Bank Polska Kasa Opieki S.A. (0DP0.IL) Earnings Call Transcript & Summary

Good afternoon. Very warm welcome at the presentation of the financial results of Bank Polska S.A. after the first 6 months of 2025, we have Szarstokowski, CEO, Vice President, Responsible for Finance, Sroroa; VP for Retail and Private Banking Bozki; and our Chief Economist, Ernest Glzik. Now I would like to give the floor to the CEO of Suzarstokowski.

Good afternoon, ladies and gentlemen. Our quarterly and semiannual results were good. The key elements we would like to highlight are the following. We have managed to maintain the growth trajectory for net profit. That was quite significant. Probably the most significant thing that we had all been waiting for and our colleague, Petz had announced this trend for quite a while, namely the revival of the credit action. It has been taking place for a while now, and it is materialized in the form of the growth of our portfolio. In the second half of this first half of the year, the second quarter, we saw greater dynamics here. And also that announces something that I called a boom in our previous meeting. And it seems as my colleague, Chief Economist confirms I should stick to this word. We are going to continue to experience this boom. And even in some elements of our credit portfolio, market share might budge a little bit. In all areas, practically, we saw growth. Capital position relatively strong, robust enough to prove solid in stress tests that the strength of the bank is underpinned by capital strength, and we were assessed as a very resilient bank. Other things that I would like to signal -- well, maybe I will not read out the figures from the slide, you are much better at that than myself. But anyway, one of the things that I would like to stress, maybe foreshadowing what Dagmara will say in a moment. As you might recall in our strategic assumptions, we assumed that we would have CI ratio is around 35%. But what we have built as a reference point in terms of cost income ratio, we are flexible and modern if we manage the cost structure skillfully where the costs were supposed to be the drivers of organic growth, we are ready to loosen this set of rigid cost control while we have fixed cost elements, and it's easy to guess which ones I have in mind, we will try to keep in line with our assumptions. However, all in all, it does not change our target of staying around the 35% ratio, but with a certain portion of flexibility. Risk costs stay below our target. Historically, we had a relatively low level of risk costs. Now the guidance is higher than what we achieved. NPL significant parameter stays within a reasonable range. As I said, the characteristic of the second quarter, in particular, was growing volumes of financing for various client segments. The weakest impact was seen in large corporations, but that is a result of a significant number of prepayments also of revolving loans. There was a redistribution of resilience funds to our clients. So periodically, this parameter was slightly weaker, but we hope it's going to rebound. Basically, you can see that all segments contributed quite decently to the overall results, even the trustee services where we have a significant share show a stable position of the bank. And our ranking over a period of more than a decade now is at the top of custodian banks in Poland. And I would like to spell out very clearly that it continues to be a very good result strategy. Well, it will be boring to talk about this strategy again and again. Just a few months ago, we had a presentation of this strategy in this very room. The 3 elements that continue to organize us are the growth, the need to be reinforced in our conviction that the bank is capable of organic growth. That was a weakness of the bank in the past. And then the question of availability of channels with which we communicate with our clients and efficiency. in terms of better IT infrastructure and improvements in operations of processes and hardware. Here, the bank has quite a lot to do still if we compare ourselves to the best market players in this market. Nevertheless, in each of those areas, we see relative growth. It will be premature to make more lofty sounding more domestic announcements, but we stay on the trajectory of the assumptions that were formulated in April. I will not talk about retail banking is at this meeting on purpose, and he will talk you through this topic because in general, retail banking is an underinvested part of our operations. The Italians did not put in any money there. So while at the end of the 1990s, Bank SA was at the top of retail banking banks. Now it is lagging behind its competitors. The bank is now looking for its niche in this regard. We talked about this during our strategy presentation. And today, you will hear from W a bit more details. With regard to the corporate market, it is worth stressing 2 things. accessibility and availability through digital channels for SMEs, that is the key source of success. SME customers in the processes that we have on paper and have branch based, we need to make quite an effort yet. Maybe these are peripheral things -- but still the improvements that we have already introduced are helpful to the clients. Then we have this dispersed branch structure, a lot of customers, smaller localities usually use cash. So this would -- it's really important to extend our package, let's say, in the way we communicate with customers, the way we maintain their cash operations. And for example, we need to think about more machines where people can deposit money and so on. I mean there's many things that come into play here in terms of our local or county level customers and branches. Over to B.

Thank you so much. As the CEO, the President said, it was a good -- well, we are well underway in terms of our strategy. in many areas of our strategic deployment, we have good progress. Let's start with demographics. I mean, demographics, that's a huge challenge for the entire sector, especially that our client base has actually moved over to that over 50 brackets, over 50 years of age, but we need to acquire younger customers as well. And we're doing a lot to achieve that product-wise, sort of commercial-wise and getting 70,000, 80,000 customers that we acquired in the first half of this year makes us -- put us squarely on the trajectory, 0.25 million at the end of 2027. And it's important that every -- I mean, 1 in 3 customers is a young one, let's say belongs to a younger demographic. And we've been focusing on growing in the most profitable areas, like, for example, consumer finance. That's a big area for us, and it's -- we've devoted a lot of attention to it. We looked at it quite holistically. We've turned every stone or we left no stone unturned. We analyzed processes and tools and instruments and risk and the way we communicate with customers. We looked at our efficiency as well. And we started seeing some results, some first outcomes. And hopefully, we will move on in this direction. Our portfolio has been growing 11% year-on-year, which allowed us to increase our market share slightly. We have an appetite for more, and we're optimistic and quite hopeful for the second half of this year. We had similar, let's say, outcomes in terms of micro funding or micro finance. We're also growing, increasing our market share. We can see that we could grow profitably Here, our portfolio has grown 12%. Our market share has grown as well. When it comes to bancassurance and synergies with the PZU Group or linked to the PZU Group, actually, all product groups have contributed here. We have all kinds of products that are -- that have been growing, products that are linked, somehow interconnected, but also ones that are not interconnected. So we want to get 5% growth in this strategy. And when it comes to gross premium written, we've achieved a record-breaking result, and we feel a strong commitment to get to EUR 1 billion. I mean that's within our strategy, and we want to deliver on it. When it comes to our clients and how we relate to them and our connection to them. This half year, we focus on aspiring customers, those who are proactive, who execute quite a lot of transactions. We prepared a special sort of holiday travel package for them. It's a really special offer that's looking to build our new identity sort of focused around travel and what people need when they travel. And we want our customers to sort of associate us and link us with whatever they need when they travel. So we're out there. We have our stands at airports, and we really want our clients to feel that we're with them whenever they travel, travel physically and also in their journey through life. What's important for us here is to really work long term with them and sort of giving them real benefits. sort of to get them to feel that what they're receiving from us is valuable. So we have rings, payment rings that we offer to them, and we guarantee low exchange rates, for example. So whenever they go on holiday, especially abroad, we want to be with them when they plan their journey, when they plan their budget and of course, when they execute their transactions while on holiday, especially abroad. So we have all kinds of packages like online packages as well. We also have wanted and have been striving towards personalization. So you can personalize the app. We can adjust what our messaging to what customers need on a personal level. So actually, personalization led to an increase of PX and our loans. And of course, with payment rings, customers want to personalize. They want to select the color. They want to select the design that expresses them and leads to more loyalty and that will lead to more transactions, of course, executed. We are also betting very heavily on safety and security. We are integrated -- the rings are integrated with PeoPay app so that customer knows that it's easy and safe and even the payment ring can be an entry to banking with us. Also, as I mentioned, we support our customers when they travel. We are part of Miles & -- more as the only bank in Poland. So actually, credit cards and Mal & -- more is a big part of our identity. That's the only loyalty program with an airline in Poland, and we're there. So next year, we are looking at 100,000 miles and more cards. I mean, that's the level that we want to achieve because we want to be with our clients, not only when they're banking and doing transactions, but also, as I said, as they travel. When it comes to banking, definitely, we pay a lot of attention to digitalization, especially that we were lagging behind and now we're catching up, 9% growth in the number of active users. So we're now after a period where we lag behind, we're actually getting to being #2 in terms of mobile banking with us. So very much we don't only want to acquire these customers. We really want them to use -- to actively use our apps. We have a special indicator that's part of our strategy, and it's like a percentage or an indicator of digital sales, and it's increasing. So for example, in terms of loans, cash loans, digital sales have grown 6 percentage points year-on-year, but it's just one part. We're working on so much more. We want to sort of move away from branches, and we want to make PeoPay the first sort of channel, channel #1. And of course, contact center will be an important channel. And of course, branches will become #3. So they will be there, but they will decrease in importance. When it comes to our contact center, in second quarter, we've incorporated our contact center -- so actually employees of the contact center became our employees. It's a big milestone. So the number of FTEs hasn't changed much, but the number of employees has increased. Over 300 employees came to us sort of officially to become our employees. So we can digitize more and we can offer more services, voice services, digital services. These services can be all about insurance, can be about investing. And again, it helps us create in creating the best contact center in the world. It's one of our goals. And actually, we are well on the way to achieving that. And second quarter was a big part of that.

Thank you so much. Right, Retail. This is important. It used to be lagging behind because the corporate division, we're a leader here, clearly. And we have huge penetration. We're highly sophisticated in terms of our product range and the number of transactions, that's the number of transactions executed or last quarter. Let me point 2 numbers to you. I mean some of these numbers are what you'd expect, but we also participated in funding some investment loans. For example, Equinor and Brookfield, which are wind farms, offshore wind farms. That's a huge project, second largest project right now on the Baltic Sea. We are quite exposed, also committed very much and sort of helping fund these projects. And secondly, I wanted to tell you about how we are more and more active in dealing with local governments because PKO, I mean, we are a sort of county bank. That's a little bit of our history. We're everywhere in those smaller localities, county level. So we do have to be more present working with local governments and sort of we have to be closer to the local government structure. Our infrastructure that's already there, it has to be put to better use. I mean, Warsaw, for example, it's a metropolly. But on the other hand, it's a county, right? But anyway, bigger cities are counties as well. So we have to be more present out there, for example, supporting town halls and getting winning tenders. We -- out of 6, 12 large metropolitan areas, we're very present in 6. So we are quite well positioned. And with that, I can give over to Ernest. 2025 is going to be the year with GDP growing by about 4%, and we think that this forecast still holds water. Second half of the year is going to be better. Already 3.2% was the economic growth in the second quarter. And in the second half of the year, there will be more and more investments. That translates into the overall development of the Polish economy. There will be more public investments first, followed by private ones. And the cost credit for enterprises has been too high so far. This is, however, changing slowly, and we can already see that in the volumes. We are already bullish in credit volumes and the end of this year should see almost 2-digit numbers next year, even better. Dark horse is shown in the graph in the middle of this slide, that is consumption. Last year was rather poor in this regard. Well, dark horse with consumption doesn't sound very good. Let's use another word, a surprise. a surprise. unanticipated growth in consumption. consumer mood with regard to buying durable goods seem to be growing. If customers have greater disposable income, they are able to drive consumption. Last year, we experienced cost inflation related to the energy crisis and so on. Now this is receding. So that will have a number of implications for various industries, but also for consumers at large. For example, the volume of consumer credits will grow as a result. We can see that something is going to budge in mortgage loans and the level of interest rates plays an important role here. Almost EUR 70 billion is the backlog here, and we will see this spilling over next year. There is going to be a significant revival in the volumes of mortgage loans. Mortgage loans in turn will strongly push the development of credit market that will significantly grow the asset portfolio at banks interest rates. Well, indeed, economists use the term of Goldilocks economy. You know probably what that is, that is about economy that is neither overheated nor to Chile with inflation on the right track. lower energy prices, also the impact of cheap products from China. In some product groups, you can see inflation because prices go down year-on-year. That is an environment good for consumers. And there is an opportunity for further decreases of interest rates. We expect the National Bank of Poland to reduce interest rates twice by 25 points this year. Probably the same will go for interest rates in the U.S. That is likely not the model environment for interest rates that we might be familiar with from the past, but that is going to be good development, stability of the economy in general.

Good afternoon, ladies and gentlemen. Now a few words about our results. If I were to give a title to this slide, I would probably call it we are accelerating and we are growing in credit volumes. If we compare the first and the second quarters, now we see a 6% growth of credits in general, loans in general in the first quarter, that was 4%. We want to grow in cash loans and mid and enterprises and SMEs and mid and SME 13% up. We are happy that we have seen a growth in the segment of large corporations. That was 10% year-on-year. As regards growth in cash loans, you probably remember that one of the strategic pillars was availability, accessibility. And this growth happens mainly in remote channels. 80% of sales go through remote access channels. This is good news to us. As for mid-corporate and SME segments, here, the growth is supported by a strong acquisition of new clients. In the second quarter, we had more than 1,000 customers more here. As for other parameters, investment funds, 29% up year-on-year with record net sales, PLN 10 billion. And to break down the PLN 10 billion, over PLN 7 billion out of that are treasury bonds and funds. We are also opening current accounts and the balance of current accounts in our total deposit share that was 71.8%. Now it is 7.8%. So if I were to sum up the deposit and liquidity part of our results, we can say that our liquidity ratios are safe, much above the minimum rates, LCR well over 200. And business growth is supported by the growth in our results on interest rates. interest income. And this stems from a greater volume of loans, but also from a different structure. We have a greater share of cash loans and mid-corporate and SME loans. And the third element that contributes to this positive margin, 8 basis points better than it used to be is a very good liquidity situation, which translates into the possibility to efficiently manage the deposits. Interest on interest-bearing assets dropped liabilities by 11. So that contributed in a positive way to the overall result, although deposits grew by 8%. Costs stayed at the level of last year, which was the effect of our efficient pricing policy. This slide is something that we presented when showing the results of the previous quarter. It shows our sensitivity to interest rates. The natural sensitivity is 20, 25 basis points down when interest rates go down by 10 basis points. And of course, there is a series of factors that we use in order to mitigate the drops. On the one hand, we have hedging strategy using derivatives. Then we have derivative instruments that we -- derivative mortgage loans that we also sell as part of our hedging effects. And the last element is the... Securities portfolio. 25% of our bonds portfolio has been overestimated by the end of the quarter, out of the 25%, 74% has been overestimated. So we'll see some positive results from that in the coming months, slowly but surely. And there's one more component that I've already mentioned, namely adjusting interest rates on our deposits, especially term deposits. What's been making us happy for 2 quarters is that fees and commissions have increased, and we have better results here. It's close to 10% now. And there's 3 components that should be mentioned and that contribute to this result very strongly. The first component is commissions from the capital market. We have 41% higher value of assets under management. So both valuation and sales are positive. Also, we have good margin on foreign currency transactions and the higher results comes mostly from volume. And thirdly, fees and commissions coming from loans, which comes from an increase in lending. So now a little bit about costs. Cost to income at the level of 35.7%. When we're looking at the banking guarantee fund data, we're going to be somewhere at 34%. So we're looking at what was in the strategy. And just like Cesare, our President said, we are a bank. That's part of our strategy, and we need to invest, of course, and we will continue investing. And as you will see, look at our cost. Our costs have been growing year-on-year by 5%. And if we break it down to components, personnel costs, 1%. But mind you, last year, we had this one-off event. There was a special bonus. And if we take a look at that, it's going to be 4.6%. And the cost of DBA, it's 11.4%. Cost of risk. Well, cost of risk is below our strategy and what's our strategy dictates, and they've been falling. Year-on-year, they are lower. First of all, cost of risk is due -- well, there was a drop in Q2 compared to what was happening in 2024. We have recalibrated our parameters of our provisions, group provisions in the retail portfolio. And when you look at Q2 and corporates, we have a higher result, higher cost of risk because we've created a provision for one sort of isolated case for one specific corporate customer. But all in all, when you look at our portfolio and cost of risk, it has been stable, behaving well. We don't see any worrying or negative trends or tendencies that could materially affect the coming quarters. Let me just remind you that in our strategy, we have 65 to 75 basis points in terms of cost of risk. Now let's take a look at the quality of our assets, NPL below 5%. And we've said time and time again that in order to -- for dividends to be paid, well, if we want to look at dividend at the level of 75%, we want NPL to be below 5%, and it is so. Let me maybe say one more thing, but it's highly surprising. It's not surprising for us, not for the sector because just like the sector, we too sell all kinds of irregular liabilities or receivables. We actually sold it. It's around EUR 180 million, and it's around EUR 30 million that impacts our overall results. When it comes to our capital position, it's quite strong. We have surplus across all categories, I would say, as you can see on this slide. So the surplus and being strong actually allows us to hit all the dividend-related targets. And we also are in line with the buffer. So let's talk about MREL. Actually, we are very much compliant. We have 3.6% over the buffer. When we look at MREL to TREA, we are able to hit the 100 bps that we need. and we're increasing or planning to increase lending. And there's 100 basis points awaiting, let's say, in September 2026. So hopefully, we have like 1 or 2 issuances this year and next year. So let's talk about recurring net profit, 13% year-on-year, 13% up, PLN 4.1 billion. We had quite significant one-off events or regulatory burdens that actually lower our risk to PLN 3.2 billion. So we're talking about CHF provisions, consumer protection -- and of course, the banking tax and the banking guarantee fund, the Financial Supervisory Authority requirements. So when you look at all these things, you get PLN 1.2 billion, which is around 35% of our net results. So to sum up, we are accelerating in terms of volumes, 6% versus 4% growth. So now we have lending revival with 6%. We're growing in key segments. We have yet another quarter of good results in terms of commissions behind us. Cost to income is at the level of 34% with annualized banking guarantee fund, our risk profile is safe and ROE over 20%. So overall, solid results for Q2 and a solid sort of deployment of our strategy. Thank you very much. So now let's move on to Q&A. For those of you who are with us remotely, you can ask your questions using [email protected] me as well. We would also like to thank some of you for coming to us sort of offline and appearing in this room physically.

So let's start with these questions from people who are with us in the room. Camilos Ski from Santander Bank.

I have 3 questions. So let me ask all 3 of them at once. I was very interested in what you were saying about costs. And actually, I asked it during your previous conference, Italians, they're not here. They haven't been here for 8 years, right? So can you quantify at this time what kind of investment you need to sort of catch up with the sector because some of you were using some words like lagging behind, stuff like that, how to eliminate that? Secondly, we're all about Ukraine, right? Trump is meeting in and so on. It's very big. So PK let's say, do you expect that when the war ends, it's going to be a huge impact on your business, on customer behavior, on provisions or even if the war ends or when it ends, you don't expect any huge impact. Also, the President, the CEO has been known to be very vocal on anything that's happening on the sector. So what about this tax? -- that may become a burden or any taxes or any other things that can encumber the sector. Would you think about that?

Well, technically speaking, your first question is really key. As we have been -- as we presented our strategy, I've mentioned it. The Italians haven't been with us for 8 years, true. But when I go back to -- back in the day when PKOSL was being privatized, it was like somewhere in the '90s, in the '80s definitely, Bank Age was, at that point, very much interested in a merger with PKOSA. At that point, Bankemgloy was a primary retail bank. They had a wonderful customer base, and they had great products. But actually, PKOSA was the first one to introduce foreign currency accounts and credit cards and so on. So anyway, back then, we were strong as well. But over the last 25 years, we've had 2 instances of sort of growth on the retail market and things that have redefined everything. The first thing was when the first online bank came into existence in early 2000s. And mBank, for example, took advantage of that. And the other company that took advantage of that was T-Mobile. So these were those 2 instances of retail development. That was when the Italians were in this bank. And those 2 opportunities were completely ignored. On top of that, the bank simply grew old. The average age of a client of PKO client is higher than the average age of an average pole. So this is not a trivial thing. Coming back to your question, my guardedness with -- when talking about cost-to-income ratio results from 2 factors. On the one hand, I'm not able to completely measure the things that are needed to catch the pattern. It's no secret that on the 1st of September, we will have a new Management Board member who will, to a large extent, take care of that area. Hopefully, we need to do some leapfrogging in order to improve our current status. Of course, when we talk about cost-to-income ratio, we are not talking only about investments that will subsequently be depreciated. -- because investments are moving forward, we are even ahead of our competitors. Some of these investments have been completed. But if you want to forge ahead and if you have a ready agenda to do some leapfrogging, you need to increase your CapEx, not only with regard to investments as such. And that's something we have to take into consideration. And when you look at those numbers, probably the branch structure will cost us a little less because we have already managed to streamline a little. We are optimizing those branches now, for example, such branches that occupy 2 floors and the area of 2,000 square meters. This is something that the Italians had arranged. But this cannot be changed overnight, but over a reasonable period, it can be completed and streamlined. On the other hand, if you have a certain acceleration, especially in IT development, then you always face the dilemma whether you shouldn't hire more people on the technology front and on the servicing front. And here, we have to admit that we do not really have a ready agenda for each single aspect of our functioning. But we do hope that within the next weeks or months, that will be specified. But then again, we are not going to increase costs without limits. And -- the second part of your question regarding the prospects of developments in Ukraine. My opinion here regarding the conflict in Ukraine, its nature origins has been very guarded. But undoubtedly, the closure of this conflict will be the source of optimism, both on the part of investors with regard to Poland and internally inside Poland. We have the tendency to ignore this conflict a little bit. but it is a real geopolitical conflict that was predictable. And the best thing that can happen now is to break the ongoing vicious circle by some form of cooperation, mediation, closing of the conflict anyway, for the position of Poland and the optimism that will accompany our clients and investors, yes, that will have the immediate impact here. And the third point of your question, tax. Maybe some of you recall the article that I wrote some time ago about the limits of burdens being exceeded. -- and I uphold this opinion. In today's issue of the economist, there is an article about credit cards and bonus systems in Europe and in the U.S. And there is a very interesting observation. who knows the interchange on cards in the U.S., 2%. And in the U.K., 0.3%. In Europe, even lower. And in Poland, yet lower. So even if there are some issues, the banking sector in Poland is very efficient. It continues to be cheap for its clients. And its profitability transitional as a result of high interest rates is relatively better. But this is the last 2 years. And along the way, we had a completely unpredictable series of events like this grace period in the repayment of the loan. So a discussion within the sector and with the involvement of the general public should take place. Everybody knows the effects of such taxation. I agree that under the existing circumstances, it's extremely hard to imagine a situation where anybody gives up the idea of such tax, especially I mean, budgetary circumstances. One option would be change in the tax rate on personal income tax, corporate income tax. And I think that would rationalize this corporate income tax rate change would optimize a lot of behaviors in the banking sector. The opinions that are voiced now to a large extent, result from lack of understanding of the nature of this business, its cycles and as a consequence, security of deposits. There are a lot of implications. I would be most afraid of a situation where some sort of incidental tax is introduced because somebody has an idea to introduce this kind of tax. And then it becomes anchored in the market for many years to come. Ignoring the nature of the market leads to dramatic events in the economy. I saw this, and I wouldn't like to live through that again.

Are there any questions from the room? If not, then let's move on to the questions asked online first regarding the results and then for our transaction. Why this double growth of loans for nonbanking financial institutions over EUR 3 billion.

To answer this question... We bought securities simply. These are securities of the European Investment Bank, free -- tax-free, let's say. And well, we also issued our MREL in euro. We bought securities of the European Investment Bank. There's a number of questions on sanctions on the free loan. And there's a question about how it impacted your results. Right. So just like my colleague said, we do have a disclosure in our statement, but let me give you some numbers. We don't have all -- I mean, as of the 30th of June, we have over 1,000 cases. The value is less than EUR 30 million. By the end of June, 80 of these have been finalized and nearly 70 are verdicts, court verdicts that are final and favorable for us in our favor. So actually, the scale of this phenomenon and the court practice is mostly in our favor.

There's another question about volumes. And indeed, volumes have been up, especially in the corporate segments? What's the reason? And is it sustainable? And what are perspectives for the second half of the year?

Okay. So let me give you some context. Well, there is, let's say, revival in investments. public investments and also lower cost of funding, lower cost of loans simply make loans more attractive, more appealing, and it will continue to happen. We've had a number of research projects where we looked into this. We looked at the scale of transformation-related projects in the Polish economy and how everyone is investing. By 2030, EUR 1 billion is supposed to have been invested. And it could be even out of around 25% of investments contribution to our GDP. So of course, we can move 1 quarter -- 1 or 2 quarters one way or another, but those dynamics could be really, really even really impressive. In 2024, 2025, there was a squeeze in the construction sector. But in 2027, it will continue. And also the energy sector will be somehow affected. There are machine parts will have to be invested in, right? So there's well, those volumes are important. And yes, this is investing in action. The second quarter was very, very active. The pipeline of the third quarter is also looking very, very appealing. And we are -- or we have we are just acting like Ernest described, these are all priorities, and we are quite optimistic in terms of volumes. They will grow. And just like the MVP is saying, there is -- the National Bank of Poland is saying where the competition is going to be more and more fierce and the banking sector will have to sort of take into account that interest rates will continue to fall. And if I remember correctly, when I look at all kinds of forecast for Poland, I think we have the toughest competitive situation since 2010, I think. It's hugely competitive, right. So all these phenomena indicate that there is a revival after some kind of a slower period for the last 2 to 3 years, but we remain optimistic. Also, we've assumed in our strategy that we want to take advantage of our expertise and our experience in the corporate sector. So we expected what's been happening, and we're acting consistently. Right. Just like I said before, of course, there are some skeptical voices in terms of retail banking. But when you look at corporate, the corporate sector, we are -- we have the most expertise out there in the market. So when costs of credits and all those requirements are loosened a little bit, we can move towards mid-caps or midsized companies. And we are, of course, aware that we need to invest more because we sometimes cannot serve some of the most mass clients, corporate clients unless we invest in our infrastructure, so we can do that. And we will -- yes, we will move there towards this space. And let me just say this, even though it sounds lofty, really, our level of expertise, what we represent in terms of syndication, in terms of what we can issue in terms of custody-related services. I mean, our expertise in corporate banking is absolutely top notch. We have super experienced experts, people who know what they're doing. And as I talk to some of our clients, I would say this aspect is being noticed that we have really dedicated top quality resources. geared towards corporate banking.

Okay. There's a number of questions on merging with PZU and the fact that the government has been restructured. There's a new minister for state assets. So what about this transaction? What -- will it be based on 6-month exchange rate or UAP 3? Right. So if you could give us more of a general update with the transaction.

Okay. The nature of the transaction, I don't think I need to explain this in this environment. When we're looking at the dynamics of the transaction, it's moving forward. It's happening. Previously, some of the journalists asked me whether I talked to the Minister for Assets. And I did talk to this person. He knows about the transaction. He knows the details. I think today, they announced some regulatory changes and modifications that will be conducive to this transaction or at least if such changes happened, it would be easier for the transaction. And I think that now our center for legislation has already published some of these regulatory changes, which again goes to show that the governments that the authorities are very much involved. and active. So I don't see too many threats, honestly. I mean the transaction, the deal itself is very complex, especially its first stage is plenty complex. There's a number of steps that need to be undertaken to stick to the structure. PZU has to -- has some steps to perform. We have a steering committee. We have steering committee meetings. Last meeting happened quite recently. But I would say most of the events will happen come fall this year. And when I'm looking at the time line, I would say a lot of things should be happening until the end of the first quarter next year or should be happening by the end of the first quarter next year. When it comes to all the benefits and when it comes to what this transaction will bring, if you want to know, of course, fire away, if you want to know any details. Are there any questions from the room? There is something from the room. [indiscernible] Brokerage.

I have 2 macro questions, maybe thought-provoking questions. Mr. Ednest talked about 2-digit growth in terms of loans, but I'm looking at your forecast and actually, corporates or loans, I can't see anything about 2-digit growth forecasts. So do you -- is there anything more than you published in your official forecast?

I mean our bank nothing is ever in line or not everything is in line. I mean, Ernest and myself, we've always been in dialogue. I mean, for 15 years, we're not always of the same mind. For example, we differ. Ernest actually published a book on the euro. And there are some differences, let's say, between us, and we have been engaging in a creative dialogue for the best part of 15 years. But actually, I mostly agree with Ernest. Sometimes we've been -- we even placed bets on how things would unfold. So I agree that certain things are moving towards 2-digit growth. That's the trajectory. But the timing, well, that remains to be seen after Q2 and after what I've been hearing in July or I would be leaning towards agreeing more with EMS. But I would say whenever you don't know, be conservative, when I learn English, that was one of the first sentences that I learned. I mean, predicting things, especially in the future, this is very difficult. So we don't want to start thinking about the second half of the year. just sticking to our scenario. I mean we have a scenario, but there is a potential upside there. But after 1 quarter, plus 1 month, well, as someone wearing a little bit of a different hat than [indiscernible] is wearing, I'm leaning towards, okay, let's leave -- let's stay with those numbers. Let's stay with those volumes, let's be part of the trend and let's sort of chase everyone, but also move forward, especially. But are these numbers leading us to sustainable 2-digit growth? I wouldn't like to pronounce on this, not now.

And the second question going beyond 2026 on the forecast slide. The interest rates at the end of 2027 after the next parliamentary elections in Poland, what level do you expect?

Another hard question, a very difficult one. Sometimes when things happen, you see changes in the market. Anticipation doesn't change anything. Europe stayed at 3% so 3.5% for Poland seems a reasonable assumption. I would like to add that in the strategic forecast, we assumed 3.5%, just as Ernest said, for 2027. I agree with Ernest that the premium on PLN is of the order of 1.5%. Should it turn out that the Polish economy develops materially faster it might continue. If there is a slowdown, it probably will decrease a little bit.

Martin? I have a few questions. One to Ernest. You talked a lot about investments. What is your assessment of the quality of these investments? Because you can evaluate the loan portfolio saying that some part of this portfolio is better. And I believe that a similar observation goes for investments, probably in energy is investing in energy is different from investing in factories, plants, but that increases our overall competitiveness. And the second question is to the President. can you expect in the context of changing the shareholder? Do you see any risk for your bank as a result of a change of the main shareholder in Santander, your chief competitor? And then a question regarding the PZU transaction. Do you think there are any challenges that might prevent the transaction from completing? Are there any risks that would make it very difficult to complete the transaction? And last question, traditional one to both gentlemen. What is your assessment of the forecast for the following periods if you compare your forecast from the previous conference after the first quarter?

Let me start with the investments and energy in particular. Some 2 months ago, we released a paper on energy. And Chapter 2 says very specifically which transactions make economic sense, which do not. We have significant doubts as to wind energy or major new investments in wind energy with a reservation that anything that carries state guarantees of the state collecting, receiving the energy at a fixed price, that is also in line with Josichowski's interview. He changed his opinion not a long time ago and now is very skeptical regarding wind energy because a change in prices would result in a major spike in prices for end users. We are very conservative here. Gas and storage is okay, plus cogeneration, cogeneration and generation at the local level. So please have a look at this research paper. We have taken a long time to present it to develop it. There are some very relevant conclusions there. This is how we approach the topic in the bank. We pick up from the renewable energy sources, the ones which make economic sense or which carry guarantees of the state treasury. And there was a question about forecast. Has our forecast changed compared to what we presented after the first quarter. Well, we probably increased the forecast for retail. We have slightly better development here. For corporate segment, we uphold our previous forecast. For retail, we bring volumes up. And if we update our forecast, you can find those changes in our social media where we update our information. The beginning of the year is slightly weaker, but inflation also is lower, 1 percentage point lower. We have freezing of energy prices. In general, there is disinflation on goods imported from China. One was a common question to both -- to us. If you ask me whether I'm happy with what Ernest is forecasting, yes, I am. The blockages of transactions is the next point. Well, if there is something attractive, then it's obvious. I do not see in the transaction any risks, any elements that would pose any risk to the economic rationale to the conclusion of the transaction. But of course, there are some risks of institutional nature, some psychological aspects. We get such questions too, and we try to answer them as best we can. The element that is also being discussed in the public domain is the topic of legislative changes. Obviously, I'm not able to predict the developments of legislative processes. But in the Ministry of State Assets, all steps that were agreed in the past are now being implemented. So from this perspective, it seems there are no risks. The parliamentary process is extremely complex. But if there are questions, we are normally prepared to give reasonable answers and we provide them. Then there is the possibility of a veto. We have a new President. Well, if there are any questions, we will try to explain things. But also, this is not the only scenario. That is the scenario which to the largest extent addressed 3 elements: time, money and state authority here. But if for whatever reason, the legislative process differs from what we expected, we will look for new solutions that were considered in the past, but were finally decided to be less attractive. from time perspective, cost perspective, even if some of them were promising to be more efficient than the course of action that we finally opted for.

One more macro-related question. What about the impact of the German infrastructure investment program? What's the impact on Poland? And there's another online participant who's asking about how trade wars and tariff wars impacts the Polish economy. All right. What's happening in Germany?

I mean, they have a whole fiscal package, not just infrastructure investments, but also military investments from 0.1% to 0.2% of GDP, but I would say even more because we're quite well sort of connected with Germany. And we will continue to be their production hub. We have been an automotive production hub. We will continue to be a defense production hub. I mean these are similar competencies, similar facilities as well. I mean, Germany, after the war, they moved from defense to automotive, and they can move back, right, from automotive to defense, if need be. And actually, we published a research results today about that, about tariffs. So we -- hypothetically, our sensitivity used to be 25% to hypothetic tariffs. you can read our research. I mean, this is not a huge impact, honestly. I would say there is a direct impact like engines and things like that, that we export into the states. We also export as part of the European Union. So there is an impact on us because there's an impact on the European Union and cheap competition from China, right? It's an impact. China will have to redirect their exports, so they will redirect to Europe. It's the second wave of the Chinese shock, as we call it, direct competition of cheap goods from China. Actually, I went to -- I read Reuters and I read on their website that Chinese exports in the first half of the year is 7% more than it used to be from the previous year. So some of it, as you know, sort of stockpiling and getting sort of prepared before tariffs hit. But Ennes actually mentioned a lot of the impact -- talked about a lot of the impact. And I agree that the impact for the Polish economy directly, I don't think it's going to be that big, but there are those 3 channels. And those channels will somehow impact us, but mostly through the fact that we are part of the European Union rather than a direct impact.

All right. Thank you very much for being with us. of course, do participate in our meetings. We'll be holding meetings in London, New York, Warsaw. So we invite all investors to stay in touch with our Board members. Have a good day and see you around. Thank you.