Mbank Sa

Good morning, ladies and gentlemen, and thank you for joining MBank Group's second quarter 2026 results conference call. The speakers today are Mr. Cezary Kocik, Chief Executive Officer, and Mr. Pascal Ruhland, Chief Financial Officer. Joining us for the Q&A session will be Marek Lusztyn, Chief Risk Officer, and Marcin Mazurek, Chief Economist. Please use the Q&A box to enter your questions. Now I hand over to Cezary.

Good afternoon, everyone, and welcome to MBank Q2 2026 results conference. We are very pleased to have you with us today. It has been six months of our new strategy implementation behind us, so it is a good moment to look at it, if we are on track or not. I would like to start with a very strong message. MBank continued to gain momentum in the second quarter and further strengthen its market position. We increase market share across the board in loans and deposits of our retail and corporate segments. Our market share in mortgage loans increased to 9.1%, up by 0.7% point year on year. This shows the strength of our franchise and the quality of our client relationship. So the message I would like to send is following. We are growing at a healthy pace, beating scale, and moving consistently towards our 2030 ambition of at least 10% market share in all key product categories. Organic growth is a real engine of value creation for MBAC. Our financial performance is also firmly on track with our strategic objectives. We continue to deliver strong profitability, high efficiency, Discipline Risk Metrics, and Robust Capital Levels. Rotary remains above 21%, despite the higher corporate income tax for banks. Cost-to-income ratio is among the best in the sector. Cost-to-risk is well below our long-term assumptions. And capital buffers remain strong. We also do confirm our intention is to pay out 30% of a net profit generated in 2026 as a dividend. Based on the current criteria, mBank would be eligible to distribute up to 75% of net profit to shareholders. It confirms that our business model is resilient, backed by consistent execution, and we remain well positioned to deliver attractive returns while funding future growth. What stands out on this slide is that our business volumes are gaining momentum. Loans grew by 13% year-on-year, driven by both retail and corporate banking, outpacing the sector and driving further improvements of our market shares. In retail segment, Mortgages remain the key growth engine, supported by healthy demand and competitive offer. In corporate banking, lending growth reflected our industry expertise and effectiveness of our unique hybrid service model, which strikes in the right balance of focusing on technology and client relationships. Deposits increased by over 20% year-on-year and outpaced the loan growth. The inflow was driven mainly by current and savings accounts, strengthening our funding profile and creating additional capacity for future expansion. In the first half of 2026, we achieved the highest ever net results of Embank. It increased by more than 20% year-on-year. despite declining interest rates and a substantially higher effective tax burden. Revenues remained broadly stable. Lower net interest income resulting from monetary easing was largely offset by growing free income and other revenue streams. At the same time, we maintained excellent operating efficiency and credit quality remained strong. Lower Swiss franc-related legal risk costs were also an important driver, as supporting profitability and consequently capital generation. Our capital position remains very strong. The inclusion of retained earnings increases our own funds and further strengthens already comfortable buffers. Capital metrics remain well above regulatory requirements. and our male position was further reinforced by the Green Senior Non-Preferred Bond issuance in the amount of 750 million euro. This gives us room to grow up the business, absorb regulatory changes and execute our strategic priorities without constraints. To conclude this section, I would like to underline that mBank is executing its strategy with consistency and discipline. We have restored business growth and gained market share, delivered strong profitability, reduced Swiss bank-related legal risk costs, and further strengthened our capital position. This progress is reflected in two important milestones. Total assets of mBank exceeded 300 billion Polish zloty and our client base surpassed 6 million. These milestones confirm the strength of our franchise, the trust of our clients, the proven ability of our platform to grow under different circumstances and its potential for years ahead. Now I hand over to Pascal who will discuss the trends in the second quarter.

Thank you very much, Cezary, and also hello from my side. The key message from Q2 is clear. Our strategy is working. We are growing, gaining scale, and converting that growth into record profitability, as Cezary already highlighted it. This translated into the highest quarterly profit in the group's history. 1.1 billion net profit and a return on tangible equity of almost 22%. And for us, very important, This growth is supported by resilient fundamentals, a strong balance sheet, comfortable capital and liquidity buffers, and therefore we have clear room to continue executing our strategy. With that overall picture in mind, let me now move to the P&L on slide 11 and explain what drove this performance, starting with revenues. Total income increased to 3.1 billion, driven mainly by recovery in net interest income. NRI rose by around 3% quarter-on-quarter, supported by loan growth and disciplined deposit pricing. Net interest margin declined slightly to 3.47%, mainly reflecting the lower interest rate environment. Going forward, we expect net interest margin to remain broadly stable around 3.5%, assuming constant interest rates. Fees remain broadly stable, while trading and other income normalize from a very strong Q1 level. As a result, we are now updating our revenue guidance. We now expect 2026 revenues to exceed 2025 levels supported by our balance sheet growth and fee income. Underlying costs increased by 8% quarter-on-quarter, reflecting IT investments, marketing activity, and also seasonal patterns. Efficiency remains excellent. Reported cost-to-income ratio was at 30% and normalized, so the more important for us, cost-to-income ratio was below 33%. While we continue to invest in growth and in technology in the second half of the year, we expect cost-to-income to remain well below our strategic target of 35%. Cost-of-risk remained at low levels at 37 basis points with asset quality very strong. First-ranked legal risk costs stayed at low level, supported by a shrinking active portfolio and lower litigation inflows. And as mentioned earlier, profit before tax and net profit reached the highest quarterly levels in our history. But it's also noteworthy that the tax burden remains very high, with more than $850 million in taxes paid in Q2 alone, including the banking tax. Even so, while we run a very efficient business model, profitability remains strong with an ROE around 18% and a return on tangible equity of close to 22%. Having covered the quarterly P&L, let us step back and look at the first half as a whole. The message remains fully consistent with Cezary's opening. AmBank is growing profitably while absorbing higher sector burdens. And I do not want to go through this chart line by line as we have already covered the key trends. But what I would like to highlight is that this chart clearly shows the full potential of our business model as the Swiss franc-related legal risk becomes increasingly insignificant. From profitability, let me now move to the commercial engine behind it, new lending business. Mortgage sales reached a record 10.7 billion in the first half, up Thank you very much. We also see attractive growth opportunities in the smaller corporate customers, so K2 and K3, supported by our faster processes and stronger client coverage. And now there is a very important point to make on our operating leverage. Our growth is highly scalable. because our largely digital processes in retail as well as in corporates allows us to absorb this significantly higher volumes without a meaningful increase in FTEs. This strong new production is now clearly visible also in the loan portfolio on slide 14. Gross loans increased by nearly 13% year-on-year and 6% quarter-on-quarter. Corporate loans were the main engine quarter-on-quarter while mortgages delivered the strongest year-on-year growth. Mortgage loans grew 18% and non-mortgage loans grew 8% year-on-year. Our core retail book, Excluding Ethic Mortgages, expanded by 15% with market share gains in household and PLN mortgage loans. The corporate loans increased 11%, translating into an 8.7% market share. Our market share gains are mainly driven by deepening the relationship with our existing clients. So this is fully aligned with our strategy of appreciations. We grow by giving our customer groups the best offer, so more reasons to choose mBank again across both retail and corporate banking, where we already have strong starting positions as we have very attractive client segments, including the youngest retail customer base in the market. After the loan book, let me now turn to the other side of the balance sheet, customer deposits and investment products, where the franchise momentum is equally visible. Total deposits reached 248 billion, up 21% year-on-year and almost 5% quarter-on-quarter. Retail growth was driven by current and saving accounts, confirming that the strength of our transactional franchise is working. Corporate deposits also grew strongly, while profitability of deposits remained very well managed. We gained market share in household deposits and maintained corporate deposit shares comfortably above our strategic target. Investment products also expanded with 18.3 billion in funds distributed through us. Regular investing is developing strongly. 117,000 corporate customers now invest regularly. Retail customers, not corporate customers. With invested volumes up 52% year on year. And this is exactly the behavior we want to encourage. So educating our customers, helping them starting small and then building Thank you very much. at 6.2 billion, so broadly unchanged. Net interest income declined by 4% year-on-year, reflecting lower market rates. But very important, it returned to growth in Q2, increasing by almost 3% versus Q1, supported by continuous loan and deposit growth. We expect net interest margin to increase in Q3 and Q4 slightly to above 3.5%. Net fee and commission income increased by 5.5% year-on-year, driven by higher client activity across several business areas. The year-on-year comparison should be viewed in the context of a one-off in Q2 2025 of about 40 million following the contract signed with Unica. On a quarterly basis, net fee and commission income remained broadly stable despite higher acquisition and promotional costs in Q2. The year-on-year stability of revenues was also supported by stronger trading results and higher dividend income. This last item includes a 40 million dividend received from PSP and that's the operator of Blink. Overall, diversified revenues and strong volume growth show that we are converting the strategic momentum into resilient income. And therefore we now expect 26 revenues to exceed 25 levels. After revenues and margin, let me now talk into costs. And here the message is very simple. We continue to invest further in our growth, and that with strong discipline. The first half operating costs grew 10% year-on-year, so fully in line with our low double-digit guidance. Despite investments in people, technology, and marketing, Q2 cost-to-income ratio remained excellent at 30% reported and below 33% normalized, so comfortably below a strategic ceiling of 35%. From efficiency, let me now move to risk costs and credit quality, which remains supportive of our growth story. In the first half of 26, impairment losses and failure changes on loans amounted to 240 million, down 19% year-on-year. And as a result, the good cost of risk remained low at 34 basis points. In Q2, LLPs increased, with the cost of risk rising from 30 to 37 basis points. And the increase of cost of risk was driven out of the corporate segment. Thank you very much. Thank you very much. And we also have enhanced disclosure in response to investors feedback, which we really appreciate. So we added more details on Stage 2 loans and commercial real estate exposure, and you can find it in the presentation on slide 41. Let me now close the financial review with capital, which remains strong and is a key enabler of our growth story. At the end of June, CFD1, Tier 1, total capital ratios remained comfortably above regulatory requirements. Even with strong loan growth and the related increase in RWAs, Our capital position supports further business expansion and our ambition to return capital to shareholders over time. Looking ahead, we are working on additional capital optimization initiatives. This includes a potential Euro 81 domination transaction and another securitization transaction which is expected to reduce RWA's by around 2 billion. And now something very important. In Q2, we have applied for an adjustment of the scope of our internal credit risk models. We expect ECB and KNF approval in Q3. Once implemented, the change should lead to a significant reduction in RWA. Based on our current calculations, the impact should be in the mid to high single digit billion range and materialize by the end of Q1 2027. And of course, this will strengthen our capital position further and support profitable growth. Let me now summarize the key takeaways from the financial review. First, scale. Loans, deposits, investment products all expanded. Second, returns. Record quarterly profit and a return on tangible equity of around 22%. Third, discipline. Efficiency, risk costs and legacy risk all under control. and fourth, resilience, with a strong capital and liquidity position, which enables us to grow further. And finally, let me translate these results and takeaways into our outlook for the rest of the year. And I will repeat what I was sending as outlook during the speech. We expect 2026 revenues to exceed 2025 levels. We expect net interest margin to remain broadly stable around 3.5%. We expect the cost-to-income ratio to remain well below our strategic target of 35%. First rank, legal risk is expected to stay insignificant. We expect the cost of risk for the full year around 55 basis points. And most important, we expect volumes to keep outgrowing the markets, led by mortgages and financing for our strategic industries. So overall, mBank, we enter the second half of the year with profitable growth, Thank you very much, Pascal.

Now we will start our Q&A session. The first question is to Marek Lusztyn. Congratulations on reducing NPL ratio. What was the main factor that contributed to this reduction?

Good afternoon and thanks for noticing. The decrease in M-Bank NPL ratio from 3.4% in Q1 to 3.1% in Q2 was driven by several factors that include positive outcome of corporate individual cases. We have reclassified the commercial real estate client from non-performing to non-default status that is circa 145 million zloty. And it was further supported by the sale of non-performing loans. We have sold 130 million of non-performing exposures in Kyoto. And that was also supported by a continued dynamic growth of the credit portfolio that Pascal and Cezary were alluding to.

Thank you. Now, let's go to the questions about NII. What was the impact of the ECJ verdict on consumer loans on NII in the second quarter? And did NB make additional provisions for legal risks relating to consumer loans in Q2?

So, I'm taking the question. So, in general, when we talk about this overall topic, it needs to be stated that since 2023, We have been one of the first banks. We're not granting anymore those kind of loans. And luckily, if you look into the overall exposure of our balance sheet, when we talk about those cash loans, we are very well positioned. Also due to the fact that at that point in time, we were fighting with the Swiss franc legal environment and therefore had not enough capital to really grant big portions in this direction. Secondly, we need to say that for us, the topic of SKD and related jurisprudence is very positive because MBank wins 90% of the concluded cases. And therefore, the provisions we have taken in are insignificant. What we have decided is the portfolio, which we are still 2023, not anymore granting, which is still a legacy. We obviously, from the 23rd of April, not charging it anymore. But as I said, this is not a significant portion.

What growth rate does the bank expect for its corporate loan portfolio, excluding reverse repo buy-sell-back transactions, by the end of this year? What is the outlook for 2027-28?

On the growth rates in January, we expect to outperform the market. Therefore, it needs to be double-digit, as we expect that the market is growing in the corporate segment around 11% this year. and for the years to come, we also expect to outperform the market. That means we also need to have higher growth rates than our competitors at the same pace.

Regarding the proceeding related to the unauthorized transactions, at one of the bank's conferences in 2025, management indicated that provisions of 21 million Polish zloty had been established. What is the current balance of provisions recognized in relation to this proceeding?

Nothing has changed in that respect.

The question about extraordinary risk-weighted assets effects. I believe the extraordinary risk-weighted assets effects are now over.

Correct. We are not guiding anything with the exception of the positive potential effect we are having, which I guided, which is then an effect which we would expect by Q1 2027. We currently don't see anything to the best of our knowledge today, which would be regulatory inflate our RWAs further.

Thank you. What is the current share in the active portfolio cash loans which accrue interest on commission or insurance?

That's a statistic we're not providing.

Just what Pascal said, that we stopped charge fees in 2023 and in my maturity of the cash loans, it's not significant part.

What caused the decline in CET1 capital during the quarter?

Okay, I'll take this one.

That's basically driven by growth of the business, because as you can see, the trade-off has increased by nearly 9 billion in Q2. And that increase is primarily driven by the credit risk, mainly due to the business development of K2, K1 and mortgage lending segments. Thank you. How have spreads in the corporate lending developed in the last two quarters and where do you see them in following quarters?

So the spreads in general have compressed. We see that not just in corporates, but in general in the lending activity in the Polish market. And we cannot exclude ourselves here. But we also see that there is a bottling out effect in the spreads if we look into our latest prints.

The question from Jaromir Szortyka. It appears that Unicredit may increase its stake in Commerce Bank to nearly 50%, becoming a major shareholder of the group. Do you see any areas where Unicredit could support M-Bank's future growth?

That we will not comment at this moment. We are waiting what will happen.

Some questions about our 81 capital?

So our 81 capital, as you know, the bucket we can fill is 1.5%. And if you take the growth we are currently pursuing and our existing issuance, obviously this bucket becomes automatically smaller if you're not going into the market in order to fill it up again. And it is nevertheless currently assumed to be a sub-benchmark. The question that we have not answered yet, because a lot of them have been covered during the presentation.

So there is one more that reads, if our merit ratio

includes the recent 750 million senior loan preferred?

The answer is yes.

Well, I don't think I can see more questions, or maybe, Pascal, you would like to repeat your guidance on our revenues and net interest margin, because also there is such

There is one more that is on capital, so maybe before we go to the guidance and summary, I'll answer also on this one, because there is a question, what is the pro-forma C2, C1 ratio, including Q2 profit, and Q2 profit after the dividend would transpose to up to 50 basis points of C1?

Exactly. Just to make it very concrete, so as Czarek was saying it, we're planning for a 30% dividend of our net profit. Therefore, we never exclude this part, the 30% into our capital trajectory. But also in Poland, we need to have approval for including the net profit of every single quarter into our core capital. And this makes it then necessary to just include it every time with a quarter delay, you can call it. Retrospective, we include it every time. Therefore, your question in terms of the development of the core capital between two quarters has also to do with that we retrospective at the depth, the net profit which was received in Q1 and visible today into our capital ratios. With that, coming once more to the guidance. So we expect now revenues to outperform 2025 levels. And that would also then just be possible if the second half of the year is stronger than the first half. We see momentum in NRI and also in net fee commission income. You saw and that was very important for us to stress that NRI has been increased between Q1 and Q2 based on our successful volume gains. And this is also related to the net interest margin expectation we are having. We've seen that the net interest margin has now bottomed out. Thank you very much, gentlemen. I think we covered all the questions. If not, please contact Investor Relations. We will be happy to answer all the additional questions.

Thank you very much again for your attendance and questions and see you again in three months.

Thank you very much. Thank you.