remain well below our strategic target of 80 basis points. Strong repayment discipline of our clients supported by a favorable macro backdrop and NPL sales contributed to a lower NPL ratio of 3.5%. On the back of all these developments, Envac's net profit in 2025 reached 3.5 billion TOLIs. This is the best ever bottom line of Envac. Losses in the non-core segments fell sharply from 3.4 billion, but remained material at 2 billion in 2025. Consequently, return on equity reached 70.9% and return on tangible equity 20.8% in 2025. At the same time, ROTI of the core business, excluding FX mortgage segment, amounted to 37.2%. These profitability metrics confirm the strong earnings power of Envine and its ability to generate value for shareholders. Last year again, we made a significant effort to further improve our capital position as it is a foundation for future growth. In June, we executed the first ever broadly distributed euro-denominated G2 transaction from Poland in the amount of 400 million euro. In October, we concluded our fifth synthetic securitization transaction based on a portfolio of We also used the ramp-up options in the previous corporate transactions. Moreover, we included our net profit for the first three quarters into our own funds. In 2025, our funds increased by almost 19% to PLN 20.7 billion. At the same time, TRERA rose by 24.5 billion, driven both by higher business volumes and regulatory changes, including the CRR3 implementation. Consequently, our capital ratio decreased with TCR at 16.3%. Capital buffer remains safety above regulatory requirements, with 4.7% for SET1 and 4.3% for T1 and TCR. Finally, as we already informed, 2025 earnings will be retained to support further loan growth. Let's now turn to the summary of legal risk related to FX Mogelson portfolio. This slide shows that positive trends are continuing. First, the number of settlements rose sharply to over 32,000 at the end of 2025, an increase of 9.5 thousand year-on-year, reflecting our continued focus on settlements as a top priority. Second, Q4 was the eighth consecutive quarter of declining info of the new court cases. Importantly, we saw declines for both active and repaid loans. And third, the number of pending court cases continue to fall across both active and repaid loans. The figure dropped by 63% to less than 6,000. As you can see at slide 19, we are very successful in reducing the risk related to FX portfolio. Both the value as well as the number of active contracts declined significantly. At the end of 2025, only less than 6,000 contracts remained active. I would like to underline that Q4 was the eighth consecutive quarter of declining, legal risk costs. In 2025, we booked in total 2 billion police lotto provisions, less than half of the amount from 2024. This brought the cumulative FX-related rigor risk cost that we booked since 2018 to a massive amount of PLN 18.6 billion. Thanks to our continuous efforts to actively reduce the risk related to this portfolio, we are optimistic about the level of provision in 2026, as there should no longer be a material burden for our results.

Before I finish my presentation, let me briefly summarize the key takeaways.

We delivered a very strong business growth in line with our strategic target. Our financial performance was outstanding with the record high revenues and profits. Our return on tangible equity of 20.8% clearly shows strong profitability and efficient use of capital. We strengthened our capital position, giving us the capacity to continuing growth and gaining market sales in a key product. Finally, we made very good progress in reducing Swiss franc-related trigger risk, bringing us closer to the end of this long saga.

All together,

This strong performance gives us a solid momentum to continue executing our full speed ahead strategy.

Now I hand over to Pascal.

Thank you so much, Czarek. And so let's move now to the fourth quarter after so many extraordinary records. I will follow up on the Q4 because also we have delivered here the highest ever quarterly net profit. I would like to go briefly through the account lines to provide you some insights and afterwards also an outlook for 2026. Let's start with our revenues which remain above 3 billion in the quarter. Net interest income is just slightly down reflecting the rate cuts respectively net interest margin as you can see is from 3.97 down to 3.474 percent. The decline came mainly from interest rate environment and there's this first lower average loan yield and second lower yields on floating rate securities and also our central bank exposures. But very important here, if you relate the drop in NRI and the net interest margin to the very steep cut of 175 basis points in 2025, you see that this is kind of modest, which confirms our effective interest rate and balance sheet management. Net fee and commission income remains solid in Q4. The slight decline quarter-on-quarter was entirely driven by a Q3 one-off of $42 million with MasterCard. If you clean that, most fee categories improved in Q4. Net trading and other income declined by 60%. This decrease was mainly driven by a sharp drop in trading income, reflecting losses on hedge accounting and a weaker result on our equity instruments. Total costs, excluding compulsory contribution, rose 9% quarter-on-quarter. And here, this is kind of seasonal, and the main driver here is, as you know, personal costs, because they increased 11%, driven by year-end provisions for unused holidays, severances, bonus accruals, and also higher headcounts. Despite that increase, cost-income ratio shows a healthy 33.1%, so below a strategic threshold. Moving to the LLPs, they increased by 25% quarter on quarter. Despite this increase, which was mainly driven by the year-end review of the corporate exposure, our cost of risk clearly show a healthy book. The cost of legal risk related to foreign currency indexed loans was 379 million, so down from 455 million in Q3. This is the eighth consecutive quarter of declining legal risk provisions, And Czarek already went into the details. So I just conclude the positive trend is visible. And as a result, we delivered 1.2 billion profit before taxing Q4, while the net profit exceeded 1 billion. So it's more than 30% up quarter on quarter. low q4 etr so effective tax rate of around 14 reflected an increase in default tax assets driven mainly by the revaluation of bpas following the corporate income tax rate changes consequently in q4 we see a very strong profitability with an roe of 19.5 percent and a return on tangible equity of 22.6 percent To conclude this slide, now I would like to flag an accounting change we introduced in Q4. We adjusted the booking of FX swap transactions related to corporate clients in two P&L line items. It's NRI and net trading income. Negative swap points generated by these transactions, roughly around 190 million, were reclassified from NRI to net trading income, improving NRI, therefore, and reducing net trading income. This adjustment applies only to 2025 as this product was introduced in that year and we have obviously restated the previous quarters accordingly. Let's move now with this message to the very important expectations of 2026. First, in 2026 we will operate as everyone knows in a lower interest rate environment following the 175 basis point cuts in 2025 with expectations of further declines. This naturally pressures our net interest income. However, we expect to offset partly this impact and therefore anticipate just slight reduction in total revenues. P&C income is expected to remain resilient, supported by ongoing portfolio growth, higher client transaction activity, and continued expansion of our transactional banking offering. The pace of growth will normalize compared to the exceptionally strong 2025 base, which also included approximately 85 million of one-off items. Second, we expect our cost to income ratio to stay below a strategic threshold of 35%. In 26, cost growth will be mainly driven by higher personal expenses, increased investments in our strategy and security projects, and higher BFG contributions. Additionally, As you know, we invest very much in our capital stack, so capex on business and regulatory initiatives will reside in higher amortization. Third, we anticipate that FX-related legal risk costs will be less of a topic to talk about in 2026. The SwissRank portfolio, as we have shown, is shrinking steadily and the number of new court cases continues to fall. Finally, we aim to grow market share. with business volumes expected to outperform the competition. Our focus will remain on mortgage lending and on corporate financing in growth stream segments, where we see strong potential and our clear competitive advantages. So overall, 2026 should be a year of stable financial performance, disciplined cost and risk management, and sustained business growth. And now we're looking forward to your questions.

Thank you very much, Cezar and Pascal. Again, apologies for this short break. And now we can start the Q&A session. We covered some of them already in our speech, but I will read all the questions we received. So the first one is about our tax. What part of the DTA of 118 million Polish zloty created in 2025 falls on corporate income tax?

So I'm taking the question. So with respect to the corporate income tax change, we have a real evaluation of the default tax assets, which had purely on that matter 118 million effect. So everything is related to the income tax rate change. But there are two other positions also which currently support our Q4 number just to complete the picture so that you can get the numbers correct. We have recognition of the R&P tax relief also in Q4 which amounts to 36 million and has also a positive impact on our tax line. And also we have higher DTAs from a larger number of settlements which are reflected in our model which also roughly adds up 30 million and with that it completes the page.

Thank you. What is the level of the free loan sanction provision and provision for unauthorized transactions?

So as we normally also discuss we very much following as everyone else these two matters and for us obviously the risk which is related to those topics is very much in our focus and currently we feel very well provisioned.

Next, we have a series of questions from Johan, so I will read them one by one. Is this the end of extraordinary effects on the regulatory capital ratio or should we expect something in 2026?

Can you hear me?

So basically, this is largely the end of one of what we have seen in the capital. This was primarily driven by regulatory changes that we have applied at the end of 2025. As far as additional effects affecting capital ratios in 2026, we have to mention that we have received final decision from the supervisory authorities on model changes related to the implementation of so-called definition of defaults and the way we calculate the days past due. The implementation of that is planned for the first quarter of 2026 with an estimated further impact on risk-weighted assets in the range of up to 5% of the overall risk-weighted assets. And beyond that, at this moment, we see no further regulatory changes to the risk-weighted assets in 2026.

Thank you very much, Marek. What was the share of refinance loans in the new housing loan sales in Q4?

That was very low. That was a one-digit number. so in percentage of course, so it's much less than 10%.

Thank you. Reason for a minor deceleration in corporate lending in Q4? Already covered by Cesare during the speech, or can we add something?

Yeah, we see the very positive trend in new loans agreements and that's why it is still not visible in a balance sheet at the end of the year, but I believe that we will give you much more detail after the Q1 results because it should be in majority reflected in our balance sheet at that time.

Okay, now the question to Marcin. Can you remind us what was the reason for a sharp downward revision of the base rate outlook by 100 bps to the terminal rate of 3% shortly after the CMD.

So thank you. Let me cast some light on this because well. At the time of CMD we were believing that as economy is re-accelerating, we would see somewhat higher rate than expected by the consensus. Very shortly, we believe that with economy gaining momentum, we also believe that labour market is going to gain momentum and wages are going to stop falling in a dynamic way. So we thought that the path of inflation in 2026 would be rather upward sloping. After that, we had a series of downside surprises. We had the new data with respect to labour demand. We had the new data of CPI regarding services and goods inflation. And we saw that the momentum is somewhere else. So basically, we've seen that, well, the second China shock is spinning over to a large extent to the tradeable prices. Right now, this pricing goes at around minus 5-7% in CPI. And also we saw that despite upswing in economic activity, we are seeing the collapse or the decrease in labour demand. So there is some kind of automation going on. So it rather speaks in favour of continuation of falling growth dynamics going forward. In this vein, we believe right now that inflation will be very, very low in 2026. Therefore, we expect rates to be at 3% at the end of the year. The consensus started the year at between 3.5% and 3.75%. Right now, the market pricing is at around 3.25%, so it moved to our direction. Thanks.

Thank you, Marcin. And the last question of Jovan, net interest margin NII outlook for 2026, I think also already covered by Pascal during his speech.

Maybe on the NII as we guided lower than 2025 due to the interest rate cuts, but it will be compensated partly by our volume gains, which will then support our NII forward-looking. I just want to reiterate that on the data in our eye, which is obviously the main driver for all of us to see how sensitive we are for further rate cuts and relates to what margin was saying. Are we closer to the three or as the market consensus law, three and a half percent that we have not moved too much by end of the year because currently we see data in our eye on our side of 100 basis points rate cut on 680 million for the study. And as you know, while we've broken various currencies, just a bit more than 50% are related to the real Polar Slotty. And there we're talking a bit more than 400 million. So that stays on our side, which if you compare it to the overall contribution to the bank via the last 12 months, it's a very digestible number. And also was shown in the Q4 results, as I was mentioning it, that we are very resilient currently with respect to the records.

Thank you. And would you like to add anything on our current guidance for Swiss franc costs in 2026?

No, we have said that the trends are in our favor. Obviously, that is the most important thing because it's based on a model. And therefore, we are very confident that the most is behind us and that we have seen in 2025 the last significant year.

Can you explain the CET1 move quarter on quarter? Yes.

So that CET1 move quarter on quarter. is basically increased due to the application of the new approach to the operational risk that includes capital for the losses due to the swiss francs is primarily driven by this operational risk calculation by five and a half billions water and that was driving the common by 0.6 billion. The increase due to the operational risk calculation followed the publication of the final European Banking Authority regulatory technical standards regarding the operational risk. This impact is expected to decline in the following years. We expect this to decrease by 1.5 billion in 2026 already. So this is something that will phase out completely over time.

Thank you. A question on the tax expense was already covered. So another question, can you provide details why NPLs increased in Q4 and what drove the increase in stage two loans in Q4?

Well, yes, thank you for the question. So on the NPLs increase, there are two drivers. The first one is we have had isolated number of defaults in the corporate portfolio. A few clients from household appliances, real estate, and energy industries, which we consider one of events. And at the same time, further increasing the way we approach the credit risk we have implemented the collective staging that covers some aspects of climate risk assessment and that resulted in a transfer from stage one to stage two of approximately four billion of exposure that was primarily shifted within the corporate portfolio.

Thank you very much and the last question from Kamil Stolarski. Would you reiterate revenue and cost growth guidance for 2026 given in the strategy presentation?

So in the revenues we have today more or less re-guided because we said 2026 will be slightly below 2025 and on the costs there is no major re-guidance. Here we expect as we have seen it in our strategy presentation to continue the investment cycle which is very important for us because we want to deliver value to our clients with state-of-the-art technology and therefore also state-of-the-art products and that is our major aim in spending the costs the right way.

Thank you very much this was the last question so thank you for the attention and questions and see you in at the end of April.

Thank you so much.