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

Good afternoon. [Foreign Language] Welcome to Bank Millennium 2Q Results Call. Very happy to be starting the earnings season for Polish banks at such a strong high note, even though we reported record high results. With us, we have Mr. Joao Bras Jorge, our CEO and Chairman of the Board; and Mr. Fernando Bicho, Deputy Chairman of the Board and our CFO. And as usual, Mr. Bicho will start with a presentation of the results, and after we'll be ready to open your questions -- to answer your questions. Thank you very much.

Thank you. Good afternoon to all. Thank you very much for joining this call. So as usual, we will go quickly through the presentation. And we would like to start from Page #5, which summarizes the main financial achievements in the first half of the year. So first of all, we closed the semester with a net profit of PLN 511, which means 43% above the level of 1 year ago. In particular, we had a very strong reported net profit in the second quarter of PLN 331 million, 45% higher than 1 year ago. If we would exclude the costs connected -- all the costs connected with FX mortgage legal risk, the net profit would have been PLN 1.6 billion, a growth of 7% year-on-year. The reported return on equity stood at 13.8%. And the results were supported by a resilient net interest income despite the gradual decrease of the interest rates. So the NII was higher by 13% year-on-year on a reported basis or 5% if we exclude the impact of the credit holidays provisions that we created in the second quarter of 2024. The NIM was at 4.18%, down 13 basis points year-on-year despite the fact that, as I mentioned, interest rates already started to go down. Cost-to-income ratio on an adjusted basis at 34%. And also on the positive side, we should stress the extraordinarily low level of cost of credit risk during the first half of the year at 21 basis points over total loans, which was supported by sale of NPLs in the second quarter. Also very important is the further reduction in the NPL ratio to 4.2%, also supported by the mentioned sale of NPLs. But last but not the least, the fact that the NPLs coverage ratio by total credit risk provisions further increased during this quarter. On the capital, liquidity, and MREL side, we continue to show very solid levels of capital ratios. With total capital ratio at 15.6% and Tier 1 ratio and core Tier 1 ratio at 13.8%. The capital ratios are temporarily lower due to further recognition of operational risk charge in accordance with latest EBA RTS draft on operational risk. I will elaborate more later on in the presentation regarding this. I should stress that if we would include the net profit of the first half of the year in our own funds, the Tier 1 ratio would be at 15%. We continue to show very solid buffers over the minimum requirements regarding MREL. And in terms of long-term funding ratio, we continue to be on track to achieve the targeted level by the end of 2026. Last but not least, a significant surplus of liquidity, which translates into relatively low loan-to-deposit ratio of 61%, which shows also the capacity that we have to accelerate lending in future periods. On Page 6 and 7, we have a summary of key profit and loss items and other indicators, which we will go through, through the next pages of the presentation. So I would skip to Page #8. This is a page that we started to show in recent quarters in order to make -- to present the status of the implementation of the strategy for 2025-2028, regarding the main business goals and financial and the risk goals. Of course, we are still in the very beginning of the implementation of the strategy, but already with several positive signs regarding some of the key assumptions for the future, namely the already visible growth on the corporate loan side. And on the other side, keeping positive trends from the past namely in terms of growth of the customer base on the retail side. Going now to the P&L and looking at Page #9. So a very strong second quarter profit at PLN 331 million despite the fact of relatively -- still relatively high costs connected with FX mortgage and also a combination of positive and negative significant items during the second quarter that we presented in a detailed way in the financial report that was issued today, but which still -- even if we would eliminate let's say, extraordinary items, we continue to show a very solid operational result. And when we look on the page -- on the right top graph of Page 9, it is visible that excluding extraordinary items, which are described below the net profit of the second quarter would be PLN 887 million. And year-on-year, on the first half of the year, the growth was 7%. On Page 10, we see the resilience of the net interest income. So the net interest income, excluding the impact of the credit holidays was higher by 5% year-on-year. And in the second quarter, it went up by 2%. To a large extent, this is the effect of the difference of the number of days of the second quarter versus the first quarter, excluding this effect. Actually, the NII is in line with the first quarter but still at a high level. We had some drop in the average remuneration of loans, but also a drop in the average cost of the deposits. So -- and this together with some increase in the remuneration from the bond portfolio contributed to the resilience of the level of the NII, already in a context where the interest rates were cut during the second quarter to 5.25%. And then as you know, in the beginning of July to 5%. On the net fee and commission income, already a small rebound versus the relatively low first quarter to a growth of 3%, although year-on-year, we still have a drop of 5%, mainly as a result of a downturn in bancassurance fees, but which is already, to a large extent, offset by other fees, mainly coming from investment funds and from cards. On the operating cost side, as expected, still a double-digit growth this year. Operating costs grew by 15% year-on-year. But if we exclude the costs connected with contributions to banking guarantee funds, so resolution fund and deposit guarantee fund, the total operating costs are higher by 11% year-on-year. And particularly, other admin costs are up already single-digit 7% year-on-year. So to remind, this year, we not only have had a higher contribution to the resolution fund, but also the restart of the charges for the deposits guarantee funds since the first quarter. On the asset quality side, so we had sales of NPLs in the second quarter, which had a positive impact in terms of P&L, a gross impact of PLN 85 million. And on the other side, reduction of the NPL ratio to 4.2%. But also important is that despite the sale of the NPLs, which tend to be, of course, totally provisioned and we still had a further increase in the coverage ratio of NPLs by provisions for credit risk to 76%. On Page 13, regarding the capital ratios. So as I mentioned before, we still keep very solid and comfortable surplus of capital ratios over the minimum requirements, although we had a temporarily lower capital ratios in the second quarter. So -- also anticipating some of the questions that could come, the decrease was connected to the implementation of the CRR3, namely taking into consideration the latest draft of technical standards for operational risks that were published by Eva in June. So this latest draft is still not the final, but we anticipate that it will be -- that there will be no further changes. So it translates into a more negative scenario than the one that had already been considered at the end of the first quarter, connected with operational risk charge. And here, the downside was brought by the need to consider all the costs connected with FX mortgage legal risk, including the cost of the settlements that we had in previous years to the operational risk charge. So as a consequence, we had an impact in the quarter of almost 1 percentage point in terms of the capital ratios. Now having said that, we should stress two important things. One is that the capital ratios at the end of June still do not include the results generated in the first half of the year. If we would include the net profit of the first half of the year in our own funds, the capital ratios will improve by approximately 1.25 percentage points, which means that we would bring back the core Tier 1 and Tier 1 ratio to 15%. And as a reminder, we are targeting for the next years to keep a Tier 1 ratio around 15%. So this is the first comment. The second comment is also to point out that the operational risk charges, especially in this part connected with -- the cost connected with FX mortgage risks are based on a 3-year average, which means that part of this additional charge that we are facing today will tend to disappear in the next 2 years. So because just to remind the peak of the costs connected with the FX mortgage legal risk took place in 2023. So the numbers that we are using today are based on the average between 2022 and 2024. And at the beginning of each year, we have a holding average. And so it means that, on the 1st of January 2027, the 2023 costs that reached its peak will no longer be taken into consideration. So part of this impact is, let's say, temporary. So if everything else would not move, at least this part, we know that through time will tend to decrease. So we need to treat this downside as, let's say, a temporary impact from the implementation of the CRR3 in this specific topic. On Page 14, significant surplus of MREL over the minimum required levels. And additionally, also, in the second quarter, we had a reduction of the MREL requirements as expected. Moving now to FX mortgage. On Page 15, the portfolio -- outstanding portfolio continues to decrease at a fast pace year-on-year, a decrease of 31% as a consequence of repayments, negotiations and settlements and also execution of the verdict. So on a gross basis, actually, this portfolio is completely marginal in the total gross loan portfolio. The provisions for legal risk in the second quarter reached PLN 509 million, bringing the total of the semester to PLN 520 million. So they were a little bit higher than the second -- than the first quarter, but still year-on-year in the first half of this year. Total provisions for legal risks are lower by 10% versus the previous year. And total costs, so not only the provisions, but also other related costs, are down by 25% versus the previous year. So we continue to show a gradual downward trend of total costs connected with the legal risks. The total provisions represented 142% of the loan outstanding as of the end of June. In terms of statistics of the second quarter on Page 16. So we had a continuation of the downward trend of new court cases, which stood slightly above 1,000 and was the lowest of the last 4 years. And at the same time, we managed to have another quarter where a number of settlements was above the number of the inflow of court cases and stood at 1,087. Moving now to the second part of the presentation, regarding business results. On Page 18, we highlight the main points, namely the growth of the total deposits by 4% year-on-year. The growth of the consumer loan portfolio by 5%. The already visible growth of corporate loans, including leasing and factoring, by 6% year-on-year, the significant growth of investment funds by 34%. And the large commercial liquidity surplus that translates into a loan-to-deposit ratio of 61%. On the other side, we keep a solid pace of customer acquisition and the total number of active retail clients reached 3,193,000 at the end of June, of which 93% are digitally active. In terms of origination, different trends, cash loan sales, higher by 2% year-on-year, corporate loans by 151%, factoring by 8%, while leasing had a small reduction of 2%. On Page 19, we see some more details about the evolution of the loans and of the deposits. So the combination of the growth of consumer loans and corporate loans and some contraction in the PLN mortgage portfolio and also the significant reduction in the FX mortgage portfolio brought as a consequence -- a reduction of the total net loans by 1% year-on-year. This would -- excluding FX mortgage would have represented a growth of 1% versus 1 year ago. It is visible already some change in the structure of the loan portfolio, as you can see on the bottom left graph, with some dilution of the weight of PLN mortgages in total to 47%, important share of consumer loans and other retail and also a gradual increase in the share of loans to companies, factoring and leasing. On the customer deposit side, overall, a growth of 4% year-on-year with the growth, especially in retail, offset by some drop in company's deposits. And investment products, as I mentioned, a growth of 34%, of which a growth of 42% in Millennium TFI funds. On Page 20, apart from what I already mentioned in terms of growth of loans and deposits in retail, and apart from the growth of 2% of cash loan sales, we had a significant drop in the origination of mortgage loans by 59% year-on-year. So which is -- which will probably be gradually reversed in the future quarters, but this also contributed to the dilution that I mentioned before of the mortgage portfolio in total loans. On Page 21, regarding other metrics for retail. So a solid growth of the number of active retail customers on a net basis, 31,000 growth in the second quarter, 132,000 year-on-year. Continuation of the solid pace of growth of micro business clients, 5,000 in the quarter, 17,000 year-on-year. And then as a consequence of the growth of the number of customers, the significant growth in terms of number of current accounts and number of cards. On Page 22, the number of mobile-only users already account for 70% of all active digital users. We have 2.76 million active mobile users, which represents a growth of 8% year-on-year. And also, we have a growth of 11% in BLIK users in the first half of the year versus last year. Digital channels getting more and more important in terms of sales. On Page 23, we would highlight the 86% digital share in cash loan sales, the 50% digital share in current account acquisition. Page 24 illustrates the continuation of the effort to build our competitive advantage through a user-friendly app with further implementations of the quarter. And the same is shown on Page 25 also with a special focus also on convenience, but also security. On Page 26, our Millennium goodie platform continues its development. And we would highlight this time the launch of a product price comparison tool, the continued growth in goodie cashback and gift card sales. On Page 27, moving now to the corporate business. We start to see the first results of the stronger focus on the corporate side, visible in the growth of loans to companies with an overall growth of 7% versus 1 year ago, 3% quarter-on-quarter, driven mainly by loans -- direct loans to companies, but also growth of 4% in leasing portfolio and 3% in factoring. At the same time, deposits show a drop by 8% year-on-year, especially due to the measures that we already have taken last year of a tighter price management of time deposits, also due to the significant excess of liquidity that the bank is currently showing. On Page 28, some additional figures regarding corporate business with a small drop of leasing sales by 2% year-on-year in the first half of this year. At the same time, a growth of factoring turnover by 8% year-on-year. And then on Page 29 to support the development of the strategy on the corporate lending side, we are expanding the financing offer and supporting sustainable projects with different guarantees that are being provided to our customer base. So in a summarized way, these are the main points of the performance of the bank and of the group during the first half of the year. And now we will try to answer your questions. Thank you.

Thank you very much, Fernando. As usual, it's an interesting presentation. I hope, in case you haven't read it yet. Gentlemen I'm supposed to be a bad cop, but I'm an easy going cop. So we have a choice, where would you like to start? We have questions on results, a bit of guidance, volumes, interest rate sensitivity, capital, Swisses and other. Let's keep Joao bit more busy. Let's talk about volumes first. What do you think? Okay. So the first set of questions that relates to volumes is basically two subjects of interest to our audience. First is mortgages. What caused the decline in new sales of mortgages in the second quarter? What is other banks -- what are the bank's expectations for the second half of the year? When do you expect the mortgage market to become attractive again? Can you talk us through what is happening in this segment, meaning retail mortgage and your expectations for the coming quarters and so on and so forth. And then, there's a second question that I will ask it afterwards. So it's a mortgage in PLN.

So under our plans, we are below our initial expectations for the mortgage production. So our plans were to produce less than in the past with a bigger concentration on corporate as it was in strategy and having some normalization in terms of market share and our presence in the mortgage market. There is not a specific reason why this quarter or even these recent quarters, we are below our initial expectations. We didn't change the credit policy. It's not a specific position. Of course, we are concerned about WIBOR, of course, we are concerned about risk, of course, we are concerned about the lack of the definition of the problem is going to be solved. This is clear, but it's something that is -- it's with us for a while. So it's not a justification for this. So it's -- we were more involved in other areas. So it's nothing specific. We believe that we will see some revamp in the next quarters. But also, we should not expect much higher market share of the bank in mortgage market and in the other areas of retail as we saw in some years ago. So it's -- the bank -- our bank will become more and more normalized on that. We explained in our strategy that we will not always only have the ambition of customer acquisition that went very well again this quarter and the quarter before. So we are -- and even in the year-on-year basis, we are still having organic growth of the net active customers at a very high level. We explained that to capture the full value. We will also -- we engaged in the primacy of that customers. So this is a view of more having full relation with the customer than a specific product. But there is not a specific reason. We also would like to do -- to have done a little bit more. But also for us, it's not so relevant as it looks for the market. So also, we will reflect about the number of questions that we had about that and the comments from the analysts. As you know, in terms of profitability, this is not so impactful as you know, because we need to have long-term financing on 40% of this portfolio. Also, there is some costs related to serving this portfolio, some embedded risks also connected with this portfolio. So more again, this idea of 10 years ago that this is a wonderful product, the basic product of retail banking, I think this is of the old times is not from the new times anymore.

And if I, allow me just to be a little bit provocative because I need to say this. I just want to remind that when we had the credit holidays in 2022, we were penalized because of having higher-than-average exposure to mortgage in the total balance sheet than others. When the long-term funding ratio was presented, it was visible that we had a bigger -- one of the higher gap to fulfill in terms of medium-term funding than others because of the over representation of mortgage loans in Zloty in our balance sheet. Each time that there are questions about WIBOR. And there is always this perception that also we are more exposed in case there would be a problem than others. So it's a little bit ironic, I would say that at the same time when the production decreases, we have so many questions about the production of mortgages, but this is more a little bit of provocation.

An interesting and right observation. Thank you. Joao, sticking or staying within the volumes, our followers have noticed the strong performance of the corporate portfolio. And the question is, what type of loans is behind the growth of the corporate portfolio in second quarter?

So we believe that this is the most important point of our presentation. So it's -- when -- at the end of last year. So in the third quarter presentation, we present also the strategy. There was a lot of questions about, okay, but you are so strong in retail and executed so well. Why are you looking for corporate? And why do you think that you would have a competitive advantage to do something in this mid-corporate SME market? We explained that we have the competencies, but we didn't have the capital. So it was a question of time. And now is the time to show it. So it's -- we had -- this area is going to be a long process. So it's going to be besides a higher intensity of the commercial areas, but there is going to be also works in terms of new workflow process. It's going to be also new deployments in terms of digital banking to support all of that area. So it's -- this is a strategy for 4 years. So it's not just an highlight of the next quarters to present. But of course, it's extremely important when we present already strong activity on that area. We believe that we are going to present also in the next quarters. If I'm not mistaken, and I think, I'm not. For example, in the last month, the biggest ticket that we issued, it was PLN 80 million. So we are talking about EUR 20 million. So it means that we are really making on the segment that we want, so SME. We are a bank that we are present across Poland. This is not -- of course, we will do some bigger transactions. Of course, we want to participate on the energy transformation and the big projects of the country, of course, but our competitive advantage is relation with the customers is to offer quality and digital services is to be close to our customers. So it's -- this is the advantage that we are in retail market and that we also are now presenting in the SME market, which we feel it very comfortable. We believe that we have good risk models. So we have the same team on the risk side. We have the same processes on the risk side, policies and everything. So we are just doing what we could not have done without the capital that we have today. And we are really, really happy and proud to present these numbers already.

Final questions on volume. An analyst is asking if we think that our balance sheet value of mortgages will increase in subsequent quarters or they will continue to decline?

I think, we will answer in the following way. There is going to be a rebound in origination of mortgage loans. So it means that sooner or later, the new origination will more than offset the amortization and repayments of the portfolio. Difficult to say if it's going to happen already in the third quarter or in the fourth quarter, but it's a matter of time that the new origination will start to offset the repayments and then the portfolio will start to grow again, but never -- but it will not grow at a very fast pace, right? So this is not the plan. But it will stop to drop in the -- we are not able to be very precise, but it will stop to drop and will start again to grow.

Thank you very much. I suggest we get the FX mortgage related questions out of the way. So there's a handful of them only. First group of questions is about the risk -- legal risk charge. What level of CHF mortgage provisions should we expect in the second half '25? What are your expectations for '26? Will '25 be the final year of material provisions for CHF mortgage portfolio? What is the run rate and so on and so forth?

So I think, we keep to what we already said in previous meeting regarding the trend. So we believe that the trend is going down, not necessarily every single quarter. So we were always clear that we are not guiding that every single quarter of legal risk provisions will be lower than the previous one, because it's not possible to do such a statement. But we know that the trend is going down unless something extraordinary, not currently assumed, happens. So our expectation is that the average of the second half costs will be lower than the average of the first half costs. How much lower? We are not able to say. But what we know is that it will still be relevant. So we are not -- we cannot say how much lower, but even if lower, it will still be relevant. This is the first thing. The second thing is that we -- if nothing extraordinary will happen, we still keep the view that this year should be the last year with very significant impact of legal risk related costs -- provisions and related costs. We still keep this view unless something extraordinary happens. And regarding what else?

It was a question about -- a bit technical about settlements. What is the reason behind the lower level of settlement costs versus already low first Q, which is probably not quite a true observation.

So we have -- so first, just to clarify. We have -- in the total number of settlements we have, settlements inside the court and settlements outside of the court. The settlements inside the court are embedded in the methodology to calculate the costs connected with legal proceedings. The settlements outside of the court when we closed the year 2024 inside the total stock of the provisions, we had a provision dedicated to settlements for out-of-court customers that has been utilized for the settlements that were done during the first half of the year. So we are still incurring in cost of settlements, but they were covered already, by provisions that were outstanding as of the end of 2024, and that's why it became not so much visible in the results.

And we have a legal question. What hopes do you have related to the expected CHF bill? First question. Second, do you think the most recent Supreme Court verdict on two conductions is a game changer?

So first of all, or I'm not enough informed that I think the question is in the opposite way. So it's more the expectations of the European court decision in terms of -- of course, it was more about the consumer, but in terms of having the balance theory. So, but -- anyhow, we don't expect nothing with the new law. So it's -- we will see if there is a new law or not. Anyhow, also in our methodology, we are reducing the time for a court decision. So anyhow, which means that with the decision of a law that would speed up the courts, the impact will be in a very big way mitigate. And we have our position since the beginning that we want to solve the situation fully. It means that it's agreements -- amicable agreements before the court or in the court and they have closed the situation before that or when it is a court decision to have a compensation agreement or offset that also secures the capital, close completely the situation and don't stay here with one part of the court decision executed and then the bank claims still elsewhere. So we have a view that when we have this type of topics, we need to close. So we're closing on an agreement in the court or outside of the court. And then we -- inside of the agreement, we close everything. And when we have a court decision, also, we want to close everything between the settlement of the customer claim, but also the settlement of the bank claim and they have an agreement on that. We have been working on that. If the courts decide faster, we will have, from one side, some costs that will occur faster, but also some statutory interest rates lower. So it starts to -- I don't know if it is better or worse anymore. We have decisions that now, especially from the European Court of Justice that should be also incorporated on that in terms of balanced theory and not just already these two claims theory. But we're not yet. So -- but sometimes it takes some time to have embedded in the Polish courts, the decisions of European Court of Justice. But anyhow, although, as Fernando said, we believe that we are reaching the end, if it is this year or in mid-next year, we will see that the end or at least the end of these extremely high impacts in terms of costs, for the bank in operational level is still a long way to go. So we have thousands and thousands and thousands of court processes that we need operational to close. So we still have a very large and engaged team addressing all of these topics, and we will have in the next years. This is -- even if everything stops by far, we are far away of operational -- operationally, finish all of this work.

We only have one question on capital. So allow me to read it. Could you kind of explain how we should think of the phase out of CRR3 impact on your capital, 1/3 per year when CHF provisions reduce, is a reasonable assumption?

Yes. So the easiest way is exactly to look at the costs incurred in each year between provisions and other related costs which, by the way, we were disclosing in the past. So it's easy to get them from all our reports. And each year, we are using the average of the previous three. So as I said, during the presentation, in this year '25, we are using the average of the costs incurred between 2022 and 2024. On the 1st January 2026, we will switch to the cost between 2023, 2025. Immediately, the question can be, okay, what is the difference between the cost of '25 and the cost of '22. Because this is a legitimate question that could come immediately. If we -- if the trends will confirm our expectation, the total cost for '25 should be lower, not -- it should be a little bit lower than the cost of '22. So there will be a small positive impact, but not very significant. And then the biggest change will happen on the 1st January 2027 when for the calculation, the 2023 will be dropped, where we had the peak of the costs. So this is the easiest way to look at this. Of course, we are focusing on this because now we had this extraordinary impact. Of course, there are other things that will happen in the future like other charges that will increase because of growth of credit risk or because of other reasons behind the operational risk. But I'm just -- we are just trying to isolate this impact and to show that this is, this one connected with legal risk is, by nature, temporary, right? So this is what we wanted to stress.

And we are at the peak of the impact.

And we are at the peak.

Important to stress. Thank you very much. Now let's move to results and a little bit of guidance-related questions. Let's start from an easy one. What are consumer protection-related costs mentioned in the second quarter report?

This is explained in detail in our semiannual report that we published today on Pages 71 and 72 of the English version. It's connected with the proceedings run by the Consumer Protection Authority regarding the handling of unauthorized transactions. The proceeding is still open. It's already going on for some time. We have reported about it in previous reports. And in the second quarter, we -- in connection with these proceedings, we have recognized a provision of PLN 37 million is based on an estimated outflow of funds connected with this. So this is the -- so the detailed description is on the report, but this is connected with this -- on the consequences of this concrete proceeding.

Thank you. Question on NII. NII guidance update, please. First half '25, NII running at 5% year-on-year. Last quarter, you guided on flattish NII development in 2025. Does this guidance still hold? What about 2026? Can you grow on '25 despite rate pressure?

Very interesting question, of course. So first of all, starting with our expectations regarding the interest rate trajectory. We have -- so we have now interest rates at -- intervention rate of Central Bank at 5%. Our expectation is that until the end of this year, interest rates will be cut to 4.5%. And during the next year that there will be further cut to 3.5%. So -- and we still continue to assume that 3.5% is a kind of terminal level for the NBP reference rate. Of course, difficult to guess the speed and the timing of each of the cuts, but I'm just stating what are our expectations, which, by the way, are in line with the expectations that we already formulated in the fourth quarter of 2024 when we presented the strategy for the next 4 years. So this is still, despite all the volatility that we are faced, these are still the same figures. This is one thing. The second thing is that the NII has shown resilience. So we expect that in the second half of the year, we still can, to a large extent, keep the resilience of the NII. So I would say that the trend is for the NII to be flattish or slightly up year-on-year. This is supported by the fact that we have relatively low sensitivity for interest rate cuts as we are also disclosing. So we have a sensitivity for a 12 months' time calculated as of the end of June, a little bit below 2%. And so we believe that, of course, this is not just a matter of interest rates. It's also a matter of volumes. So of course, it also depends if the volumes will grow in line with some of our expectations. It's supported also by the bond portfolio that we have invested in which we have invested the excess of the liquidity during the recent years. So here, I think that the picture is, it's easier to guess. Regarding 2026, where we expect further cuts of the interest rates. So I think it will depend partially on the capturing the volume growth that we are pursuing. So because it's obvious that if the portfolio would not grow and if the deposit growth would continue we would need to continue to invest on the excess of the liquidity in bonds. And of course, this would not be so much accretive. So we have to rely on the assumption that next year, there will be some acceleration of the loan growth in line with the implementation of the strategy, and this can help to mitigate at least partially the lower interest rate environment. So we are still in July. I still -- it's still too early to give more concrete guidance for the year 2026. We are still even before preparing the budget for the next year. So I would not like now to elaborate too much on that. What I can say is that, we have tried to the maximum possible extent to protect for the maximum for the longest possible period, the protection of the levels of the NII within the regulatory limits framework that we have to comply with.

Needless to say that we have, as usual, plenty of room on the funding cost side, especially on the deposits. So if there is a decision to cut, then we'll save. Going down the P&L. What is the outlook for net fees and commissions in upcoming quarters?