Bank Handlowy w Warszawie S.A. ($BHW)

Okay. It's 2:00 p.m., Warsaw time. Hello. Welcome on financial results of Citi Handlowy for first quarter 2026. My name is Adam Piotrak. I'm Investor Relations Head. I'm with Maciej Krywoniuk, Head of Strategy and Investor Relations Department. We will go through this presentation. The presentation is available on the screen and also as well on our website. So, Maciej, the floor is yours.

Thank you very much, Adam, and welcome, everyone. Thank you for joining. I will walk you through the set of results for the first quarter '26. It's my pleasure to share that it's been a solid quarter. I will walk you through the drivers behind the results. Maybe before we start, just a few words of explanation regarding sale and exit from our consumer banking business. The midyear date for the demerger that we announced some time back still holds. We will be informing the clients and all relevant stakeholders about the process in due course, the first messages went out yesterday, 14 days prior to the demerger date, we are planning to have more communication regarding the details. In terms of the highlights of the quarter financially, the net profit reached PLN 386 million, has been 17% above the consensus. The return on equity is solid 19.2% and strong capital ratio with TLAC TREA at 23.5%. The balance sheet has been growing this quarter. At quarter end, the loans were up 13% and deposits 15% year-over-year. I'll walk you through more details on the following slide. We are -- have been focused on execution of our strategy, which is the bank for global business. And in terms of the institutional loan growth, we reached a record balance of PLN 17.1 billion in this segment. It's been 5 consecutive quarters of growth in the institutional lending book. And we have been observing quite significant client activity. When you look at the deposit volumes, they were up 13% quarter-over-quarter and custody business recorded growth of transaction volume by 18% Q-on-Q. We have been investing in the technology platforms, including the AI tools. And these were primarily focused on enhancing our client experience and enhancing the global connectivity as per our strategic directions. And we implemented tools for relationship managers as well to improve their experience in terms of how well they can access information about their customers. On the consumer banking side, the consistent growth in wealth management, the number of clients in -- Citigold private client segment was up 3% quarter-over-quarter. Moving on to the next page, Page #3, we will walk you through the business volumes. So in terms of the lending book, when you look at the graph, the loan portfolio was 18% up year-over-year. It's been growing more than 3x faster than the banking sector. Q-on-Q growth was also positive with 5%, and primarily contributing to the growth in terms of the year-on-year view were the segments of global and corporate clients. The deposit volumes, I mentioned them in the beginning of the presentation, but in the institutional banking, they were growing double-digit growth with 16% Q-on-Q and 22% year-over-year. Strong performance in the financial markets with -- it's also a reflection of transaction value, which among others in the brokerage departments were up by 50% year-over-year. On the services side, 38% growth of our trade finance assets and the volume of assets under custody was also 23% up. When you look at the red arrow at the bottom of the page with 49% decline in the new financing granted in the quarter 1, it's the base effect of last year where in Q1 '25, granted a large facility and this impacted the growth rate in a negative way. Page 4 is just a summary of landmark transactions executed this quarter. I mentioned that the client activity was strong, and that's just the evidence of a few transactions that we have executed varying sectors from P4, which is a play operator, automotive and trade sector as well. So that's the side with transactions. Moving on to the slide on the consumer banking volumes, which is Page #5 in the presentation. Flattish loan volumes in consumer bank with 1% decline quarter-over-quarter. They were up 2% year-over-year. The deposit volume is stable with 1% Q-on-Q and 2% year-over-year growth. What's important is the wealth management business with private banking growing both in terms of the total relationship balance that we hold for our clients, which was up 9% year-over-year and number of Citigold private clients increasing by 16% compared to last year. It's my pleasure to share with you what's on the next page. Our Citi Handlowy Foundation is 30 years old this year. And as you can see on the slides, the contribution for social activities amounted to over PLN 110 million in terms of the budget. And when you look at number of beneficiaries, they were -- they sum up to over 10 million, so significant numbers here. And we have been and will be committed to support the communities we operate in. And it's going to be executed continuously through the Citi Handlowy Foundation. Now moving on to some details behind the financial results, starting with the top line. Just briefly, the total bank revenue was at PLN 1.2 billion, which is the second highest historically. The highest historically was 3 years ago, but just to remind you, the interest rate level was 300 basis points higher compared to where we are now. So something to be proud of in terms of the top line. The total revenue amounted to PLN 971 million in the institutional banking. It includes almost PLN 200 million of gains from sale of debt securities in the quarter. When you look at the growth rates, both 33% Q-on-Q and 24% year-over-year, represent significant growth. In terms of the contribution from different areas, that's the management view on the right-hand side and the revenue dynamics are positive in each of the product categories that you see ranging from financial markets through services and relationship banking. The consumer banking revenues were at PLN 228 million. They were down 8% quarter-over-quarter. It's a function of lower interest rates. But all in all, summarizing the page, it was a strong quarter in institutional banking definitely. Moving on to net interest income page. So the net interest income was slightly affected by realized gains on the sale of the debt securities. And that's primarily what's behind the decline that is 8% Q-on-Q. It's been offset by growing lending portfolio. And what we want to share with you is definitely that we are very focused on discipline around interest expenses. They were down this quarter despite the growth of the deposit book in the bank. And the net interest income on the consumer side, PLN 186 million, down by 8% Q-on-Q, again a function of declining rates. When you look at the net interest margin graph, the NBP reference rate was at 3.75% in Q1. Our house view is that there will be no change in interest rates by year-end. And our CFO shared this morning that we are expecting the stabilization in the NII line this year. Moving on to fees line. So PLN 107 million in the institutional banking for Q1. It's slightly lower compared to last year. There were some episodic transactions executed in Q1 '25. No major episodics this year in Q1. But when you look at the main contributors behind the fee line, it's custody and transaction banking, they represent more than 80% of the revenue. And in fact, in the consumer banking, the fees amounted to PLN 39 million and they were kind of stable Q-on-Q and year-on-year, no major changes in the consumer banking side. Moving on to our treasury business. It's been a strong quarter for our treasury area with PLN 918 million of revenues. They were up 35% Q-on-Q. Definitely very strong trading results, as AFS gains that you see on the graph, were both close to PLN 200 million. It's in a way preparation of the balance sheet for the demerger. And as you are aware, our consumer business is very liquid. It's got more deposits than loans, and we need to prepare for the demerger plan for midyear and the liquidity requirements for the upcoming transaction. In terms of the balance sheet, you see the mix on the right-hand side. And we are kind of more towards short-term investment securities at the moment. And the revaluation reserves that you see at the bottom of the page at negative PLN 108 million are the function of the macro environment changes linked to the war in Iran and the changes that happened in the operating environment that followed. Moving on to expenses, which is Page #12, which is PLN 335 million in institutional banking this quarter. It's a quarter where seasonally, we are booking the regulatory expenses at the elevated level. The Q1 is characterized by the Banking Guarantee Fund contribution. This time was no different, slightly higher regulatory expenses, you see PLN 118 million compared to PLN 88 million last year. When you look at more details in Q1 in terms of the type of expenses that were growing, I walked you through the regulatory expenses that were up PLN 30 million compared to last year. The IT investments are behind the PLN 17 million of growth. In the expense line that -- these are the investments in the tech infrastructure and linked with our ability to increase the client experience and the global connectivity and staff expenses with PLN 11 million growth, that's our focus on keeping the salary levels competitive. And I would draw your attention to the cost-income ratio, which you see for Q1 was at the level of 34%, very healthy cost income for the institutional banking despite growth in some of the areas, we are still very committed to the cost discipline that the bank is well known for. The operating expenses on the consumer banking side were PLN 214 million. They were higher by 31% Q-on-Q. They were also up 8% year-over-year. The growth is primarily linked with the incurred migration expenses and the preparation for the transaction that's ahead of us. In terms of the cost of risk. So cost of risk is at PLN 17 million in the institutional banking area. We have booked additional provisions. That's the growth which is linked with the provisions related to the portfolio growth. So nothing that is to worry about in terms of what's in the PLN 17 million. When you look at the -- both the coverage ratio and share of Stage 3, they are at much better levels compared to the banking sector with coverage ratio at 64% in the bank and share of Stage 3 at 2%. Cost of risk in the Consumer Banking segment amounted to PLN 3 million, which is a positive result of write-offs. And we have also executed the sale of the nonperforming loan portfolio in Q1 this year. So briefly, that's the summary. When you look at Page 14, maybe I would just draw your -- again, your attention to the total revenue level at PLN 1.2 billion, very strong top line results this quarter. Also that helped to generate the ROE at 19.2% and keep the ROA at high level at 2%. The net profit of PLN 386 million -- all this with significantly higher tax rate, which grew from 19% to 30%. And that's, in a nutshell, all from my side. And now I open the floor to questions.

If there are no questions, thank you very much for...

It's Peter Priisalm from Avaron Asset Management. Maybe I ask a question on loan growth. So now that the retail banking is out of the system. So in which segments in corporate lending do you see perspectives for growing? Or what could be the strategy for speeding loan growth going forward?

Well, we are not changing the targets. Thank you for the question, Peter. So we are not changing the target market as such. So you would not expect to observe that the risk profile of the bank will be changing. The 2 growth engines that we are looking for as per our strategy are defense and energy security and energy transformation in general, so these are the -- from a project perspective. And when you look at the segment, in fact, there is no single segment where we are expecting more growth. We have been executing very long-standing relationships with our clients. And we observe some projects that are executed at the corporate levels, and it's always the case that there are such transformational deals -- we are part of such transactions. They also include some cross-sell elements. So whenever we land, we also make sure that the cross-sell is included so that our profitability profile is also maintained going forward. So I hope this answers the question.

Maybe just a follow-up on that. Do you see those defense and energy security segments mostly in kind of state projects or you are more focused on kind of private, kind of, companies doing those projects? And a follow-up, if these are state-owned, how is the kind of margin outlook there? Because I think the state-owned banks are also very keen to invest into those projects. So is there some kind of appetite for you to go for those low margins?

Well, you're right on the competitive side of things. Definitely, it's been and it is a very competitive market. And we are observing some margin compression in those high demand products around security and energy transformation. That's why we usually offer a full range of products, including some treasury related hedging solutions as part of these transactions. And so there usually is some element of risk management component since quite often the tenures are longer. And basically, to your question on whether it's more state-owned or private, I would say it's both, and we are active in both areas. And basically, where we are also active is some of the projects that are executed by -- on the private side, by large corporates that are multinationals, that are present in Poland, and they are behind some of the energy projects, energy transformation projects. And since we are the home bank in a way, so basically, this is where we are also active on the private side. Okay. Any more questions that you would like to ask?

Okay. So thank you for joining. Thank you for the time, and have a nice rest of the day.

Thank you for joining, and see you soon. Bye-bye.