Bank Handlowy w Warszawie S.A. (BHW) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome on Citi Handlowy earnings results for second quarter 2026. My name is Adam Piotrak. I'm the Head of Investor Relations. I'm with Maciej Krywoniuk, Head of Strategy and Investor Relations Department. We will go through the key highlights of Citi Handlowy in second quarter and the financial results. The presentation is on your screen, and also you can find on our website, Investor Relations, Citi Handlowy. So Maciej, over to you.

Thank you very much Adam. Hello everyone, thank you for joining the Q2 earnings call for Citi Handlowy. We will start with the presentation, and I invite you to the Q&A session at the end of the meeting. So Q2, quite an intense quarter for us, so we have completed the sale of our consumer business as we have informed all of the stakeholders, and we embarked on the new chapter for the bank, which is the Bank for Global Business chapter, where we laid out the plan for the dynamic growth in Institutional Banking. More about the highlights of the second quarter results. For the total bank, the revenue reached PLN 878 million. This is including consumer bank and the net profit reached PLN 321 million. This left us with ROE at the level of 21%, so healthy returns. And it was the quarter characterized by the growth of the balance sheet with loans growing at 16% and deposits growing at 12%. This is post the exit from the consumer banks because at the end of the quarter, the balance sheet did not improve the consumer banking assets. In a nutshell, that was the sixth consecutive quarter of the lending growth. The global clients remain a key pillar of the lending portfolio in the bank, They called a 38% share in the lending portfolio. We have been growing our tax volumes, which grew by 14% Q-on-Q, reaching record high levels. It was a quarter with strong transactions executed both on the equity and debt markets, which the volume amounted to PLN 7.4 billion. And briefly on Page 3, we want to touch on the new reporting structure for the segments, post exit from the consumer banking. As you can see, we have implemented two new operating segments, reflecting our integrated business model, the first one is Corporate Banking, which encompassing the services and banking. By services, we mean transaction services that has to do with liquidity management, payment products, trade finance and custody services. The relationship banking represents the investment banking and financing solutions for our clients, and the Financial Market segment is what at Citi terms is called markets, and it covers both the client activities, so the tax risk management, capital markets and brokerage as well as interbank operations, with this we mean the financial instruments and derivates. We are capitalizing on our competitive advantages, primarily globality. We are present in 24 countries in Europe, and the global clients are responsible for 41% of the bank's revenues. The relationship we have in the bank are the long-standing relationships with having products loads with 3.8 products used by our institutional clients on average and almost 60% -- around 60% of clients are with us for at least 10 years, so really long-standing and deep relationships that we have with our clients. Moving on to volumes, which are on Page 4. So the lending volumes in Corporate Banking grew by 2% quarter-on-quarter. It's been 16% year-over-year, and a primary driver in terms of the segments was the Corporate Clients segment with growth of 17% Q-on-Q and 22% year-over-year. The deposit volumes were also growing. We reached, in fact, a surplus PLN 47 billion in the deposit volume in the second quarter, and the deposit portfolio grew by 3% Q-on-Q and 12% year-over-year. In terms of the business volumes, you see the growth rates on the right-hand side on Page 4 in fact, in every product line, and the volumes were growing, especially strong transactional activity in our services area, our trade finance assets grew by 34% year-over-year. Assets under custody were up 22% as well. We have granted PLN 1.4 billion of new financing to our clients. It includes also increases in the current facilities. Moving on to landmark transactions, which are on Page 5. These are just the flagship deals from Q2, and these are public. Of course, that's what we can share with you, but there was much more behind the results. So as you see, the key flagship transactions range from syndicated laws through DCM transactions and also capital markets transactions. We have been also granted best funding solution for the Adam Smith Award for Play, where we have concluded the export agent based financing. We have been also nominated to receive the Poland's Best Investment Bank for M&A Euromoney award, 2026. Traditionally -- moving on to Page 6, Q2 and specifically, June is the month where Global Community Day happens around the globe, and Citi Handlowy was also active here with 1,800 Citi volunteers supporting 117 organizations with 24,000 beneficiaries, so this is our effort to be engaged in the communities we operate in every day. Coming back to the business. So Page 8, which is the revenue picture for the quarter. The total revenue in Corporate Banking was -- the total revenue, the top line reached almost PLN 700 million which is a decline quarter-over-quarter by 28% and also year-over-year on a quarterly basis. However, if you look at the segment of Corporate Banking, it was up 7%. The drivers behind the growth were ranging through different product areas, from tax volumes, strong payments, from trade finance as well as brokerage. And in financial markets, the quarter specifically was down by 53%, but that's a reflection of the calendar organization in fact because when you look at market results more in the long term, which we did, as you can see on the page, looking at the first half of '26, vis-a-vis, the'25, so in the corresponding period last year, the revenue was lower by PLN 130 million. So '26 represents 20% growth H1 to H1 year-over-year. And a pretty balanced view in terms of the segment revenues, it's a well-balanced model in terms of the operating segments. Moving on to the next page, Page 9, which is the net interest income page. We have generated almost PLN 46 million in NII this quarter. The growing lending volumes were supporting the growth in the clients' interest income. When you look at the Corporate Banking segment, the 2% growth is the reflection of the landing portfolio growth I've just mentioned. In the Financial Market space, the NII was down 9%, and the drop was driven by the interest expenses. This is linked with the liquidity that was required to be accumulated for the consumer bank exit transaction, so a bit specific quarter in terms of the nature and the transactions that we have executed. And when you look at the interest rate forecast, we -- the house view is that the rates will remain at 3.75%, which most likely will have to stabilize the net interest income levels. Very strong quarter on Page 10. So very strong quarters in net fees and commission line. In fact, contribute -- all business has contributed to the to the result of PLN 119 million, which is 10% up Q-on-Q and 11% up year-over-year. Strong fees related to capital markets, I mentioned the transactions in the capital market space, and today we're also supporting the fee line growth. The trade finance assets, which grew by 34% year-over-year, also contributed to the fee line. Moving on to Page 11, which is the Financial Markets page. The numbers, the treasury results numbers that you see on the page are the view that is post transfer pricing, and Q2 revenues reached in treasury PLN 273 million. Again, what's behind the change, so the primary components of the change are the trading results and the AFS results, but it's more a function of calendar when you look, as mentioned, into our first half to the first half last year, this year was PLN 850 million and last year, it was PLN 722 million treasury results. So looking at this in the long term, quite strong first half in terms of the treasury results. As you see on the page, lower and specifically in Q2. I think what's worth noting on the page is also that despite of the growing volumes, so there is a slight drop in the income on FX client activities, 3% drop. It's attributed to the higher ticket transactions where -- which are characterized by the slightly lower spread, and this is the explanation for the 3% drop in the income on FX. What's good news, that's right bottom graph, where valuation reserve is growing, there is a positive change of around PLN 200 million that improved the position and the evaluation results, so positively impacting our capital position. Moving on to expenses, Page 12. Again, it's a quarter where the costs are down Q-on-Q by 37%, but it's important to remember that Q1 is a quarter where we need to include the regulatory expenses in the P&L. So in fact, in the quarter, both the staff expenses and the admin expenses are slightly down by 4% and 3% Q-on-Q. They are traditionally lower in Q2, so it's also a calendar effect in a way. Moving now to year-to-date. So in the first half of '26 versus first half of '25, coming into more details. The staff expenses were up, and the growth is PLN 28 million. And there was also growth and IT expenses, that, in fact, the execution of our strategy of investing in platforms where we want to be more connected to better serve the global needs of our clients, and in fact, the PLN 40 million growth is the reflection of our investments in the IT platforms, and it's both front and back office, so client facing and more process automation and tools for our employees linked to the automation. The regulatory expenses are up by 29% this year in the first half, and that's primarily a contribution to the restructuring fund of the bank guarantee fund. Now moving on to Page 13, which is the cost of risk page. The cost of risk, as you have noticed, is up, and in fact, this -- the growth that you see in the cost of risk line is a representation of two client relationships that have been reclassified to Stage 3. I want to stress that these are pretty much isolated cases and the overall portfolio quality remains good. And when you look at the cost of risk, 4 to 7 basis points this quarter. It's elevated, but excluding the one-offs, the cost of risk remains at a healthy 19 basis points level, so we are working with the clients to restructure and we are heavily engaged with them at the moment. Yes. And it's, in fact, this is it. Page 14 is a summary. I will just maybe point to strong returns with ROE at 21% and ROA at 2.3%, stressing this PLN 321 million of net profit and some one-offs included in the results linked with real estate sale of one of our headquarters building. And this is also representation of how we handle the stranded costs. So post consumer exit, we did not require so much office space, and we have decided to sell one of the Warsaw buildings. I think it's important to note that the core revenue line, which is PLN 578 million, which is our underlying core business is pretty stable, and the strong capital position with capital ratio at 25.8%, as you can see on the page, this is a function of the lower credit risk requirements post customer bank exit. So this will be a brief summary from my side in terms of the quarterly performance of the bank and happy to take questions. I see there are no questions. So thank you very much again for joining, and if you need anything from the IR team, please reach out to us. And in terms of the quarterly earnings, we see each other in November.

Thank you, Maciej. Have a nice evening.

Thank you. Bye-bye.