Bank Millennium S.A. (MIL) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Bank Millennium Second Quarter/First Half '21 Results Call. With us, we have Mr. -- the usual presenters of top management, with Mr. Joao Bras Jorge, our CEO; and Mr. Fernando Bicho, Deputy Chairman of the Board and CFO. Without further ado, gentlemen, the floor is yours.

Good afternoon. Thank you for attending this presentation of our second quarter and first half results. We will start to with Page #5. As you remember from several months ago, we have treated this 2021 year as a transition year before the new strategy rollout. At the same time, we put forward some targets to be achieved during this year, namely on one side, the quick recovery of the business results after the pandemic times. The second is the focus on operational efficiency. And the third, this target of full digitalization. Today, after closing the first half of the year, we can say that we are on the right track. After the first -- end of the first half of the year, our net profit, excluding FX mortgage provisions is up 87% year-on-year. The sales of cash loans are higher by 14% year-on-year and origination of mortgage loans were just in 6 months at the level of PLN 4.8 billion against our expected target of PLN 7 billion for the full year. On the other side, we continued the optimization of the branch network, and the number of branches is down by 4% year-to-date on the top of the reduction that we have done last year, and the cost to income fell to 45%. And finally, in terms of digitalization, the share of digital clients as of the end of June was above 81%. The Pages 6 and 7 show the highlights of the key profit and loss items and key balance sheet and business items. We will go through the details in the presentation. But just here, I would like to point out the strong growth of net fee and commission income by 11% year-on-year, also the recovery of the net interest income in the second quarter versus the first, growth of 5%. Also the significant reduction of cost in the first half of the year compared with last year by almost 13%. And then this strong rebound in the net profit without extraordinary items, namely without these provisions for FX mortgage and the net profit in the first half of this year would reach PLN 474 million without this FX mortgage provisions. Also important, the clear improvement in the cost-to-income ratio and the fact that excluding these extraordinary events, the bank would be able to show an ROE of almost 11%. On the business front, a strong growth of loans, also partially offset by a strong reduction of the FX mortgage portfolio by almost 22% year-on-year and continuation of a very strong capital position. On Page 8, so we have a loss in the first half of PLN 512 million, which was driven by the significant additional provisions for FX mortgage legal risk. Excluding these provisions, the net profit would be PLN 474 million driving this double-digit ROE adjusted of 10.9%. It is visible on the right-hand side of Page 8, the positive evolution of the net profit without extraordinary items quarter-after-quarter, reaching PLN 268 million in the second quarter, an improvement of 30% quarter-on-quarter and 45% year-on-year. And operating income showing a growth in the second quarter of 6% quarter-on-quarter and 7% year-on-year. In terms of the second quarter, as you can see on Page 9, apart from what I already mentioned, we would highlight the rebound in NII and the improvement on the net interest margin by 4 basis points quarter-on-quarter. The growth of fee and commission income by 17% year-on-year. The adjusted ROE for the second quarter at 12.4%. Lower costs by 7% and the increase of the coverage ratio of NPLs over 90 days to 124%. Looking now at net interest income on Page 10. Clearly, an improvement versus the picture that we showed a quarter ago. Now year-to-date, we have net interest income only 4% lower than the same period of last year after a growth of 5% of NII quarter-on-quarter. This is driven on one side by low cost of the deposits that even fell by 1 basis point during the second quarter. And on the other side, some improvement in the average interest from loans. As a consequence, the net interest margin improved 4 basis points to 2.6%. If we would keep these trends for the next quarters, it would be possible to have net interest income for the full year 2021 already above the 2020 year, which was significantly affected by the cut of the interest rates. On the net fee and commission income, strong performance, a growth of 11% year-on-year and 2% quarter-on-quarter, we had PLN 209 million of net fee and commission income in the second quarter of 2021, which is our record level ever. Moving to costs on Page 11. The total operating costs decreased to 13% year-on-year, supported by lower contributions to the Banking Guarantee Fund and a number of cost-saving initiatives. If we would exclude the lower contributions to the Banking Guarantee Fund, the total reduction of costs would be still 7%. As a consequence, we have a clear improvement of the cost-to-income ratio from 47% to 45% in the first half of the year. We continue the process of optimization of the branch network. As I already mentioned, we have now less 90 branches than 1 year ago and also of the gradual reduction in the number of employees. On Page 12. The quality of the loan portfolio remained very strong. The impaired loan ratio improved in the second quarter to 4.7%. As a consequence, the cost of risk remains low and was still lower than in the first quarter. So we had a total amount of provisions in the quarter of just PLN 57 million. The overall cost of risk this year is 63% below 1 year ago. Of course, we should remember that in the first half of last year, we had some covenant-related provisions of PLN 70 million, which also inflated the cost of risk of last year. We are benefiting now from much better picture and the cost of risk annualized as of the end of June was at 33 basis points of our total loans. At the same time, the cost of risk is also being supported by sales of NPLs in the second quarter, these sales contributed on a gross basis to -- positively with PLN 19 million. Page 13, just a picture regarding private moratoria and public moratoria or credit holidays, as we call it, almost all credit holidays already expired and the quality of the loan portfolio that was under credit holidays remains solid with a relatively small percentage of those loans becoming nonperforming. On Page 14, regarding the FX mortgage portfolio. We had a continuation or even an acceleration of the reduction of the portfolio. This is driven by a combination of natural amortization of the book conversions and early repayments of loans and also the FX variation. And finally, also the deduction from the gross amount of the loans of the amount of the provisions that we have created. As a combination of all these impacts, the share of FX mortgage loans originated by Bank Millennium in total loans was already below 14% in the end of June. We had still a relevant inflow of new court cases, which increased by more than 1,700 during the quarter. But at the same time, we significantly increased the provisions for legal risk. As we announced by current report a few weeks ago, we have created another PLN 460 million of provisions in the second quarter, and this increased the coverage ratio of provisions against -- measured against the total FX mortgage book to close to 15%. Page 15. Liquidity remains strong loan-to-deposit ratio, even slightly lower than the previous quarter at 84%. And capital ratio is also very strong with a significant surplus above the minimum required levels. Moving now to the second part of the presentation about business development. starting with the highlights of the second quarter on Page 17. So as I already mentioned, loans had a significant growth of 6% year-on-year, even after this significant reduction on the net exposure of FX mortgage loans. We had a new record in sales of new mortgage loans, PLN 2.6 billion. Cash loan sales were also up by 14% year-on-year. Investment products higher by 24% year-on-year, more than 2.1 million active digital customers, and customer deposits still growing 4% year-on-year despite the significant cut of interest rates that we have applied to deposits during the last year. Page 18. Strong dynamics of retail loans, especially supported by the growth of mortgage loans. Overall, they grew 9%, while loans to companies also started to rebound and growing 3% year-on-year and also a positive evolution of consumer loans, which have grown 4% year-on-year. Structure of the loan portfolio continues to change with the dilution of the FX mortgage portfolio. And on the other side, a rebound in investment products, a growth of 4% quarter-on-quarter and 24% year-on-year with total assets -- total investment funds in customers of almost PLN 9.5 billion. On Page 19, our focus on digitalization continues to bear fruits. The popularity of digital channels continues to grow. We finished the quarter with more than 2.1 million active digital users, a growth of 9% year-on-year and 1.8 million mobile-only users, a growth of 15% year-on-year. Only in April, just as an example, our clients have logged into the mobile app more than 50 million times, record-breaking number. And in terms of support for the sales activity of the bank, we would highlight 63% of the cash loans that were disbursed online. And the 29% of current accounts that were opened online. These are on the top of other numbers that you can see on Page 19, which shows a significant growth in other indicators such as big transactions, Internet payments and so on. We continue to invest heavily in our digital solutions. Even today, we can announce that today, we made available to our customers, BLIK contactless payments. We are the first bank in Poland that offers this solution of pure mobile payments in -- pure contactless mobile payments in shops. So this was made available today for the first time. We continue to invest in streamlining digital processes. In this second quarter, we would highlight the launch of the mobile app for children and also the easier opening of the current account using open banking solution to confirm identity of the new customers. Page 21, this effort continues to receive external recognition. This time, the recognition of Global Finance's Innovators 2021. And also the fact that we were the first bank on the Polish market to use open banking for service personalization. On Page 22, continuation of the development and improvement of goodie, smart shopping platform, with more -- another more than 200,000 new app downloads during the quarter, adding to a total of 2.5 million app downloads and also significant amounts of generated cash back turnover and amounts of cash back passed back to customers. Page 23, just looking at the retail performance. the high growth of retail loans was driven by the growth of mortgage loans. The PLN mortgage loans grew by 27% year-on-year. The total growth of retail loans was 7% year-on-year or 18% if we would exclude FX mortgage loans. We had growth of new markets origination, which was extremely strong, just in the second quarter, PLN 2.6 billion, PLN 4.8 billion in the first half of the year, which marks the growth of 68% year-on-year and a market share of 13%. On the consumer lending side, cash loan sales also rebounded and reached PLN 1.4 billion in the quarter, PLN 2.7 billion in the first half of the year, a recovery of 14% versus 1 year ago and with a market share above 10%. Retail banking, the number of -- in the retail banking, the number of customers continues to grow and also the number of accounts even after closing of inactive accounts that was done in previous periods. And also, we would highlight the significant growth of payment cards by 97,000 year-on-year. Moving to the corporate side on Page 25, significant growth of current account balances by 22% year-on-year. while on the other side, of course, term deposits are lower than 1 year ago. But also important is the rebound in loans, which grew already in the -- as of the end of June, 2% year-on-year, especially pushed by factoring, which had a significant growth of 12% year-on-year, and also, in general, showing a strong pickup in transaction activity. The rebound in factoring is visible on Page 26 with a growth of factoring turnover by 31% year-on-year, and also the rebound in leasing sales, which was one of the most affected activities by the pandemic in the first half of the year, now showing growth in origination of 20% year-on-year. On Page 27, just also a reference to the novelties and improvements that also are being introduced for corporate banking clients, apart from the document exchange module in Millenet. We also would highlight the availability now of the Millenet FX transaction platform, 24 hours a day for 5 days a week. So this finishes the most important aspects of our second quarter and first half results, and now we will be available for questions. Thank you.

Thank you very much, Fernando. The questions that have arrived so far. As usual, I have grouped into 3 categories. And the remaining questions, we'll be answering as they come. So the first group of questions related to our 2Q or first half results. First would be very interesting to our employees. The question is average salary in second quarter was up 7.9% year-on-year, have you revised salaries up?

We have a normal process of revisions. But I must say that it was more in a case by case in this situation. It's very clear that there is a big pressure in terms of salaries in the banking, and -- in the banking sector, let's call it like that, and in general terms in the Polish economy. And also for us, it's very clear that the retention and the adequate revision of salaries is always better than to go through hiring process to re-establish the headcount or to search for a new person for the position. So we believe that the headcount reduction has been crucial to finance the salary pressure that we are having in Poland. It's not only in Poland, I think it's across Europe and U.S. But there was not general exercise, but there is a constant attention to the salary level of the employees in order to retention of talent.

Thank you. Second question was about our net interest income. Question was, why interest income on loans is growing faster than the loan growth itself in the second quarter?

What we have in interest from loans is a combination of sometimes normal accruals and some termination of loans, which also have additional contribution to the NII. So it's a number -- it's about also the recognition of commissions that were capitalized through time, both from retail loans and corporate loans, so there is a number of factors that is not just the pure accrual of the loan portfolio. So there are always a few events that can sometimes on a quarterly basis, inflate a little or deflate a little the average level of net interest income. This is the first thing. The second is also that the economics of the loan growth continue to be positive in the sense that the average margins of origination of new mortgage loans continue to be higher than the average level of the book. So this is important. So there is a -- the growth has also a qualitative aspect that also gradually is reflected in NII. So -- and this is happening on mortgage but also in consumer, the economics of the consumer and new origination now is a little bit better than the economics that we had in the second quarter of last year or third quarter of last year. And so this is also contributing to some -- is contributing to this improvement.

Thank you. There was also a handful of questions relating to our admin costs. Some described them as extraordinarily low. Others were asking about the positive cost side in administrative...

So I think this question is related to the table that we present in our financial statements. So again, the costs are also not a straight line in terms of recognition throughout the year. There are sometimes some extraordinary settlements or some extraordinary savings that are booked. And so we have a combination of -- when we compare especially with -- this period with the same period of last year, we have clearly many different items that are aggregated in this other line, which show clearly lower costs. For example, in -- just as a reminder, 1 year ago, in this line, we had extraordinary costs connected with fighting the pandemic with all the measures that we had to take at the branch level, at security level, at safety level that -- and this was inflating the cost at the same period of last year. This cost this year did not -- almost did not exist or were much lower. And there were a number of savings connected with a number of different items that per se are not huge, but when put together contributed to this result plus some additional settlements of costs that have turned out positive and that contributed to this, let's say, positive line extraordinarily in the second quarter of the year.

I think the last question that relates to our second quarter results was about the FX line and loss there. The question was about the explanation, the reasons for it.

Mainly this time, it's a little bit more visible, also the special conditions that the bank gave to conversions or early repayments. So the bank, for a long time, is talking with the customers. in terms of Swiss francs and trying to find always the best solution possible for each customer. As time goes by, there was a change also in the customer needs. So there was a time that it was more the possibility of exchange of the collateral in order to maintain the loan, but to move to a different house. And later on, it was more a vision in terms of early repayment today with very low interest rates in zlotys, the pure conversion, elimination of the risk of Swiss francs and stabilize the payment in zlotys at these levels have been the preference of the customers. Of course, also the openness of the bank sometimes in accepting conditions that are more favorable to customers, these have been interesting for our side. And we believe that this is very important also. At the same time, that from one side, the bank is building provisions for future legal risks. But this side is even better if the bank is able to eliminate this risk by transforming exposures in Swiss francs in zlotys. And this time, let's call it, the success of this interaction with the customers, it was more visible also in our accounts.

There's a related question regarding how many agreements with the FX more we already signed? Did we change the approach to settlements? What are the terms of offers? And do we negotiate individually, or do we have the common offers?

So we negotiate individually because I understand that as a vision of the analysts is, of course a common approach to the portfolio, but we need to remind everybody that behind the portfolio there is loans that are individual, and each loan is a family. And the family have a story. So a lot of people, meanwhile, had a big capital gain in their apartment, so they can be selling their apartment to realize this gain that they have. Others are less successful stories, a divorce or a problem, and so they need to find another solution. How -- that is just this elimination of the risk. So we have 4,000 settlements during these 4,000 negotiations with agreement -- successful agreement with customers year-to-date. But this is nothing new. So it's true that today, the numbers are bigger. But we always have these individual interactions with customers and this approach that we believe that this is our role. This is also always incentive by the authorities, consumer protection, KNF, NBP always. There was this message to be open to talk with customers as much as possible, even if at the same time, we are studying other alternatives that then these ones are more like a global approach like the KNF proposal. So here it's not, it's an individual approach that we are applying and that we are inviting all the customers to be open and to talk with the bank, and we have special teams to address these subjects and to make all the calculations and simulations that the customers would like to get even to understand what are their possibilities and the bank approach for their needs.

Just there's one additional question also about how many clients we have with FX mortgage. I can say we have a little bit more than 50,000 from originated by Bank Millennium.

Since we touched upon the FX mortgage and related subjects, why don't we stay in this area. There was also a question about provisions in the second quarter. What drove them and what is our thinking or outlook for the rest of the year, whether we expect the same rate or not, FX mortgage provisions?

So we have -- so the drivers of the provisions are on one side, the number -- the inflow of court cases and second, the probabilities of winning versus losing. As the recent trends were negative because we had on one side additional inflow of court cases, which was, in fact, the quarterly highest that we had. And on the other side, the decisions of the courts continue to be negative. So we have reflected this in the methodology of calculating the provisions. And these were the 2 drivers of the provisions for the -- in the second quarter. So going forward, these are going to be the 2 -- will continue to be the 2 main drivers on one side, the probability of winning versus losing, also the nature of the decisions of the courts because we still have decisions regarding declaring the loans not valid. We have sometimes decisions declaring the loans valid, but with PLN plus LIBOR. So -- there is still a lot of uncertainty regarding the final outcome. And for that, we also still -- we are still also waiting for the Supreme Court ruling, if there will be a ruling on -- in the beginning of September to bring more clarity to this situation. And so these are the drivers, inflow of cases and the probabilities of winning versus losing.

And analysts are asking, do you think you need the KNF voluntary settlement now? Or will conversions just occur naturally going forward? And there was also a couple of questions about our latest on the KNF, so to speak, conversions.

As a bank, we didn't tell yet a decision on KNF. The proposal -- as a team, we believe that there is value on this proposal, and we believe that this could be a good solution for the problem. To have the solution being able to apply, we need also to have a decision in Supreme Court. And -- there is also a need to slightly reduce the expectations that the law firms are giving to the customers on nonremuneration of the loans. So it's -- and so it's -- this clarity, it's important. And it's important that these slightly more positive or less negative for the banks or more positive for the bank's decisions from the latest decision in Supreme Court by the panel of 7 judges, and the previous decision also in European Court of Justice. So it's important to have this reinforcement that this solution of loan for free, it's out of the table and that the solution of equality of loan or conditions of a loan in Swiss francs to a loan in zlotys would be more the adequate solution. So this is important. And so what we are doing at the moment is that we are, as we should, to make all the preparations from the bank side in operational terms, in IT terms, in process terms, to take then recommendation and the decision to the Supervisory Board. But in our calendar, this will be then after the session of September -- 2nd of September of Supreme Court.

Just not to leave questions unanswered, just because there was still this question about the explanation about the decrease of -- the breakdown of the decrease of the portfolio -- the reasons of the decrease of the portfolio of FX mortgage. So as I mentioned, we have -- compared with 1 year ago, we have a reduction of around PLN 3.1 billion in the net portfolio, a little bit less than half of this was driven by deducting from the gross portfolio, the provisions that were created. And then a small part, a very small part was connected with FX impact, less than 4% to 5% and the rest was driven by the natural repayments on one side and then all the conversions and the early copayments that were so, were done during the last 12 months, but especially stronger during these last 6 months.

I think we're largely done with questions relating to Swiss francs. Then there are still questions about the outlook and more general questions. First is about our appetite for sales of mortgages because we have been a very strong originator, do we plan to further increase the sales? Do we encounter bottlenecks while processing applications because apparently, some banks have additional hirings and have extended the time to decision to 8 weeks? Then there were similar questions about our strategy to unsecured lending. We also have had strong performance. Are we offering these to non-Bank Millennium customers? What is the growth outlook, what is the price competition? And then there was also a question about -- similar about the outlook for overall lending and corporate lending. So let's come together.

In terms of mortgage, we are at the level that we want to be. So we even reframe a little bit ourselves in terms of production lately. So we would like to see ourselves in average production in a monthly basis of around PLN 800 million. We don't want also to -- the bank already have a big exposure, PLN 800 million per month -- the bank already has a big exposure in terms of mortgage. So we would like to grow as balanced as possible. So I would say that more or less the production that we are having is the production that we would like to have in a constant basis. We like the portfolio -- the risk profile of the production that we are having, the pricing that we are having at the moment. So I think that that's what -- we are very focused in also making the re-engineering of this process. We are in the middle of that internal project. This will allow us to decide faster, to disburse faster and even to have some alternatives that are fully digitalized. So without this need of making -- hiring more people, and also having such a delayed process. In terms of consumer loans, today, we are -- lately in last month is in the production, I would say, pre-COVID times. There is space to have -- to the end of the year some growth here. So we believe that also people will make new projects, personal changing in their house, is traveling. And so this will allow us to have increase on production. But I would say that it's 10%, 15% higher than what we are producing. So it's not a huge revolution even because we are having healthy production in risk terms, and we would like -- we don't believe in accepting higher risk levels even if there is higher commissions or something like that, this is usually not a good idea. We have an activity of credit on point of sale. It was an area that was started with the acquisition of Euro Bank. We are happy with this area. We are developing this area. We believe that there is also a high potential on this part, especially also in the digital offer for this type of credits. So I would say that this will be the driver for the credits to -- we don't call it noncustomers. We will call it new customers because we have also the will of that they will become customers after this. But this will be our main activity for this type of credits for noncustomers. In terms of corporate, we had a good activity in terms of factoring. Very, very good activity. Also, we see some rebound in leasing. In terms of credit, we are in credit of 4 companies. We are seeing some activities, especially in SME and mid-corporate, and we are happy with that, but also as our bank, it is exposed to the Swiss franc risk. Also, we need to manage in a proper way, the risk with assets and we definitely ways to have a proper manage to allow also to have let's call it, savings of capital that will allow the bank then to make any kind of Swiss francs decisions without making any decision of capital increase and things like that. So for that, be possible. We need to have a very strong activity in commercial level and in the revenue level. But also, we need to have the proper management of [indiscernible] to save capital to allow us to take the decisions in due time.

Also questions relating to our NII and NIM outlook for the second half and their drivers, particularly on the asset side. There was also a question about rates outlook in this context.

So our -- we do not expect changes of interest rates until the end of this year. Although we believe that next year, we could have an increase of interest rates, but we are not counting with this for this year. So the driver of NII and of NIM until the end of the year will be to volume growth on the loans side plus the average yield and the margin that we will be able to achieve on the lending side, as we are expecting to continue to keep the stable cost of the deposits at the current level. So we are not expecting any further improvement in terms of cost of deposits. And also, we believe that also the average yield on our bond portfolio is stabilizing. So also, we will not -- we don't expect to have much penalization coming from the bond portfolio. So these will be the drivers of the evolution for the second half of the year.

On a similar page, so to speak, there was also a question about the fee outlook, question about the cost management, which so far has been excellent. And -- but what do we think lies in the second half, particularly whether we have any plans with regard to branches and stuff. And finally, there was a question about COVID rates and provisions, whether we are writing them back. And why was there a positive corporate cost of risk?

So I think regarding fees, and as you saw in our presentation, where we are showing the evolution of fee and commission income for the last 6 quarters. They have been -- since the second quarter of last year, they have been steadily growing. And of course, some quarters, we have more contribution from one item versus another. But in general, they have been going up. We do not expect jumps here in terms of performance. So we expect a continuation of gradual improvements going forward. Regarding -- what was the other one?

Costs management...

Costs. The costs on the quarterly basis are not just pure -- are not always regular. So there, of course, there are costs that are very regular through time. But there are others that can fluctuate between the quarters. So -- but still -- and as it was mentioned, we are also facing some pressure in terms of the staff cost due to the general situation in the market. But generally speaking, we continue to focus on initiatives that can streamline the bank, can improve the operational efficiency. Some of the projects take time to deliver concrete results in this operational efficiency, including, for example, the mortgage-related initiatives that have been -- that are being developed, but we continue to have this clear target of gradual improvement of cost-to-income ratio overall. Now the first half of the year was very positive with this cost to income around 45% level. We still -- for the medium term of course, we wanted to achieve levels closer to the 40% level, and we will be developing solutions that can help us to continue to increase the operational efficiency and to reduce costs. In the short term, we do not expect significant -- any significant reductions in the branch network because we are after a significant reduction that took place during the last 15 to 18 months. So now it's just more fine-tuning at least for the time being. So this is not going to be a major contributor for the next few quarters. But there will be a number of initiatives that hopefully through time will also help to contribute, to achieve this target of cost to income. Also sometimes, we also have a situation where the second half cost in some items like staff costs are usually lower than in the first half of the year. So somethings will offset others, but we continue to be positive about what we can achieve in terms of further improvement of the cost-to-income ratio. Regarding corporate cost of risk or overall cost of risk. So we are always in a process of updating parameters with the latest information that we have available. This happens both for retail and corporate portfolios. We did -- the situation that we have today in terms of IFRS models is different than what we had one year ago. One year ago, we had forward-looking information, which was very negative. But basically, you probably remember that one year ago, we were putting some provisions for COVID, but we have really -- nobody could say that new housings were going to develop. And in fact, reality proved that we can estimate whatever we want, but then the reality is the reality. And when we look back, we see that the last 12 months were much better than anybody was expecting one year ago. And so -- and our understanding is that the provisions that were done for COVID-19 one year ago, basically, to a large extent, were not reflected in the reality. So it's not that we reverted provisions that we have done in such a way, but we have now a positive macro scenario embedded in our models, which is completely different than the model that we had -- the assumptions that we had one year ago. On the top of that, there were a number of movements in terms of improvements of the situation of some loans and recoveries on another and also methodological changes. We also incorporated a new default definition for corporate loans in the beginning of this year after a change that also we had done one year ago. And now the data tends to be much more stabilized after we made this significant move in terms of improving the default definition. And so this is the explanation that we can provide.

You largely answered the questions. Maybe one question to Mr. President is that it was a question about the competitive position, pricing? And what do I think about whether we -- will we see increased pricing competition in different products? What's the strategic pricing situation?

The repricing movements from our side, they were done. And I do not believe that we will see repricings in the market or increase of pricing, let's call it like that. Even when Fernando was saying about the higher increase of net interest income versus the increase of loan portfolio and everything like that, was a little bit further repricing that was done. And it's a mix between the commissions, insurance penetration in cash loans, for example, that somehow offset the interest rate cut and -- but today, it looks -- there was also, if you remember well, some increase of commissions in terms of corporate, in terms of deposits of corporate amounts in current accounts and all of that, it was a way of the system to adjust off to a very low interest rate environment in the corporate side. But for the time being, at least looks to me that the driver will be more volume. So we are very optimistic with the business volumes now and for the next times. We see that the customers, they want to implement new ideas, make new investments, apply their savings, leisure, travel. So there is a big intensity in terms of their life. So it means that in our side, so in their financial life, also there is this increase. So we expect a lot of activity in this part, so not radical change, but a lot of activity. I don't know if it's fully understand by everybody. The jump in terms of digitalization, that was happening in the market and in our bank, in particular, but I would say across the market. There was a big jump in terms of digitalization, not only the customers they, are using digital channels, but also the number of activities that the customers are doing through digital and the numbers of services and possibilities that are being done in digital. And this will allow also the bank to have a capacity to transact more, to sell more products, to be more efficient during this time. The competitive environment will be as intensive as it is today. And I think that Poland is already maybe the most aggressive market in Europe, and we'll keep being, unless there is another wave of consolidation because with consolidation, there is, of course, a radical change in terms of the competitive environment. But I'm not forecasting this. I would say that the market will stay very competitive as it is. But somehow with a good performance if we would take out the cost for our bank but also for the system of the Swiss franc, the market would be extremely profitable, and it would be one of the best in Europe.

I will answer shortly 2 other questions. One is connected with sensitivity of NII to 100 basis points rate increase. This information is disclosed in the risk chapter of our financial statements, that is chapter #5, we are showing there that a parallel increase of 100 basis points of the yield curve would have an impact -- positive impact of around close to 11% in terms of NII during the next 12 months. And another question is regarding the outlook on risk costs for 2021 and the next year. We had similar questions today in the morning with the journalists. What we answered is that we are really benefiting from lower cost of risk versus the historical average as we presented 33 basis points over total loans. We still do not see relevant signs of the duration in any of the portfolios. So it is possible that the second half of the year will still be very, very positive and that the overall cost of risk for the full year would still be clearly below the 50 basis points that we usually -- we used to speak about or even not higher than 40 basis points for the full year, so at least if the current trends will continue.

Okay. Thank you very much, gentlemen, for all your time. Any closing remarks or any other comments that you want to share with our audience?

Yes, maybe we can -- I would like to -- because we had this question also in the morning about strategy. So it looks to us that it was a good decision last year, to postpone one year to have the strategic exercise because it was goods that we could address the impacts of COVID, the interest rate cut impact, but also the deterioration of the legal risks of Swiss francs. Today, our plans are that at the end of the year, we will present the strategy for the next 3 years. In the past, we presented in the third quarter results. Now this year, because it's also close to the Supreme Court decision and everything, we are pointing more to do this closer to the end of the year, also to have a separate moment and also to be able to be more accurate about all the impacts and also because, of course, we need to address a little bit -- as usually, we do the 3 things. So from one side, the legacy, and now we are managing this legacy risk. The intensity of the short-term results and some targets in terms of more immediate results, so for these next 3 years. And then -- but also then the vision that we will have for the organization and for the development of the bank. So -- and that -- it's an exercise that we already started, but that we will prolong a little bit more than usual. In order to also incorporate all the facts and all the decisions and information that we'll still have up to the end of the year.

Okay, gentlemen. Thank you very much for all your insightful answers. And thank you very much, the audience for taking part in our event. We will see in late October. And before that, obviously, enjoy the summer, stay healthy, and good luck. Thank you very much.