Bank Millennium S.A. (MIL) Q4 FY2025 Earnings Call Transcript & Summary

Good afternoon. Welcome to Bank Millennium 4Q '25 /2025 Results Call. As usual, with us, we have Joao Bras Jorge, our CEO and Chairman of the Board; and Mr. Fernando Bicho, CFO and Deputy Chairman of the Board. My name is Dariusz Gorski, I'm Head of IR. Also have two more inferior functions, one is to manage the traffic. [Operator Instructions] And secondly, also -- I'm also, let's say, a caretaker of compliance, so to speak. So I would like to remind everyone that we are presenting today preliminary non-audited results -- we're still in the process of audit. So things can change, obviously, not abruptly and not, let's say, revolutionary, but still some numbers may be different. So please note and take that into account. Thank you very much, Fernando, over to you.

Thank you. Good afternoon. Thank you very much for joining this call. We will go through a brief summary of our fourth quarter and full year 2025 results. So we go directly to Page #5 of the presentation where we present the main financial achievements of the year. We had a very positive year. We reached the highest in our history level of net profit to PLN 1.202 billion, a growth of 67% year-on-year. If we exclude the extraordinary items, the net profit grew by 1% versus 1 year ago. The return on equity on a reported basis stood already above 14% at 14.3%. The results were supported by a resilient level of the net interest income despite the fact that we have been facing a gradually lower interest rate environment. So overall, in the full year, the NII grew 4% on a reported basis or 2% if we exclude the 2024 impact of the credit holidays. The NIM for the full year was at 4.01%, and during the year, we had a drop on average of the 3 months WIBOR by 80 basis points, while the reference rate of the National Bank of Poland dropped by 175 basis points. The cost-to-income ratio reached to 36.9% on a reported basis, or 35.8% on an adjusted basis. We had a very low cost of credit risk during the year at 30 basis points over total loans. And for the first time, the nonperforming loan ratio fell below 4% and stood at 3.8% at the end of the year, already meeting the target that we had set in our 2028 strategy. On the capital side, we continue to show very solid levels of the capital ratios. We finished the year with a total capital ratio at 15.1% and Tier 1 at 13.7%. These ratios still do not include the second half 2025 net profit, which will be incorporated after the shareholders' meeting that is planned to take place before the end of March, and also does not include, of course, the issue of the AT1, PLN 1.5 billion that we have completed in January 2026 and where we are still waiting for regulatory approval in order to include the proceeds from such issue in our Tier 1 and total capital ratio. We also continue to show solid buffers over MREL requirements and also on target to meet the long-term funding ratio in its current format. The loan-to-deposit ratio continued to be very low. It was stable versus the previous quarter at 58%. So I switch now to Page #8. As we are showing this page every quarter, we are tracking the achievement of our strategic targets for the year 2028, showing where we were when we announced the strategy in the fourth quarter of '24 and where we are now. So as it is possible to see, we are largely on track to meet the business and financial and risk goals that we have announced more than 1 year ago. In particular, the pace of customer acquisition and growth of the retail customer base remains very strong, and we finished the year with 3.27 million active customers in retail. Also significant level of digitalization of our retail customer base with a share of retail digital active clients at 93.7% of our active retail customer base. And on the business and corporate side, visible signs of growth, especially shown by the growth of the corporate loan volume that grew by almost PLN 3 billion during the last 12 months, also followed by a growth of the number of business active clients. In terms of return on equity, we came back to double-digit level of return on equity at 14.3%. The cost to income, of course, worse than in the previous year as a consequence of lower interest rate environment and still some cost pressure and the NPLs, again, showing the resilient quality of our loan portfolio and also supported by the sales of NPLs that were done during the year. Moving now to more details on the results, starting with Page #9. For the last 3 consecutive quarters, the level of net profit of the group has been above PLN 330 million. This has allowed us to have a return on equity on a quarterly basis between 14% and 15% and helped us to reach this level of 14.3% ROE in 2025. At the same time, if we exclude extraordinary items, essentially -- most of them related to FX mortgage the level of the net profit would have reached PLN 3.222 million, which would mean a growth of 1% versus the previous year despite the lower interest rate environment. On Page 10, we can see the evolution of the net interest income, which so far has been quite resilient to the gradual decrease of interest rates. So looking at the fourth quarter, the NII stood 1% below the third quarter. Looking at the full year we had a growth, excluding credit holidays impact of 2% year-on-year. Of course, there is a contraction of the net interest margin that fell in the fourth quarter to 3.78%, but still, for the full year, as we mentioned before, the NIM stood at 4.01%. On the fee and commission income for the full year '25, the net fee and commission income was flat as a consequence of still some downturn in bancassurance fees that offset the relevant growth, especially coming from payment cards and from investment products. On Page 11, the picture about cost is more or less in line with the previous quarters. We finished the year with a cost growth of 13% year-on-year or 10% if we exclude the contributions to the banking guarantee fund. Other admin costs grew already only single digit at 6% year-on-year, while staff costs grew 13%, partially driven also by some increase in the number of employees as we proceed with the deployment of the new strategy until 2028. On Page 12, the asset quality remained solid, and we managed to bring down the NPL ratio to a level below 4% as this was one of our strategic targets. So during this period of 1 year, NPL ratio went down from 4.5% to 3.8% despite the fact that the loan portfolio overall did not grow much. It grew only by 2% year-on-year. And this was a consequence of from one side, the resilient quality of the portfolio, both on the retail and corporate side and also the positive result from the sale of NPLs, especially concentrated in the second and in the fourth quarter. So overall, the cost of risk was at a very low level at 30 basis points of our total loans, so even lower than the 40 basis points that we had booked in 2024. This translated into a reduction in the nominal amount of provisions that was created during the year. But also, we would like to highlight that even in this scenario of decrease of NPLs, we have further increased the level of coverage by NPLs by total provisions from 73% to 79%. On Page 13, we show the evolution of the capital ratios. In the recent quarter, there was some additional consumption of capital, which is also partially driven by the growth of the different loan portfolios and especially corporate. But anyway, we should stress that the capital ratios at the end of the year still do not include the results of the second half of the year. If such results would be included, the Tier 1 and total capital ratio would be higher by 1.3 percentage points. And additionally, after we will get the approval for the AT1 issue consideration in terms of our capital base, this will further increase the capital ratios, especially the Tier 1 and the total capital ratio by further 2.7 percentage points. And as a consequence, we will be prepared also to deal with additional capital requirements coming from the countercyclical capital buffer in September this year, also for the growth of the risk-weighted assets, and at the same time, keeping a Tier 1 ratio clearly above the 15% target that we had in our strategy. On Page 14, significant surplus of fulfillment of the MREL requirements and also very strong liquidity indicators. So loan-to-deposit ratio at 58%. So positioning us in a very comfortable way for the growing lending cycle that we are expecting in the next few years. Regarding FX mortgage on Page 15. The portfolio continues to be downsized at a quick pace. So overall, a reduction of 40% year-on-year. The provisions in the fourth quarter were at PLN 487 million is in line with the current report that we have disclosed 4 weeks ago. And it is visible on the bottom right side of this page, the drop in the overall costs related to FX mortgage in 2025, they were lower by 34% pretax when compared with the year 2024, and that year 2024 had already shown some drop versus the peak that has been reached in 2023. So this is a positive development in line with some of the expectations that we had already formulated in previous periods. And it's supported by a lower inflow of new court cases as it can be seen on Page 16. The inflow of court cases dropped for the sixth consecutive quarters to 699 in the fourth quarter, while the number of settlements, especially majority of them done during court proceedings still stood above 1,000 in the fourth quarter. Now moving to the business development section and starting with the main highlights on Page 18. It was a very positive year in terms of business development, especially translated into a high growth of customer funds, growing customer acquisition and much stronger dynamics in terms of corporate lending. So all in all, we achieved double-digit growth of total deposits by 12% year-on-year. Corporate portfolio, including leasing and factoring grew by 20% year-on-year, investment funds by 40% year-on-year and consumer loans by 4%. In terms of sales, the corporate loan sales more than doubled versus the previous year, while leasing was flat, factoring grew 11% and cash loans grew by 4%. At the same time, we continued the solid pace of growth of the active retail customer base, reaching 3.27 million active customers in retail, of which 94% are digitally active. Seeing in more detail on Page 19. We have clearly encouraging signs -- continuation of encouraging signs coming from the growth of the corporate business with the already mentioned 20% overall growth of financing to companies. Also consumer loan portfolio still growing 4% year-on-year, while mortgage year-on-year still contracted. But when we look at the quarterly basis, it is visible that finally, the mortgage loan portfolio has stabilized as a consequence of a significant rebound in the origination in the third and fourth quarter. The combination of these trends is leading to a gradual rebalancing of the structure of the loan portfolio of the group with a lower share of PLN mortgages, which is now -- which are now at 45%, while we have gradually increased share of loans to companies, leasing and factoring. Important also for the last year performance was the growth of investment products by 40% year-on-year, especially driven by the growth in Millennium TFI funds, where we already crossed the level of PLN 11 billion of assets under management. On the deposit side, both deposits from retail and corporate have grown at single -- at double-digit pace. On Page 20, we see, first of all, the rebound in the sales of mortgage in the third and fourth quarter, allowing a gradual recovery of the market share of origination and the stabilization and which will be followed by subsequent growth of the PLN mortgage portfolio. On the consumer loans, the origination year-on-year was higher by 4%, allowing us to reach a market share close to 11%. On Page 21, we kept the strong pace of growth of our retail customer base, a growth of 36,000 net active customers in retail in the fourth quarter and overall growth of 144,000 during the full year. At the same time, the strategy is also focused on the micro business segment, where during the last 12 months, we increased the portfolio by 20,000 customers net. This growth of number of customers is followed by a significant growth in the number of current accounts, and in the number of debit and credit cards by more than 200,000. The next pages show additional data, especially regarding the digital strength of the bank, 78% -- on Page 22, 78% of the customers log into the bank only via mobile app. We have more than 3 million active digital users, a growth of 6% year-on-year. We have 2.87 million active mobile users, a growth of 8% year-on-year. Very high ratings of -- in the app stores of our mobile app. On Page 23, we continue to show the very high share of digital channels in different sales and services processes of the bank, not only in terms of the sale of loans, but also important in terms of the acquisition of new current accounts. On Page 24, in the end -- in the fourth quarter '25, we have 2.23 million BLIK users. And on Page 25, a summary of the initiatives launched in the year 2025 that are further supporting our leading position in terms of digital banking, including several digital processes, but also a lot of focus on the security. And also a reference to the introduction of new insurance payments, including property insurance in our mobile app and also payments with wearables and digital dispositions as we can -- as we are showing on Page 25. The goodie platform continues to grow at double-digit pace with more than 20% increase in the number of transactions done with cashback. On Page 28, moving now to the corporate side. we are leaving a very strong momentum in terms of financing of companies. It was one of the pillars of the strategy that we have announced more than 1 year ago. We have, in terms of loans to companies, only a growth of 34% year-on-year, followed by a growth of 15% in factoring and 4% in leasing, and that's how the overall growth of 20% in financing to companies was reached during the year 2025. The origination of loans has accelerated further, an increase of 52% versus the previous quarter and 152% versus the homologous quarter of the previous year. The new sales in leasing are always -- are already picking up in the fourth quarter '25. At the same time, deposits year-on-year were mainly supported by the growth of current accounts by 15%. Finally, on Page 29, a word about the sales. So as I mentioned, leasing sales in the full year were flat, although with a clear rebound in the fourth quarter of '25, while factoring turnover grew by 11% year-on-year. So these are the most important highlights of our fourth quarter and full year results. And now we will go through your questions. Thank you.

Thank you very much, Fernando. In the meantime, questions have indeed arrived. Let me present -- do the bundling or the allocation of this. Why don't we start with a more general question on the competition and then you have a look at questions in the meantime and then we'll go through this. So a question for Joao. How do you see the competitive landscape, especially from UniCredit, Ernst were others?

So let's start with others because I believe that the landscape in Poland is always with a very competitive market also because it's a fragmented market and all the operators are in. And so we see it as demanding, but also positive. So it's -- there is always a push for new products, a new approach, customer acquisition, new digitalization and new tools. So it's -- we think that this is positive for the market. We are in the game as well. So Santander was an amazing bank. Ernst is an amazing bank. UniCredit is an amazing bank. It was already a very strong corporate bank when it was the owner of Pekao SA. Now it's back on the market and also more present on the corporate side, at least for now, we say they're welcome. And we are here to also make a lot of transactions together and sometimes, of course, competing to the serving the customers. So for us, we believe that the new players bring value, valorize the market as well, but they will not create more competitiveness in the market because the market is already very competitive and very demanding.

Thank you very much. We have so far received only two questions specifically relating to the results, which means the results are very clear. It's a very nice development. So let me read those two out. What was the expected DTA in 4Q accounts? What is the level of provisions for [indiscernible] unauthorized transactions?

So starting with the question about DTA. So due to the increase of the corporate income tax rate in 2026 to 30% and then followed by a decrease in subsequent years to 26% and 23%, we had to perform a reevaluation of the DTA in the fourth quarter of 2024 -- '25. The result of such revaluation had a positive impact, slightly above PLN 100 million. But on the other side, was to a large extent or at least partially offset by a number of other items that increased the tax rate in the fourth quarter 2025. This included namely higher share of nontax deductible costs related to FX mortgage, also some NPLs write-offs that were not tax deductible, apart from the other typical items that are not tax deductible such as the contributions to the banking guarantee fund and the payment of the banking tax. So as a consequence, the tax rate in the fourth quarter was a little bit lower than what would be normally. It was at around 16%. And the overall effective tax rate for the full year was at 26%. So it's still high, relatively high, although it was a little bit lower due to the extraordinary DTA reassessment revaluation that has to be done at the end of 2025. So this is the answer regarding the tax. Regarding the provisions for free credit sanction, for the time being, we have not opened the provisions for this topic. We are -- we will be disclosing as usual detailed information in our annual report in the end of February about this. But what we still have is a regular flow of claims and court cases, which has not increased versus the previous periods. And also, the banks in general and our, in particular, have been still winning in court around 85% of the court cases. So in this context, until now, we have not opened provisions for the free credit sanction. Regarding the unauthorized transactions topic that we also have been disclosing in our quarterly reports. We have created provisions in the second and third quarter in a total outstanding amount of PLN 82 million, if I'm not mistaken, and this amount was not changed during the fourth quarter, and these proceedings are still not finished. So we are still before the final conclusion regarding the proceedings that were opened by [indiscernible].

I'm sorry. Apologies. I read it again. What is driving rising cost of accounts, while revenues from this fee line are essentially flat?

I think we would say that we have different costs related to customer acquisition through different channels. And then the revenue from such -- coming from customers that are acquired through these channels are, how to say, shown in the future through different lines depending on the products that they will be using. So it's not possible just to look at the single line on the commission cost and commission income to take a conclusion regarding the -- how these costs are translating into additional profitability for the bank? Because for us doesn't matter. We are not, let's say, targeting just a specific product. What we are trying is each time that we acquire a customer that he will become a primary customer of the bank. And so the -- we are incurring costs in acquisition of customers as every other bank with different promotions and channels mix. And then we expect that there will be an interaction with different transactions and products that the bank -- that the customers are taking that will generate a different fee and commission income or net interest income doesn't matter, that will come through different lines.

Thank you very much. So we're moving away from 4Q specifically. Now a set of questions, actually, surprisingly large number of questions relating to PLN mortgages. And I think Joao will probably be willing to answer this. What growth rate should we expect in '26 with regards to PLN mortgage portfolio?

So I would say, so roughly, we had a decrease of the portfolio of 6%, so we would capture 50% of that. So we should have as a target to have now a growth of 3% around this number.

There was also a more specific question. Despite higher origination of PLN mortgages in 4Q, portfolio was flat quarter-on-quarter. What is driving the high amortization of the portfolio, repayments, refinancing?

So it's mainly also, we need to remember that in our case, so every time that we have a year that we are a little bit less active, the natural repayments will be higher as the loan, as the time goes on a mortgage loan. Anyhow, of course, there is also some early repayments, part is due to normal conditions of life, but others is, of course, also refinancing of mortgage. So when we have moments of decrease of interest rates as we have this year, as Fernando said, we have during 2025, 175 basis points of decrease of reference rate. So it's natural that some of the consumers in the banking system would look for refinancing their rates, especially, of course, if they made loans in the top of the rate hike moments.

There's actually a very specific question on this subject. What percent of new origination of period-end mortgages is related to refinancing of existing loans on the bank?

So at the moment, it's around 25%, 30%. I don't know if this is a guidance for anything. Also, we are revamping the volumes. So with high probability, customers that have the biggest relation with us, took the opportunity to bring the mortgage. So maybe it's a little bit higher than in a more stable environment. But at the moment, I would say that is this 25%, 30%.

There is a question on the outlook for loan growth in '26. We covered mortgages, but obviously, the question is then on the other parts of our balance sheet.

So for everything?

Per segment.

Okay. Okay. Okay. So I would say that in consumer loans, it's obvious that we are in our natural production. So it's -- we could consider to maintain the growth that we are having at the moment. And it would be difficult to be much higher than what we are doing at the moment. So it's -- we have a natural amortization. We have -- so it's -- even if we keep fighting from the privacy of the customers. And as Fernando said, and this also just to complement also what he said, we need to remember that as a normal commercial bank, so when we acquire customers, more the customer is engaged with us, more you will pay in terms of commissions and fees directly in the accounts. So more active is, more waivers you get, more services use, so more costs is for the bank, but of course, then it's also easier for us to make models to offer consumer finance, cards and other products. But I would say that the consumer loans, we will have a similar rate. Mortgage, as we said, so it's a recovery for 3% more or less in terms of the stock. And in terms of corporate, I think we should start to expect the volume of this growth. So not as a percentage because, of course, as the stock is getting bigger, also it's -- but if you pay attention for our targets, as we announced for the strategy, so this would be more or less the volume that we should present as growth per year from now up to 2028. So this should be embedded in the expectations of the analysts.

Speaking of corporate business, the next question is on the margins. How are the lending spreads developing in the sharply growing corporate business?

So I would not like to give any guidance even because, as you asked me in the beginning about competitors. So it's not -- it's never a good idea to say this. I would just give an information that maybe is relevant also to understand the business that we are doing. So if we would divide the business of small companies in Poland, which is below PLN 30 million of turnover then medium companies in Poland, which is PLN 30 million to PLN 100 million. And then not big, but already bigger, let's call it bigger, higher than PLN 100 million. We have more or less 1/3, 1/3, 1/3 of the production. So it means that if the question is behind, if we are making very large transactions with the squeeze margin is not true. So we are more or less with the pricing that we are having. We are splitting between small, mid and already corporation size, although still in the SME criteria in European level, but at this level, 1/3, 1/3, 1/3 of the production. And it's -- we are not a price maker. We are -- we participate in the market, but also we do not differentiate ourselves by being the more aggressive in terms of spreads. So we are mainly applying what are the market rates today for the corporate business in Poland.

And last question in this, I'd say, topic, a bit philosophical. What is the reason for such a strong growth of deposits? Do you expect this trend to continue in '26?

So -- we were a little bit surprised in the quarter in terms of corporate, current accounts, but there is also some seasonality on that because when we put together it's 15% in current accounts in retail and in corporate. So it looks like there is a natural trend through customer acquisition, relations and everything to have these dynamics. We always have internal debate about if -- or being already so liquid and having some -- not difficulties, but some limitations from the market also dynamics in terms of credit growth, if we should keep be competitive or not on the savings market. However, we believe that as a big retail bank, this is what we should do. So we need to be a saving bank for the savings of our customers. This also then help us to have the growth that we are presenting in terms of investment funds. So we -- our investment funds are more balanced funds, more regular contributions, mass market in participation. And so we are presenting at the moment, 40% growth year-on-year after some years of 30% year-on-year. So it -- we have been very positive. So I would say that we would -- if the market will grow as in total deposits in the system as have been growing in the recent times, we will also participate. So I don't think that we can -- we should expect the normal participation of our bank. So it's not anything specific. It's just more activity with the customers and also wants to be competitive. And also, we want to be a bank that our customers consider to keep their savings. So it's -- I would say that like that.

Now it's time to bring Mr. Fernando Bicho into the action. Do you think the low cost of risk can repeat in '26?

We still expect it to continue to be relatively low, but not so low as in 2025. We cannot assume that each time that we sell NPLs, we will continue to generate the same positive result. We are also growing the portfolio at a fast pace. So we are always prepared to come back to, let's say, more normalized level of cost of risk, which traditionally, we always have put around 50 basis points of our total loans. So we would not guide for repetition of what we managed in 2025. In 2024, we had 40 basis points of our total loans, which was also below the -- what we were expecting. So here we are, let's say, prudent. We are not, let's say, bringing the expectations too much down regarding the cost of risk. We think that as time will pass, we tend to come back to a level of cost of risk that will be around 50 basis points of our total loans.

Next question is on FX mortgage related costs and provisions. First of all, on provisions, what led to the increase of FX provisions in quarter-on-quarter, so it relates to 4Q? And then a follow-up is, how should we think about this in '26? And also, could you give us a more tangible target for CHF mortgage costs in '26?

So we are never guiding amounts of provisions on a quarterly basis. So we never promised that each quarter will be lower than the previous. Especially at year-end, we always have to make assumption about everything that's happened during the year. We have to make, again, the update of all parameters to incorporate all the available information. So here, we are not committing to a straight line downwards trend in terms of the provisions that we will be doing. Having said that, as I stressed during the presentation, on Page #15, it is visible that last year, we had a significant drop in the pretax costs connected with FX mortgage by 34% year-on-year. Of course, the drop of provisions was 9%, while the drop of the other cost was 74%. But this was also partially related the way we were accounting for the different costs and especially how we were accounting for the cost of the negotiations with the customers. But what matters is that the drop of the cost was 34% on a pretax basis. So what is our outlook for 2026? We have been saying already for some time that we expect in 2026, the costs to be -- to again, to drop significantly versus 2025. We cannot be very precise. We have a base scenario. Under that base scenario, the costs could fall even more than 50% versus the previous year. But of course, are based on the knowledge that we have about the current status of the different legal cases, jurisprudence and court jurisprudence and so on. So our expectation is that there will be a continuation of the significant decrease of the costs. Of course, we also highlighted that the decrease of the costs was also supported by the lower inflow of court cases. And of course, if the inflow matches our expectations, it means that we do not need to create additional provisions because of the inflow that is being received on an ongoing basis. So we are not inflating the expectations. But if nothing extraordinary will happen, we should see a continuation of the significant drop in the costs related to FX mortgage.

And we can say that we're hoping for a free digit number?

So let's say, I say more than 50% drop versus the 2025.

Tangible guidance. Tax rate. Do you have a tax rate guidance for '26?

It's not so much of a guidance, but it's just to give a reference. So when we have an official tax rate of 30% this year, and we know that part of costs of banks are not tax deductible, namely the banking tax, the contributions to the banking guarantee fund and in our case also a significant part of costs related to FX mortgage. This means that excluding any other effects, the tax rate for this year will -- effective tax rate will tend to be close to 40% against 26% that I already mentioned, that was the final result in 2025. What can change this again is the structure of the provisions and cost related to FX mortgage because it depends if there will be more or less tax deductible. But, let's say, in general, we should have a tax rate -- effective tax rate close to 40%.

Time for NII and NIM. How should we think about NII in '26 and its main drivers, rates, volumes, hedging? I mean, volumes we've already covered, raise to some extent to...

So I would say that regarding revenue is the most important question, right? So it's -- there are many assumptions that we need to take into consideration when speaking about the levels of NII in 2026. So from -- so coming back just for a moment. In 2025, NII proved largely resilient. However, we need to take into consideration that there was accumulation of interest rate cuts in the second half of 2025, which impacts are gradually flowing through the P&L through a gradual repricing of the variable rate loans through a gradual repricing of the variable rate bonds, and at the same time, with more limited space for the repricing of the deposits. So what we are currently expecting is that in the first quarter, there will be a drop of the NII versus the fourth quarter. This is going to be inevitable. But as we don't like to just to give very concrete guidance on a quarterly basis, our view for the full year is that first, interest rates will still go down up to 3.5% and will remain flat thereafter. So this is important assumption. And this should be reached until June, July. And second, that the volume growth will also gradually help to offset some margin compression that still can come from all the repricing that is taking place and from this lower interest rate environment. So looking for the full year, despite the drop that is going to happen in the second -- in the first quarter, we still can expect a quite resilient NII. We are not going to provide exact guidance about if it will be possible or not to repeat the level of the NII of 2025. What we see is that the combination of hedging that we have done from the past and volume growth will help to offset to a large extent, margin compression. This is our current belief. And of course, we will see in the next months how the NII will evolve.

And a bit of a question on the component of NII, namely NIM. Shall we expect the similar NIM erosion in relation to the expected base rate decline in '26 or a bit more pronounced?

Yes. As we show in the presentation, in the fourth quarter, the NIM was at 3.78%. And it still does not fully reflect all the cuts that have taken place during the fourth quarter because sometimes there is a lag in terms of the repricing. So we still can expect the NIM to be -- to go further down at least to 3.5%. This is possible to happen. But then as I said, also the volume growth, especially from the lending side can start playing a role in terms of offsetting further compression. This is our current view.

Thank you very much. And the final block set of questions. They are from a little bit different subjects. First is what would be the level of the long-term funding ratio in the newest format?

So I understand that this is a reference to the potential change of this ratio, which is still not approved. But if it would happen in the way it was presented, we would be above the minimum 20% -- the new 20% -- the new 20% level. So this would be -- this would imply that we would be already above the minimum required.

Very comforting answer. How comfortable are you with the growing government bond portfolio? What are the limits to which you would accept the size of the bond portfolio?

We have a bond portfolio divided in, let's say -- or one -- the biggest part, of course, invested in Polish government bonds, but also we have a sizable portfolio of euro sovereign debt where we are investing our excess of liquidity in euros. The portfolio grew substantially as in the last 2, 3 years, the deposits have grown much faster than loans. We expect that gradually with the loan growth, this growth of the excess of the liquidity will slow down. We don't have a specific limitation to the investment in Polish government bonds. And -- but although we have limitations in terms of the tenors that we are buying due to the different risk limits, including regulatory limits that we are obliged to comply with. So due to that fact, typically, the bond portfolio that we have has tenors up to 5-, 6-year maximum. So I understand that the question behind the question is the fact that there are additional needs of financing of the state budget. The hedging of Poland has remained stable so far. So we -- so far, we do not have a concrete limitation regarding the investment, although we already started to diversify by having part of the excess of liquidity invested in some -- in euro sovereign debt. Payouts?

Yes. Okay. Could you comment on payout targets? When will these be restated? Is leverage a limitation?

So we are speaking about the payout ratio, right, for dividends. I think before we restate the payout, we should start to pay, right? Because I think to have this discussion before, we still did not pay the dividend. I think it's a little bit too early. As we have been stating through time, we envisage a payout ratio between 35% to 50%, and we expect to be able to come back to normal dividend distribution in 2027 from the results of 2026. It's still too early to have now the discussion about whether this will still be the level of payout range that we will keep for the future. What we can say is that, of course, in order to ensure the possibility to pay dividends, of course, we will be closely managing all the requirements published by the regulator that usually are summarized in one letter at year-end -- at each year-end. So we are always, let's say, monitoring that we will be able to fulfill the minimum requirements that will allow us to pay dividend in 1-year time. This is what I can say for the moment.

And it's probably worth reiterating that we will -- we're committed to return to dividend payments from '27 on. So '26 profits will be the first base of, let's say, profit that will be divided.

And of course, needless to say, of course, the issue of AT1 apart from improving the Tier 1 and total capital ratio also improves the leverage ratio significantly. So just to be clear.

Even if this was a hurdle in the past, it should not be anymore going forward. Can you explain declines in capital ratios in 4Q?

I already mentioned partially -- it comes from risk-weighted assets growth that we have been observing. We will provide more details in our annual report when we will provide more detailed information about the structure, and also about the own funds position at the end of the year. But as I said, most of it comes from the risk-weighted asset growth.

On effective interest rate methodology change? I think any comment...

We will not -- we will also -- of course, we'll be providing further explanation in our annual report. As time passes, we always need to look back at different assumptions and the way from a technical point of view, that some calculations are being done. So we have also been looking especially at the way of applying effective interest rates to contracts, loan contracts where we have, let's say, a mixed rate where we have temporary fixed rate, followed by variable rate. So that's why we have made also some update in the way we have the algorithm making the completion of the effective interest rate.

It's 15:00. So time for the last question. It's the question as well, M&A, are you willing to explore potential consolidation opportunities? And then there's another question on that is, do you prefer to act as an acquirer or a target?

So during these 20 years that I have been working in Bank Millennium, always the questions, okay. But usually, the question is more if the bank is going to be sold and not so much if the bank is going to be an acquirer. So it's, of course -- I think each transaction, it deserves to be studied. But one of the things that I think everybody already learned even by the processes that we have been seeing around the world is that we can only buy what is for sale. And it was like that, that we did Eurobank. So when Societe Generale decided to initiate the sales process, and which means that if there is a sales transaction, if there is somebody that wants to sell, and we think that there is a value added. For our bank, we, of course, will study the operation, and we will do the transaction and we will recommend for the shareholders. What we can do is, of course, to be will capitalized to have a strong business model, also to have clean systems and process and to be already an organized entity that can bring value to any transaction. And this, of course, we have been doing. But this is, of course, talking about the potential. Usually in Poland, we talk a lot about consolidation, but what we see is change of shareholders, which is completely different. Consolidation is when two banks of the system, merge or one acquired another. When we change shareholder, nothing changed in the system. Of course, it changed the owner, but the environment is the same. And this has been the normal environment here and the transactions are then usually are with the much smaller players. So anyhow, we will see whatever will be present to us. But for us, what is really, really important is to deliver the strategy. So we were very clear. It's -- sometimes it looks like it was a long, long time ago, but it was just in October 2024. So it's not so long ago, even because in '24 before the summer was -- it was the time that we also raised a recovery plan. We present a new strategy. The strategy was very clear, paying dividends in 2027 on the results of 2026, to keep the speed and the growth in retail. We are very happy that we are presenting this. I know that it's difficult to quantify, but for a franchise of the bank, the capability to grow every year, active customers is extremely valuable. And every year, we have been growing. Not a long time ago, we were celebrating the 3 million customers. Now we are already with 3,270,000 customers. And every year, we put 120,000, 150,000 customers that are active, and this is the net growth, and this is very valuable. We would like to have done even better in terms of the credit side in retail. Part, it was our own decisions how to scope with some of the limitations in terms of mortgage, in terms of long-term financing and everything. But we are already very happy from the signals of last quarters in terms of revamp of that area. Deposits doing very well. Investment funds are very well. Cards are very well. So it's clear that we are with a very strong growth and momentum in retail. And even more important was our capability to show that the bet in strategic terms to invest in corporate ranking is successful. And that although we were very strong in retail, we can be also strong in corporate. We -- when we present in 2024, we had a lot of questions about that. Why we thought that we could do it, what would be the competitive advantage, what wold be the strategy, how this is possible, that the market is already very crowded and very competitive. We explained that we would not do nothing strange that we would leverage as the relations that we have, the capabilities that we have, the presence in the banking areas and in the locals and the proximity to the customers that we already have. We are very happy that we can show the results that we are showing. We believe that, as I said, that this pace of the growth, it will continue. Also, of course, as we're financing also, we increase the relationship. So we will have also more transactional banking, more treasuries, more factoring. So this is -- all of this business would come along. And so we are confident, happy, and we believe that we could not forecast better at end of first year of the strategy. What Fernando said is very important also that we need to -- there is always these seasonalities, ups and downs. The markets always have difficulties to understand how the banks gain a lot when the interest rates have the first time going up but also how difficulties to adjust as the first time as the interest rates go down. But there is always stock portfolio, habits with the consumer. So it's -- to reduce the prices of time deposits take time. The impact on current accounts that are not remunerators, of course, is immediately. So all the rebalancing of the system, it takes time especially when the movements are so abrupt as the ones that we were having. So I think this is also prepared, but we could not be in a better position and also with less optimism -- or we could not be with more optimism for the year of 2026. So we really believe that we would have, again, another year of strong execution of the strategy, and that we would be closer and closer to the targets that we present for 2028.

Thank you, Joao. Thank you gentlemen, for your time and for your very insightful answers. Thank you, the audience. To remind, next data point is February 27, when we are to release our full year accounts. You have all the notes and narrative there. And the next event will be AGM, which we typically have in end of March and then first Q results on April 28. Thank you very much for your time. Thank you very much for your questions. See you soon, I hope. Thank you very much.