Mbank Sa

Good afternoon, ladies and gentlemen, and welcome to NBank Group's quarterly results conference call after the first quarter of 2026. Thank you for joining us today. My name is Joanna Filipkowska in Investor Relations, and joining me today are Pascal Ruland, Chief Financial Officer, Marek Rusztyn, Chief Risk Officer, and Marcin Mazurek, Chief Economist. As usual, the presentation materials are available on our Investor Relations website and today's call is being recorded. With that, let me hand over to Pascal to present the highlights of the first quarter.

Thank you, Asha. Hello, also welcome from my side. Let me start with a brief overview of the key highlights for the first quarter. In Q1, we developed strong, well-balanced growth while continuing to operate from a very solid capital base. On the asset side, gross loans of the group increased year on year from 131 billion to almost 146 billion, so representing maybe 11% growth. At the same time, we saw very strong momentum in the liability science, with our deposit base rising from 201 to 237 billion, so an increase of 18% year over year. Importantly, this growth was achieved without compromising our balance sheet strength. Our Tier 1 capital ratio stood at 14.1%, which is well above the regulatory requirement of 10%. This gives us comfortable capital buffer and the flexibility to pursue our growth ambition. Turning now to the profitability and efficiency. Despite a challenging market environment, Q1 marked a milestone quarter for us. We delivered the highest gross profit in our history, driven by growing revenues, excellent cost discipline, very low risk costs, and a decline in legal risk provisions. Our normalized cost-to-income ratio came in at 30.8%, confirming that operating efficiency remains a key strength, even as we scale our business and continue to invest to support future growth. As a result, gross profit increased by 54% year-on-year, reaching a record 1.5 billion compared with 990 million a year ago. This translated directly into shareholder returns with a return on tangible equity improving to 20.5%. This level of profitability underlines both the strength and the sustainability of our business model. And finally, this performance has also been recognized externally. Standard & Poor's upgraded our outlook to positive while reaffirming our BBB rating and Fitch reaffirmed our BBB rating. So this further is strengthening our credit profile. Let me briefly touch upon our market position. Starting with households, we continue to gradually build market share across all key retail products. Retail loans, mortgages, deposits all improved versus December and are clearly up year on year, confirming the ongoing strength of our retail franchise. In the corporate segment, we also made progress quarter on quarter. Our low market share recovered after a temporary dip at the end of 25 and remained broadly stable year on year. At the same time, Our share in corporate deposits increased slightly, both quarter-on-quarter and year-on-year, and continues to stand at very strong levels, above 10%. The key takeaways here, steady momentum in retail and stability in corporates, so fully in line with our long-term ambition to exceed 10% market share in all strategic key products. Let me now briefly walk you through the key PML developments. Total income reached $3.1 billion in Q1. increasing both quarter on quarter and year on year, demonstrating very good resilience despite a more challenging interest rate environment. Net interest income declined by 3.7%, respectively 3.2% year on year, reflecting lower interest rates and pressure on asset yields. Importantly, the pace of the decline remained very well contained relative to cumulative breakouts, underlying our very effective balance sheet management. The net interest margin decreased further to 3.5%, driven mainly by lower loan yields and reduced returns on floating rate securities as well as central bank exporters. Net gain commission income developed very well, rising by 6% quarter-in-quarter and almost 15% year-over-year, so fully in line with our expectations. Net trading and other income were supported by much stronger trading income as well as gains on non-trading financial assets monetarily measured at revenue. Turning to cost. Total cost excluding competitive competition declined by 11% quarter-on-quarter, reflecting the absence of several year-end items. On a year-basis, cost increased by 8.4%, mainly driven by higher personal costs, IT-related expenses, and depreciation, so very consistent with our growth and investment priorities. The reported cost-to-income ratio reached 37.9%, impacted by the annual contribution to the BFG Resolution Fund. On a normalized basis, the ratio stood at very healthy 30.8%, well within our strategic threshold. Credit quality remains very strong, with a cost of risk of only 30 basis points, and Mark will elaborate in a moment. As expected, the risk cost related to FX loans continues to decline materially. And as a result, operating profit increased significantly. and profit before tax reached this record of 1.5 billion, the highest pre-tax result in our history. Net profit amounted to 953 million, and this quote-unquote decline was fully driven by the higher tax burden under the new corporate income tax regime for the banking sector in Poland. Despite the elevated effective tax rate, ROTI, as mentioned, was very strong and breached 20%. Overall, C1 confirms that we have a very strong underlying profitability with record high gross earnings. And now let me step for a moment away from the financials and turn to the execution of our full speed ahead strategy. Here we are clearly now moving from vision to delivery. Financial innovation and product development are key enablers of our momentum. And Mark and I would like to highlight a few concrete examples of the last months. And let me start on the left side with smart terminals. a smartphone becomes a payment terminal for our corporate customers. No external hardware, no intermediaries, and fully integrated in our end-line app. It is a first-of-a-kind solution. Your point of sale by default in our app. And importantly, it also addresses regulatory requirements and access and solves the client issue. This solution delivers immediate, tangible value to our corporate client. Please follow me to the right-hand side of the slide for the second example. Our fully digital end leasing platform, which redefines leasing execution. It offers end-to-end online processing, qualified e-signature, 24-7 availability, and full omni-channel capability. So more or less delivering faster, paperless, frictionless service with really minimal formalities. Taking together these two initiatives as examples, this underlines our consistent focus on digital, client-centric solutions for enhancing the convenience for our customers. And here we reinforce our competitive edge to be a frontrunner in the digital game. And with that, Mike, I hand over to you.

Thank you, Patka. So on the following slide, let me turn now to the two strategic initiatives that we are directly driving growth in our corporate and small and medium enterprises business. On the left-hand side, you see our strategic growth engines in the corporate segment, a core pillar of the Full Speed Ahead strategy. We are deliberately relocating capital towards six priority areas with clear ambition to double their share in the corporate loan portfolio from 20% in 2025 to 40% by 2030. This strategy is already delivering. By the end of Q1 2026, we had provided $9.6 billion in growth stream financing, lifting the share of those priority areas to 23.9% of the portfolio at the end of March, while our target for the full year is 25%. On the right, we highlight smart lending in the SME segment, where technology is fundamentally reshaping the credit delivery. We have built a fully digital end-to-end lending process for the K3 segment, covering the entire credit journey. From electronic application to remote signing to automated decisioning and disbursement, the solution supports exposures of up to million zloty, delivering credit decisions three, four times faster than the traditional tasks, and has been live since Q3 2025. This is a scalable growth model, and under our strategy, we aim to double the number of the SME credit clients by 2030, with 40% finals to simplify credit processes. Progress is already visible today. In Q1 2026, 7% of K3 credit clients were processed via the smart lending part. Overall, Q1 was a very strong quarter for the lending activity in the corporate banking. The core loan portfolio increased in volume by 2.8 billion zloty, clearly confirming the effectiveness of our strategic focus. Pascal, over to you.

Thank you, Mark. And following up on that, Let me briefly walk you through the new lending activity. In Q1, we delivered very strong loan production across all segments. Mortgage sales reached a record of 4.5 billion, almost doubling year on year, confirming our strong position in the Polish lottery mortgage market. We continue to focus on fixed rate mortgages, which still account for more than half of the new production and 55% of the total mortgage loan portfolio of the PLM. Non-mortgage retail lending also reached a record. 3.7 billion, demonstrating sustained client demand. Corporate loan sales remained solid at nearly 12 billion. While lower than peak quarters, the mix improved, with clean new lending increased both quarter-on-quarter and year-on-year, so fully aligned with our ambition. This strong sales momentum translates directly into portfolio growth. Retail loans were the key driver. Mortgage loans to individuals continued their strong up-returns, supported by stable growth in non-mortgage retail lending. As a result, our core retail loan portfolio, excluding our big mortgages, grew by over 14% year-over-year, and we further gained market share. Our share in household loans rose to 8.1%, while in the PLM mortgages, it increased significantly to 9.1%. Corporate lending also rebounded strongly, excluding repo-thrived transactions. The corporate loans grew nearly 5% quarter-on-quarter, as Maya was mentioning, so fully consistent with our growth ambitions in this segment. Starting now to deposits. Customer deposits reached $237 billion, up 18% year-on-year, reflecting the continued strong client trust in our capabilities and in our brand. Growth was well-balanced. Retail payment and saving accounts remained the main engine, while corporate deposits also increased at solid pace. This translates also here into market share gains. Our share of wholesale deposits increased by 0.2 percentage points, while in corporate deposits we reached already 10.5 percentage points, comfortably above our strategic target of 10%. In addition, clients are increasingly investing through M-Bank. Investment funds distributed to customers reached 16.8 billion, and despite market volatility, MTFI, so our asset manager, continues to grow strongly. And let me briefly now move to income and margins. Despite a lower interest rate environment, total income increased slightly, both quarter on quarter and year on year, highlighting the resilience of our revenue model. Net interest income declined, and net interest margin fell to 3.5%, reflecting the rate cut and asset repricing. Importantly, this pressure was more than offset by non-interest income. Net fee and commission income increased by almost 15% year over year, driven by higher client activity, brokerage, and debt issuance fees. Also, we delivered strong trading and other incomes, including FX performance and a positive revelation of our stake in Blick. On the next slide, a brief word on cost inefficiency. Reported costs increased quarter on quarter due to one of regulatory contributions fully recognized in Q1. Excluding these effects, our underlying cost finds declined, reflecting disciplined cost control. Personal and material costs were well managed, while investment focused primarily on IT, and strategic capabilities. And as a result, our normalized cost-income ratio stood at around 30%, so clearly within our threshold of 35%, and confirming that we at mBank remain one of the most efficient banks in the market. With the point of efficiency, I'm handing back to you, Mark.

Okay, so the next one is on the credit losses and the cost of risk, and going to our cost of risk. As you can see on the left-hand side, impairment losses and fair value changes on loss declined significantly in Q1 2026, both from a quarter-on-quarter and year-on-year perspective. The total impairment losses fell to 104 million zloty, almost 60% down quarter-on-quarter. And this improvement in the cost of risk was mainly driven by the corporate segment. where we have recorded sizable provision releases on three individual cases from commercial real estate. And already answering one of the questions from the Q&A that was directly related to that, this is basically driven to those three single main events that were primarily repaid. One was reclassified back to the stage one. At the same time, we maintained prudent and forward-looking stance given the geopolitical environment. Following the update of our macroeconomic forecasts, we have adjusted the weights of the macroeconomic scenarios used in our credit risk models, and this resulted in precautionary overlays of around 80 million zloty. Discharges were not linked to any specific deterioration in portfolio quality, but rather reflected a conservative calibration to higher external uncertainty with respect to the geopolitical and macro environment. In retail banking, environment charges declined by 22% quarter-on-quarter and 5% year-on-year, despite growing portfolio, and that was primarily supported by the non-performing loans sale. Overall, credit performance across retail products remains stable and solid. As the result of all of those developments, our cost of risk dropped to 30 basis points in Q1 compared to 77 basis points in the previous quarter and remains clearly below our through the cycle and strategic assumptions. Looking ahead at 2026, we continue to expect the cost of risk at around 70 basis points by the year end. Going forward, long portfolio quality Overall, asset quality remains very solid and well controlled, and this is clearly confirmed by all key risk metrics which are displayed on this slide. As you can see, starting with the inter-loan portfolio, we see that the total balance is going to be stable year-on-year at under 5 billion slots at the end of March. Quarter-on-quarter increase was driven mainly by the methodological changes, not the portfolio policy as such. That's mainly introduction of the group definition of default with slight movements over the quarters, mainly affecting portfolio management actions, including the earlier mentioned sales of the inter-loans. The MTL ratio of M-Bank Group remains stable at Q1 at around 3.4%, which is one of the lowest in the Polish sector. That confirms that credit risk remains under control despite the challenging macro environment. Polish lottery mortgage portfolio remains particularly strong with the MTL ratio falling below 1 percentage point. concerning the very high quality of these books. Next, coverage ratio remains prudent, about 70% with the decline versus Q4, driven mainly by those above-mentioned events in the corporate portfolio, single name related. Looking ahead, we expect stable payment discipline in retail, with slight improvement versus 2025, supported by raising real wages, solid GDP growth, and stable interest rates. Marcin will comment more on that in a minute. For corporate, we expect overall stability in key credit risk parameters with the macro environment continuing to support portfolio policy despite ongoing geopolitical uncertainty. And with that, Pascal, thanks to you.

Thank you very much. So let's turn now to our new slide, profitability. Net profit rose strongly to $953 million. and it's up year on year despite the higher regulatory and tax burdens. Lower net interest income, as you have seen, was more than offset by strong fee growth, credit income, lower provisions, and a sharp decline in FX legal costs, partly absorbed by the higher fiscal charges. And as a result, our profitability, and this is shown on this slide, is very strong. Our EF 17.5% and return on tangible equity higher than 20%. Following up is our capital position. As shown on this slide, we continue to operate with comfortable capital buzzers to well above the regulatory minimum, supported by profit retention. Total risk-rated assets increased to $135 billion at the end of March, so up by around $9 billion since December 25. This increase was mostly driven by growing business volumes, with some additional impact of regulatory changes as expected, including the implementation of group definition of default. With group definition of default concluded, we do not expect significant negative regulatory changes in RWA in the following quarters. And all in all, our capital ratios remain sound, with a CET1 ratio of 13% and a total capital ratio of nearly 16%, providing buffers of around 4 to 4.5 percentage points above the regulatory minima. And this gives us enough firepower to pursue our growth ambition. To sum up, Q1 confirms that mBank is delivering strong growth, defending profitability in a lower interest rate environment, and maintains exceptional efficiency. And let me conclude from our side with our outlook. And I would like to start with today's announcement. This morning, we launched a tender offer of up to €500 million across our two bonds, totaling €1.25 billion. This transaction further optimizes our liability profile and underlines our proactives. to balance sheet management. And at the same time, let me remind especially our debt investors that for 2026, we expect to issue a benchmark-sized green non-preferred senior bond, so something we really like you to not miss out. Turning now to the business outlook, we expect total revenues to remain broadly stable year-on-year despite pressure on net interest income from lower interest rates, which is supported by an active balance sheet growth and solid fee income. We will remain very committed to cost discipline. The cost-to-income ratio is expected to stay below our strategic target of 35%, while we will continue to invest selectively in our growth and transformation. FX-related legal risk should not longer be a significant burden, supported by the shrinking first-rank portfolio, fewer cost cases, and improving legal clarity. So overall, this outlook confirms that our confidence and our strategy will be executed. Continued market share gains should follow, stable revenues despite rate cuts, strong efficiency, disciplined legacy risks, and proactive capital management. And with that, Marjan, over to you for our economic view.

Thank you, Pascal. So, economic situation right now is, I would say, favorable, but at the same time, mixed. Without the conflict in Iran, we would have said that the seller growth in 2026 is ahead of us. But recent rises in oil prices and also some problems with shipping other goods, I would say put some clouds over this very optimistic scenario. Right now, we expect that the GDP growth in 2026 will be a little below 4%, namely 3.7%. And why? First of all, the first quarter was rather weak. It was mostly related to weather effects and low temperatures in January and February. Going forward, we expect that there will be some fallout due to higher oil prices. Our modeling suggests that it's going to shave off some percentage points from GDP growth. That's why we decided to lower growth perspectives from 4.2 to 3.7 that I mentioned before. At the same time, the economy seems to be well balanced. As the shock hits, unemployment rate is low, consumer moods are staying high, and inflation hovers around the target Recent number from today is 3.2%. So that's why the situation is very comfortable for MPC to keep rates on hold. But, of course, if inflation goes up further, there will be some discussions within the MPC whether to hike rates or not. We think that the bar for hikes is set very high. But yet at this time we are analyzing closely the pass-through of oil prices to the whole economy. Right now we think it's very limited and will be limited due to the fact that overall demand conditions in the economy are rather moderate than high. Turning to monetary aggregates, we are seeing a full upswing here. The economy is firing on all cylinders and so are loans and deposits, both in corporate and household sector. We are seeing, I would say, meaningful upswing here. As far as the financial markets are concerned, we've recently seen some bond yield increases. That was globally driven. From that point, we moved down a bit, but still bond yields remain elevated. It's mostly connected with the overall impression that the inflation in the global economy would be higher for some time, and there is a risk that central banks would react with higher rates. We think that the most... the most probable direction of yields is rather to the downside from now, but of course we remain very alert. As for the currency, it remains exceptionally stable in this very volatile environment. Although we see some minor slotted depreciation over the next quarters, mostly over the uncertainty regarding the fiscal policy, We think that the Zloty would be rather stable and stay below 4.30 with respect to the euro. Thank you.

Thank you very much, gentlemen. Now let's start the Q&A session. So the first question is on fee and commission income. The fee and commission income growth is strong. At the last conference, you guided for stable year-on-year fee and commission income. Is it still valid after a strong Q1?

So I'm taking the question. And thanks for the question because our signal was every time sending an increased net and fee commission income development on a year-on-year basis. So we expect that the net fee and commission income on a year-on-year basis has significant growth.

Second question on cost. Do you plan to maintain cost discipline in the upcoming quarters?

As you know, we are very cost-cautious in this respect, so we every time think before we invest if this is worthwhile. Nevertheless, what we have in our strategy is further investment in IT capabilities and also to deliver our products to our clients. So the cost base is expected, if you exclude this one-off of DFG Resolution Funds, to be increased, but we will maintain the costs internally in every single investment we are taking.

Thank you. Volume growth does not seem to offset the decline in net interest income. What is the sensitivity of NIA to a 100-billion decrease of interest rates?

You're right that we see pressure on our NRI due to the rate cuts. In this slide, you see that we have now an interest rate environment if you compare it to last year, which was already a record year for us at MBank, that we are today working in 225 basis points lower interest rate environment, which obviously has in our profitability scheme a drag on NRI contribution. So it will be offset on a significant portion by our volume gains we are having in terms of going faster on the loan side than our competitor, and also maintain momentum on the deposit side. But it will be not 100% compensated from today's perspective. On the data in our eye sensitivity of 100 basis points rate cut, we have barely moved since the last quarter, so it's short of 700 million Polish Doty. And I want to remind everyone that we are working in different currencies, because we are also active in Czech Krona and Slovakia, And also our corporate customers demand significant euro and US dollar. And out of this 700, which would be a total sensitivity of around 7%, if you take the OBO and NI contribution of the house, it would be a bit more than 50% on the Polish zloty, if it would move. And here we are talking then about something around 450 million Polish zloty.

What share of your mortgage origination is related to refinancing?

So that is not yet the main driver of our sales. Therefore, this is something we are looking at, but we are not yet needs to be worried about.

How come FX result in the sector is declining despite growing imports and sector?

Good question. We're seeing strong momentum on the FX result on the group as well as especially in our corporate business. So we actually see that we can, with our customers, on this further trade volumes. Also, the ethics results and on the sector, I cannot comment.

What is the share of risk-weighted assets growth not related to organic growth in Q1? And can you please remind us what to expect from previously indicated extraordinary effects in 2026?

So in general, if you look into our RWEA growth, which was now on a quarter-on-quarter basis driven by 9 billion, you can say that the regulatory effect is a third of our debt, and the rest two-thirds is driven by pure volume growth on our corporate and retail side. Forward-looking, we do not expect any significant RWEA increase with related to regulatory environments. Because as we have said the last year, with GDD, the book definition of default, we have concluded successfully the last big package, which is known. No worries. We have some technical, exactly, the mic is away.

So while we are having a bit of a technical issue here in the room, I will take over as the moderator from ASHA for a minute. So there is a next question on can we comment on the dividend ambitions and the potential pay-up ratios?

So it's clear that this year, so with the profit of 2026, we want to return as regular dividend company. And we set ourselves, also communicated to the market, a dividend policy, and we aim for starting with 30% of the net profit of this year. That is also already included in our capital projection because we take away the 30% in every net earnings we are today generating and not adding it up into our capital stack. So that is the clear ambition that next year we pay to the shareholders 30% dividend distributions.

Can you elaborate more on the Stage 3 increase? What sectors were devised? Do you see a need to increase coverage?

There is not a specific sectoral-driven reclassification, and we do not see a specific need for coverage increase. As you can see from historical charts, it's hovering around 75% and we expect this to stay at these levels.

Thank you very much. Gentlemen, I think we've covered all the questions that were asked today. So thank you very much for the attention and for joining our conference and have a nice afternoon.

Thank you so much. Thank you. See you soon.