Bank Polska Kasa Opieki S.A. (PEO) Earnings Call Transcript & Summary

[Foreign Language]

[Foreign Language] [Audio Gap] by [ instructing ] our strategy. On the other hand, we also want to be modern. We are modern, but we want to be even more modern, offering state-of-the-art banking products and services in a manner that facilitates customer communication with the bank. What kind of bank are we going to be though, after these 4 years, and how do we want to imagine ourselves in the coming 4 years? We will continue to be a universal bank of first choice for our customers, meaning we want to craft even more in-depth relationships. We will focus on the remote distribution and customer service model, investing in resources necessary to bridge the technology gap and offer as many services as possible through remote channels. This way, we will improve our cost and process efficiency, which is significant from the point of view of the objectives defined as cost to revenue ratio. Finally, we know which market segments are the most relevant to us, given our market share. We have identified the most significant segment in the banking market. We will talk more about that in a moment, and we want to grow exactly where the profitability figures are the highest. The 3 most important strategic goals for the 4 years covered by the strategy include: First of all, an improvement of our ROE up to 10%, it's our strategic KPI; reduction, secondly, of the cost/income ratio down to 42%, inclusive of the BFG costs. So right now, in 2020, the level was at 49%, meaning this is a significant lowering of this ratio. Thirdly, we know we should develop in remote channels and we want to measure that by the number of active mobile banking customers. Today, we have 2 million of such customers using our mobile app, we are talking about mobile banking. And in 2024, we want to bring that level up to an aspirational level of 3.2 million people, that is an improvement of more than half. That mobile banking, that's apps which will become the core of our operations. We want to develop mobile apps, invest in relationships with our customers and build environments not only consisting of banking product, but also services that will be available in that very app to our customers with increasing numbers of such services. Very soon, we're going to start offering solutions related to funds, the investment funds, to insurance products. That is exactly where our clients should be able to find whatever they need, but we also want to improve the digitalization ratio defined as 100% match of digitization rate matching 100% of services that customer can process end-to-end through the remote channel. This is our aspiration, to be able to offer whatever we have in our portfolio to the customer end-to-end via the remote channel. As for today, that rate is around 50%. What is very important to us is not just the objectives, but also the way we want to take to get there, knowing that we should focus more and more on agile methods, knowing that we should invest in automation and digitization of processes, and to make sure that the processes we have in place are more and more efficient, measurable and satisfying to our customers, again in a measurable way determined based on these KPIs. We know which segments are the most significant to us. Those 4 main segments where we want to grow and where we believe there is an improvement in terms of profitability available. Our cash flows, where we want to bring our market share up to 10% from the current 7%, more or less, that's 3 percentage points more, we want to invest in our presence among micro businesses up to 8%, that's up by 3 percentage points. We want to also be increasingly present among SMEs, with to a target of 12%, which is an improvement of 2 percentage points as compared to 2020. And hopefully, finally, we want to target mid enterprises, reaching a level of 19%, which is an improvement of 4 percentage points. Simultaneously, we know what environment we are in. It's an environment of record low interest rates, with COVID impacting increased provisions for loan assets that could be impacted by the pandemic and the resulting recession. It's a world where banks suffered due to loans, mortgages and court cases related thereto. And at the same time, it's a world where customers move to the digital one and are more and more demanding in terms of services rendered remotely. So this decreased profitability and pressure of digitization means that banks need to focus on the economy of scales and speeding up customer processing. What's our starting point? Where are we at after the last strategy period? We know we have carried out a digitization project quite successfully in spite of all the difficulties we faced, we have the strengths, improving efficiency of our PeoPay app, offering more and more services through the remote channel, including significant payment services that we offer to our customers. A very good PeoPay KIDS app we offer to our young customers. We react promptly to solutions. Our competitors introduce offering access to governmental programs, offering many services our customers like, as evidenced by growing numbers of our mobile users at 2 million right now, which is an improvement of 1 -- of a ratio of 1.6 and a significant 16-fold increase of transaction numbers in the PeoPay app. We are very proud with that. And we know customers react well to what we are offering to them, but we want to reach even further. Today, we are at the situation where we have 5.5 million customers. We're being market forward in terms of individual customers numbers. We are very strong in mortgages. We are a leader in providing services to large corporate accounts and a stellar risk management profile. On the other hand, we know very well we need to invest in more profitable customer demographics, younger customers, and tap into the potential available in the more profitable segments such as cash loans, micro businesses and SMEs, as well as mid businesses. And obviously, there is a huge potential to improve relationships of cost to income. Now for the pillars of the bank development. That will be narrated by Krzysztof Kozlowski. Krzysztof, the floor is yours.

Thank you so much, Leszek. A new bank strategy is based on 4 pillars: the first is the customer; the second is growth; the third is efficiency; where the fourth is responsibility. This is a very diverse set of 4 directions that combine to create a coherent whole. The first pillar is the customer. Customer always comes first for us. We want to make sure, however, that all the processes that we manage and the offer we provide to our customers is perceived correctly as matching their dreams, needs and ambitions. Hence we will measure our customer satisfaction levels regularly using the NPS ratio. In our customer relationships, we also want to focus on personalization. The customer will become an agent in banking services, with their agency well respected. To achieve that we will implement a state-of-the-art CRM platform that will help us manage communication and personalize the relationship in real time. The second pillar of our strategy is growth. It will be based and anchored in the most profitable market segments and the areas that we've identified in our today business as untapped potential. Special priority will be assigned to [ replicate ] enforcement of our foothold among the younger demographic groups. As the President has already said, we also want to maintain our leader position in corporate banking. The third pillar that was included in the strategy and that is very important to us is efficiency. Efficiency in banking operations in its internal and external processes. Thanks to the implementation of this pillar, we will include our cost efficiency and operational efficiency. We will optimize and digitize processes. We will reinforce efficiency of our sales channels. We want to meet this objective by implementing, developing and implementing a new integrated distribution model. Finally, last but not least, the fourth pillar, responsibility. It focuses all the plans related to responsible risk management as well as the ESG operations, the banking sustainable and responsible activities. We want to support the growth of both the economy and the society and then we want to support environmental protection just as well. Our upcoming plans goes included in all the pillars will now be narrated by my colleagues from the bank management vault. Wojciech Werochowski, the floor is yours.

Thank you, Krzysztof. Ladies and gentlemen, it's a great pleasure to meet you today. I will provide information about the first pillar of our growth: customer and also part of the growth pillar. Within this pillar, type of customer, we want to listen to our customer and be focused on providing services that better meet the customer needs. We have 3 strategic directions. The first one building client-centric culture that will create our position as the first relation bank. What is the relation between customer-centric culture and the customer needs? To fulfill customer needs, first of all we need to strengthen our customer-centric culture within the organization. This is what we want to work on. The second strategic direction is designing mobile services and transferring sales and increasing customer satisfaction in the digital channels. Third direction is personalization. We want customers to appreciate us and also to recommend us. Let me come back to this relation between customer-oriented culture and customer satisfaction. To build customer satisfaction, first, we need to focus on the customer, look through his or her perspective and needs and ease. That's why we will improve and facilitate the culture also for our employees, so that they know how to focus on the customer. This will be translated into new model. We will improve access to mobile access. We will also improve the experience at the bank branches. We will focus on value-added services, especially for customers from the corporate sector. We will engage customers in designing new services to strengthen this bond and to also tap on their knowledge. And I will later talk about new CRM that we want to build. We want to have the significant improvement in customer satisfaction rankings by 2024. PeoPay will be the main contact and sales channel. It is an important app today and definitely we will strengthen its role. We want it to be a key app on the market, based on automated sales and service processes. We would like to have as many processes available on PeoPay, including service and sales processes. A very important element is safety. This is why PeoPay will be supported by special security mechanism. Our aspiration is more than 60% of active mobile consumers in PeoPay. 75% of sales -- of cash loans will be done remotely. Now it's around 50%, and top 3 in the NPS score in remote channel. This is our aspiration. Personalization and foundations of the data-centric institutions will enable us to better match the offer to the needs, profile, time and context of the customer. We have very good and solid foundations for building and tapping on personalization, a very good CRM in a traditional perspective. However, they are mostly product campaigns. We want to improve those elements now. Building upon new technology, we want to have better approach to data management, we want to use different analytics and strengthen competencies that will introduce advanced personalization. We want to use micro segmentation, all of that will lead to our growth in revenues per individual customer by 20% roughly. The second pillar is growth. We will grow in the most profitable and prospective segment and strengthen business synergies with PZU. We will focus on dynamic growth in the most profitable market segments. We will rejuvenate our customer base and enter e-commerce market. We will monetize our unique relation with PZU. We want to be the bank of first choice for individual customers and strengthen our position in micro businesses segment. Before I present more details from this slide, I wanted to refer to what has already been done in the previous strategy. We have provided a lot of products and processes that will help us compete effectively in the area of individual customers and micro companies, PeoPay. We are able to provide services, sell through PeoPay. We have enabled this product first on the market pre-approve. We have new CRM solutions, and this gave us a very positive perspective for the future. What is it that we want to achieve by growing in those profitable segments? First of all, we will focus on acquisition and onboarding of customers to PeoPay. CRM will provide us efficient offered presentation and migration to remote channels. Cash loans will be sold also by remote channels, and we will have a new mortgage factory. This is a big transformation project of the bank. We do not forget about bank cards that are very important element of consumer finance. In micro businesses, we focus on digital channels, simplification, new workflow, additional service apart from the banking services, so leasing, refactoring, so a very wide area of services. So what is that we want to achieve? We plan the acquisition of CA more than 400,000, fourfold improvement of sales in cash loans in remote channels. When it comes to micro businesses acquisition, over 40,000 customers and fourfold growth in lending origination. We want to strengthen the position in the segment of young customers. We have very solid foundation here as well, young customers up to 26 years of age are [ 16 ]% of our customer rate, but it's 45% when it comes to older customers. And we are very visible in this group, presenting our commercials and at the universities. We want to more attractive. We want to strengthen our image as an institution that responds to young customer needs. We will be active online, where we'll keep on commercializing PeoPay and PeoPay KIDS and we will keep on our commitment on financial education for the youngest customers. Aspiration for 2024, then more than 600,000 customers up 26 years. And another element is the improvement of our relation, unique relation with PZU to enhance our bank assurance offering. We want to be even more efficient within the strengthening of our position. We want to implement e-installments, so launch the offer of installment loans available online. If it is profitable, then we will establish relation through different partnership and retail chains. We will implement Tpay, a payment gateway for e-commerce. I think we will offer services for stores and e-commerce platforms on installments. So we want to be the leader in e-commerce. We will also use the PZU relation by enhancing bancassurance offer. A lot has been done already in the last strategy that we are finalizing now. And what is worth mentioning, we have great successes in linked insurance sales, linked to mortgages and loans. We will develop this cooperation furtherly. We are planning on standalone insurance launch. We are testing already those solutions. All of that will be realized or most of the processes will be provided through digital systems. The CRM will support those initiatives and real-time marketing will also be engaged to increase the effectiveness of sales. All in all, our aspiration is the increase in gross written premium twofold. Thank you very much. [ Jarek ], I give you the floor.

Thank you Wojciech. Ladies and gentlemen, the low interest rate environment indicates naturally that we should be focusing on digital and expanding our offer here. What is that we will do? First, we want to provide CRM fully digital tool for our reps, having access to direct data -- customer database. We will be able to create value, customer value-added offer also for business customers. As you know, business customers use tailor-made investment solutions. However, individual customers are customers that will be able to use the PeoPay application. We want to have full stock exchange products and investment offers. We want PeoPay to do window to investment for our customers. And we also want to create wealth management platform that will include both asset management and advisory. What is our aspiration? On top of what I have enumerated right now, we want to have more than 80% sales of mutual funds done by remote channels. We want to have an 8% share in turnover on domestic capital market on the Warsaw Stock Exchange and more than 17% of market share when it comes to asset under management.

Hello, everyone. I will provide you information about the SMEs and mid businesses. We have 4 pillars here, also customer growth responsibility and efficiency. The customer of the bank is always our priority. That is why we focus on increasing their satisfaction, both from tools and products, at the same time taking care of high quality of relation with the customer. We deeply believe that focusing on the customer and better cooperation will translate into growth. The growth of active customers, credit penetration growth and cross-sell growth. We never forget that we are efficient, and we need to focus on improvement of efficiency constantly. This is fast and convenient credit process, optimize service model and also effective pricing management. Responsibility, the fourth pillar. Last but not least we always remember that we fulfill a very responsible role. We support the enterprise on every stage of their development, sustainable economic growth, ESG, and we also invest in renewable resources project. What is also important, this is all possible, thanks to engaged employees of the bank. To build and strengthen those 4 pillars for companies, we focus on those priorities. Credit factories, which is possible thanks to automation and digitization of processes that use big data analytics and behavior analysis. We want to build this new credit factory for SME and mid businesses. We will digitalize customer services in the [ sell curve ] self service zone both online and for mobile banking, and we will acquire digitalization and clients onboarding. Thanks to new product like value-added services, we will reach to higher number of customers thanks to cooperation with partners like PZU. We will build new CRM systems supporting evolve new customers acquisition and cross-selling to existing customers, and we will continue to responsibly support entrepreneurs based on the ESG policies in building and supporting renewable-based businesses. All those priorities will translate into annual acquisition of SMEs up -- going up to 2,200 customers a year, at the same time, improving revenue per client by 30%. We also plan to increase credit product sales in 2024 vs. 2020 by [ 72 ]%, inclusive leasing and factoring, while in the mid segment, our annual acquisition will be around 1,000 accounts -- 1,000 customers a year with revenue per client improving by 15%. Blazej, the floor is yours.

Ladies and gentlemen, we are now moving on to the first pillar in our strategy, the efficiency pillar. Here we will focus underneath all of our stakeholders. We are talking about a decisive, actionable response in implementing digital simple processes and relieving our staff from repetitive activities, helping them move on with more creative tasks and solutions for our customers. From the Board point of view, it's also a decisive response and adjustment of our business model to fit the new macroeconomic environment, with low interest rates and operating and the speedy digitization on behalf of our customers. Hence we will focus our activities on 3 priorities: digitization, operational excellency, technological transformation and optimize streamline credit processes. Moving on to the first priority, that is, the rapid digitization of our customers. So we want to achieve that rapid digitization throughout all the segments. From the point of view of individual clients, we are working on a new PeoPay version to enhance the options to implement sales and post sales tax. Our plan foresees all tasks to be processible in a digital manner. We will support our customers in migration to the digital channel, and we will also scale up and reformat our networks to fit this enhanced customer digitization base. As a result, we want over 80% of customer orders to be made through digital channels. The same is true for SME mid and corporate clients. We plan to implement a new self-service digital tool, enhancing it by self-service zone that will help customers make both sales and post sales orders with the bank related to payment costs, account management, ForEx operations and financing tools. Followed by this rapid digitalization of our SME clients, we expect over 80% of them to use self-service channels. Now moving on to the second priority and process excellence. We assume we will move to standardize and simplify process as a target. We want to cover the most cost-consuming processes and to reshape them into lighter, leaner processes such as cash management, cash processing, loan processing. We want our staff to spend time providing customer service, to have more time at their hands to do just that, to work with the customers where simple tasks that could be centralized should be elevated -- escalated through the operations center at the HQ. The centralized tasks will be automated or robotized. In terms of robotization, we want more tasks to be carried out by robots from 4.7 million up to 11 million a year in 2024. The external signs of our internal process excellence will be the number of customers per employee. We assume until 2024 the number will double, which will bring us into the top leading banks in terms of operational efficiency. These days, banking, it's very closely linked to technology. Hence, our strategy assumes multiple activities have to be implemented by technology change. In particular, we want to focus on implementing efficient IT models. We continue transforming our IT department towards a model mirroring those of high-tech companies. We want IT to enable fast adaptation to ever-changing environmental needs, customers' needs. Hence we will work in 5 technological areas. First, in terms of technology and innovation, we want to utilize mobile technologies so that our mobile-first approach can bear fruit. We will use biometric data, geolocation as additional functionalities or native functionalities available in iOS or Android systems. We also want to utilize AI solutions and Big Data solutions to deliver our business departments and our customers with right on time or real-time analytics and marketing information. Moving on to the next area, architecture. We assume modernizing and shifting towards cloud technologies. We want to utilize hybrid approaches to the cloud technology as well as multi-cloud approaches. We will modernize our architecture. Not all the layers are equally important, though. There are 3 layers out there that we would like to particularly focus on. The front-end layer, these are client apps, data analytics and big data layer, AI. And thirdly, finally, the process layer to enable process excellence. Reliable infrastructure is yet another area where we assume the use of both cloud technologies and durable use of remote working for our employees, and hence, increasing cybersecurity of work carried out on the part of our employees and our customers. What we are going to focus on, in particular, is a faster app development model using agile methodologies as well as well-proven DevOps technologies. Last but not least, people. We are enhancing our internal competencies. We have built competencies related to UX, DevOps, et cetera, throughout the last strategic period. Now we're going to focus on cloud technologies, mobile technologies internally, but we're also more than open to working together with market leaders in their fields to further enhance our competencies. We believe 1 in 10 of our employees at the end of 2024 is going to be closely related to IT. Thank you so much. Marcin, the floor is yours.

Thank you, Blazej. Welcome, ladies and gentlemen. We wouldn't be able to talk about cost-effective bank without effective and optimized loan processes. Over the last few years, we have built a sound foundation in that regard. We learned to develop workflow systems. So we selected appropriate tools. We developed the first new generation of workflows under the strategic period. And under this strategy, we're ready for rapid optimization of credit processes by means of automating all tasks in the process by standardizing and simplifying the processes, thinking about the process outcome while planning starts so that the whole process is streamlined and cheap, and so that both our employees are able to work through those processes easily and that they will not be problematic to our customers using their self-service solutions; for instance, when applying for loans or other products. We're also going to focus on advanced analytics so that our customers and employees will not have to collate information if we already have the data necessary for loan application online. We will also streamline the mortgage process. So we want the whole mortgage application process to get down to 8 days. So we will also optimize micro business credit processes down to 1 day, and we are developing fast tracks for SMEs as well as for corporate customers. Another important factor in the new processes will be fast track offering based on pre-approved limits, meaning a customer knows what amount they can get financing for -- unsecured financing for, for instance, for a retail customer before they even start to apply. Now let me move on to the fourth pillar in our strategy, it's the responsibility. We continue to believe that responsibility is a key characteristic in any banking corporation. It's also a characteristic our bank continues to be associated with. We are proud of that, and we want to continue in that track. And here, we would like you to focus on 3 parts. We declare we will maintain a responsible approach to risk and capital management. Secondly, importantly, we will support the Polish economic development. And thirdly, another part we believe to be more than important and that we want to focus on, is including environmental, social and corporate government factors in our operations. Now let me move on to the first of these 3 priorities, namely the responsible risk and capital management. As you well know, Pekao is well-known for its stable management cycle, strong balance sheet and low-risk costs for many years. They've been ranked as low in our industry or even the lowest in our industry. In the COVID situation, we generated additional buffers, additional provisions, which also were a result of our approach thereto. And under our new strategy, we want to continue that trend. Still, we see some options for the risk cost to go up slightly, up 50 or 60 basis points. There is a strong justification for that, though. Firstly, just like you saw earlier, our asset mix is going to change, namely our portfolio will see more of high margin, more risky products such as unsecured loans for individuals, all SME loans. Secondly, we are ready more than ever, to base our credit strategies on the profitability of credit products, including their full risk costs and the bank's risk appetite, which opens us up to acquiring new customer base, provided that these customers are profitable to the bank. Regardless, we still want to remain within the top 3 in terms of the lowest risk costs throughout the banking sector, and we will also hold onto our capital positions. For other aspects that are on one hand going to support our bank business-wise, and on the other one, that will make us grow even more safely and cautiously, is the development of credit risk, algorithms and models and expansion of the data scope and data quality that we access, analyzing our customers based on preapproved models or automating credit processes just like I discussed, for instance, with regard to monitoring loan terms offered. Another thing I wanted to pay your attention to is cybersecurity management. Here we've already started working to reinforce and to develop our techniques and competencies related to cybersecurity management, process management and as a second line of defense, we want to limit and measure quite carefully all those cybersecurity risks, so that we have all that well controlled. Now let me give the floor to [ Jurik]. Jurik, the floor is yours.

Thank you very much, Marcin. And now we will proceed to the next part of this presentation. As Leszek Skiba, the CEO, mentioned, we have a leading position when it comes to corporate banking in Poland. We have the biggest share, 23% in this segment of the market. We want to be a responsible bank, but also we want to benefit from those opportunities that are creating for Polish companies, the general economic conditions. And definitely, one of those opportunities is the time of huge investments in Poland and in Europe, investments from both domestic funds and also EU funds. And I believe there will be a big share of Polish companies engaged in those projects. We want to support Polish companies. We want to help them grow. And we do not only want to be perceived as providers of some services or products, but we want to be their partner. And I believe that this situation will be very helpful to establish such good relations between the bank and our customers. The EU programs are huge. This is the biggest financial perspective in EU history, EUR 1.6 trillion. Poland will be one of the biggest beneficiary of this perspective. Very well negotiated on behalf of the Polish government, represented by Prime Minister Morawiecki. The national recovery plan is in the pipeline. It will be part of EU recovery plan. This is the next opportunity for Poland and traditionally, cohesion policy and other EU policies create some opportunity. But there is a big change in those policies. Focus on climate change and by the 2050, 1/3 of the resources will be allocated to fighting climate change. We want to be engaged and participate in those actions. At the same time, we want to be the leader as we used to be when it comes to environment, society and corporate governance. We are right now perceived as a bank that is on the leading position. But not only do we want to be a leader on the public sector, however, those 3 important values are key for us, and we want them to be visible in our daily operations in environment, society and corporate governance. Our bank will keep on providing services for corporate banking and maintain our leader position, but also project finance, investment banking, PPP. We want those elements to be our flagship projects. Thank you very much, and now I give you the floor, Tomasz.

Thank you very much, Jerzy. Let me start with the macroeconomic scenario that we forecast for the upcoming time. There are some optimistic news. Jerzy already mentioned this. We are expecting the inflow of capital from the EU even higher than historically. So the GDP level is expected between 4 to 5, while realizing this strategy. Poland has performed extremely well in the previous financing perspective, and also during the pandemic year. So we are expecting very good results here. The inflation rate is in this upper threshold of the Polish National Bank that, by the end of the year 2024, might translate to decrease. However, we have assumed for our strategy that there will be no major change in the interest rate. Everything will depend from us. We don't count on those optimistic scenarios. Unemployment rate also relatively low, and this will support the cost of risk. Let me start the financial analysis from referring to the previous strategy. That strategy had 4 pillars, as you probably will remember. It was growth, intelligent growth, efficiency, leader of the integrated risk management and also the employer for the bank. Where were we while realizing the strategy? In 2020, we have achieved positive results in the smart growth. So the dynamic of growth has accelerated comparing to 2017. We've reached 6%, 7% in the overall growth. The interest 10%, provisions 4% and 8% growth in the whole portfolio of investment. We also have positive operating growth. The costs were below the inflation level and income has already been explained. So step by step, our ROE reached the level of the strategy between 11% and 12% and cost/income also improved in the subsequent years. Of course, pandemic has changed everything. It has changed the environment when it comes to cost-to-income ratio and when it comes to interest rates, that's why we had this decrease in the final results. If we were to tell you, frankly, have we used all the potential of our strategy, have we achieved all the goals? Then we have to admit that there are some elements that it was not fully realized. On the slide on the left-hand side, you can see 3 of those untapped potential. First of all, customer loans, cash loans. We started from the 7% of mortgage roughly. We want to reach 10%. In 2019, we were reaching 8%. So still not enough to reach the 10%. In 2019, we started products, those were effective [ then ]. However, the pandemic put it on hold. Another area where we did not fulfill our ambition, but it also remains a future growth potential, is micro businesses area. In this segment, we have not finished our credit workflow. As Marcin mentioned, we have built those competencies for credit workflow operations, some of them do operate. But in the micro businesses, it is not fully available. So not full potential has been unleashed. We count on this in the new strategy. Third element, efficiency. I believe not all the processes that we wanted to streamline were finally improved. That is why -- if you remember, the cost-to-income ratio has significantly been improved. However, it is below our key competitors' level. That is why this element is something we want to focus in the new strategy. Another element that has revolutionized our strategy and situation was 2020 when the COVID hit, had an impact on cost/income and also the interest rate. What is worth underlining, we are living in this pandemic situation with a clear balance sheet in the whole banking sector. We had the biggest number of write-offs. However, we had one of the most conservative loan policy and one of the safest asset mix. We had a very responsible policy. We have cleared the balance sheet to avoid potential losses in 2020 already. And similarly, we have performed such actions for Swiss franc mortgages. So we do not have to worry about the negative outcome. And we can focus on our potential to introduce new strategies. But what is that we want to achieve? As the management Board, we have performed long discussions concerning the ambitions and initiatives we would like to implement in the new strategy, leading to achievement of our plans. First of all, we wanted to have an ambitious ROE, lower than the capital cost level that will help our shares to come back to the book value and refuel alike ambitions of our shareholders. 4.5% ROE is the initial point, but if we eliminate those one-off COVID costs, then we are talking about 6% starting point. Our strategy will include 3 main elements impacting on this financial element. So growth, efficiency and also capital efficiency. Another very important element that binds those 3 elements are key investments. So first, we want to invest to be able to achieve the goals. Many of those goals have already been announced: digital transformation; personalization; and process excellence. Let me start with growth. We plan to focus on the loan portfolio, a CAGR 6% to 8%. We want to focus on those segments that were announced previously by the speakers, Marcin and Wojciech. It is cash loan, where we have a significant gambit to win fair market share; microbusinesses; mid and small and SMEs. For today, those segments constitute 1/4 of the whole loan portfolio. We want it to grow to 1/3. We also would like to improve our margin from 5 to 8 bps. How will we achieve this? Thanks to repricing, because keeping those margins will definitely translate into improving our position. And on the other hand, there will be positive results, thanks to positive asset mix. So focusing on those elements with highest profitability. Very good sign for our bank that long-term hedges do not have maturity time during the strategy, but at its very end. So through the cycle, we have secured the most important elements of the process. At the same time, we will work on our cross-sell and pricing for investment products and other value-added services. All those segments will generate good dynamics for commission revenues. Another element is efficiency improvement, cost efficiency. It will be 1:1 hand-in-hand, linked with the investments we want to realize in this. Wojciech Werochowski has already mentioned how important the mobile app is to our bank. However, we want our customers to be able to use the app to provide and fulfill all their needs. So that no visit to the bank branch is necessary. This will definitely give more opportunities to the network to provide different character of services and then the scale. Because we have to follow the global tendencies that are quite dynamic right now. In the last 3 years of our strategy, we have reduced the number of branches by roughly 20%. We can see some potential in remote working and optimizing real property costs just as well and in optimizing cash management costs. As of today, we are one of the banks that enable cash management operations in virtually every branch, which is no longer a market standard. So it's an ambitious objective ahead of us. 42% cost-to-income ratio is just as ambitious as ROE of 10%. But in an environment of 0 interest rates, efficiency -- operational efficiency is one of the most important factors. The last financial component I wanted to mention is the capital adequacy and risk. Marcin already discussed risks quite extensively. So let me just mention just 50 to 60 bps cost of risk, somewhat above the through-the-cycle cost due to migrating towards higher risk segments. For capital, the minimum we foresee C1 at 14%, while Common Equity Tier 1 may be further reinforced by issuing AT1 instruments, providing potential for further capital optimization. We cut the costs activities that will help us maintain the nice dividend policy as well as efforts on the IRB implementation and RWA optimization, where we still see some untapped potential. We offered you a dividend policy at a level of 50% to 75%. It is well in line with our growth appetite and the current requirements, all the historical requirements, given the demands of the regulator. Please bear in mind that to pay out dividends upwards of 75% in Poland, historically, the Tier 1 level has to remain above 16%, meaning the dividend level offered matches both the growth rates and the regulatory policies that have always regulated these payouts in the previous years. This does not exclude any potential plans to pay out dividends that would be somewhat higher, although get involved in other activities to redirect capital surplus, if any, emerges in the future, to assure it with the investors. But the baseline scenario assumes these payout at the level of 50% to 75%. Let me now give the floor to Krzysztof, who will discuss our values. Thank you so much.

[Interpreted] Thank you so much, Tomasz. Ladies and gentlemen, recently, the Board members of Pekao S.A. Bank as well as all our employees have reflected collectively on developing our long-term mission and vision. Together, we sought a place for us in the value space. Finding values we want to support ourselves on and support the organizational development of our bank on. We concluded our mission is to be expressed in a tagline of a simple and safe banking world. This is the headline for this upcoming strategic period, a simple and safe banking world. What does it mean? What specifically is our bank about, and what is specifically our mission as expressed in the strategy? What are we here for? We responded to that by saying, well, we've started with the very important foundation. For almost a century, we are setting the standards on the market, generation to generation. As Pekao S.A., we are a reliable partner in everyday life of millions of Polish people. We help to make dreams come true and to pursue passions. We finance small and large investments alike. We have positive impact on the Polish economy. We built strong relationships with entrepreneurs and provide safety to our customers. We put innovative services into practice in an easy and friendly way. Now the next thing, when we're looking at the etiology, the foundations, the values is the vision, how we want to work day by day for our customers and shareholders alike. For everyone who owns our shares, our shareholders, and our customers that are the lifeblood of our everyday functioning. We expressed the vision headline of let's be the best together. It's a good summary and a starting point, all the same. When we reflect on what we want to be like in the nearest future, in the time perspective laid out in the strategy that was just announced. And we have quite a few responses to that question. Our aspiration is to become a leader on the Polish banking market. Our ambition is to be the fastest developing and modern bank, with offering going beyond traditional banking services. We wish to strengthen domestic brands and provide convenience and safety to every customer. We know we won't be able to achieve that unless for the support of our brilliant employees that are the core of this bank, our bank. That's why we want to be an inspiring workplace for all of them, a workplace where they will feel safe, comfortable and where they will put all those values to fruition. When talking about values, we're working on developing the strategy. We have developed a charter of values as well. These are values we all identify at Pekao S.A. These are values we believe in. And these are the very values that will shape our approach to the future and constitute the foundation of evolutionary change, organizational culture change for our bank. So that all those assumptions that my colleagues discussed included in this strategy can be implemented successfully and on time. Hence you can ask a question of how we want to act, how we want to work to put the vision, the mission and the values into life, and so that the strategy implementation is successful at the end of the period. We've responded to that question very simply. And it's here in this slide. We want to do it together. We want to do it simply. We want to boldly and responsibly. Thank you so much for your attention.

Krzysztof , thank you so much. And at this point, we can thank the whole Board for their collective presentation and sharing their reflections on the strategy. Right now, let us take a 10-minute break and let's meet together at 25 past 2 Warsaw time, when we will launch a Q&A session. Let me just state at this point that we've received many questions, and we will do our best to respond as many as possible until 3 p.m. So let's meet again in 10 minutes. Thank you. [Break]

Welcome after the break. In the name of the management Board, welcome to the Q&A session. As you all know, from our quarterly publications and meetings, we will have the Q&A session. The only difference is that questions that will be asked in Polish will be answered in Polish, but the questions from the English-speaking audience will be directly responded in English. Many of the questions are directed to Tomasz Kubiak, our CFO, who has a leading role here, but also, there are many questions where almost all Board member will be able to speak. So starting with initial question, the dividend that raised. We'll begin with Tomasz. We have several questions on this matter. The first aspect concerning the bank policy concerning the profit from 2020. The second area, are you foreseeing share buyback? And the third one, first element, the forecasted payout presented today, is there a chance for a correction in case the pace of growth is impossible to achieve, this high type of growth that was forecasted? So maybe if you could answer in English, that would be great.

Okay. Thank you for the dividend questions. 2020 dividend, we have announced that our target will be to have a payout close to 75%. We need to discuss this with the regulator, but as we were anticipating, we believe we are in the position for such a consent from the regulator, because of lack of -- practically lack of Swiss franc mortgage risk as well as high coverage with COVID provisions. So the intention, yes, is to pay out. The second element is dividend. I must say that we had a big discussion if to propose 50% to 75% or 50% to 100%. And according to the models that we had, 50, let's say, being closer probably to 75%, but was the, let's say, optimal level to compensate between growth, which is very ambitious in that strategy, and also ROE, which is the most important target at the end of the day from the investors' point of view. Now of course, it doesn't exclude that if growth is weaker, because just a step behind before what is the key behind the capital ratios that we are targeting, the minimum level, the 14% Tier 1. It's the growth. It's the potential for the growth. It's the regulatory approach, so the regulatory minimum, which also might change. And it's also the, of course, rating perspectives, how rating agencies see those levels and discuss those levels. So if those change, so growth is lower, regulator will be more, let's say, positive on the dividends, yes, of course, we would take into account the potential to exceed that 75% and go somewhere above 100%, but this is not in line with the current regulatory policy. That's why we kept those levels and not proposing as a basic one, the higher amount. Now what solution would be then used in such a situation? It can be a buyback. It can be using the 2019 undistributed profits. We would have to, let's say, see the situation and upon the changes in the environment, take the decisions. But the basic scenario is to be somewhere between 50% and 75%, probably closer to 75% than to 50%, especially in the first years of the strategy, where growth is most important for delivery of the target.

Thank you very much, Tomasz. The next question from Michal Konarski at MBank Brokerage. Could you describe what sort of path will the ROE take over the strategic horizon up to the point of 10% in 2024? Should we expect some bigger step-up in any of those years? And maybe, Tomasz, I would like to ask you again for an answer to this question.

We want to go step by step. So not, let's say, let's say, hockey type of approach, but we want to improve step-by-step and deliver and improve, of course, in line with -- of course, 2021 should give additional -- should be a big -- first big step, because of lack of the one-off provisions that we created in 2020 and so on. So 2021 will be exception, but then I would say, more linear than a jump.

Thank you. The next question comes from Andrzej Nowaczek from HSBC. The question is about competitive environment following the pandemic. And as a bank, you described segments you want to focus and target market share gains. And the question really is what sort of strength you see versus your competitors? And how would you want to achieve those market share gains? And then if I could ask here Leszek for the answer.

Yes, this is a good question, because we see the past strategy and the effects of the past strategy, and it is important lesson for us. We know that this is important to grow in this most -- the segment group, the highest margins. And we -- this is micro, this is SMEs and this is the consumer loan. And what is our approach that we identify that we have these clients. Yes, for example, in micro segment, we have 3x more deposits than loans. Yes. It means that we have clients that park here their money, because they perceive us a very safe bank. But the loan process, and so this is sometimes better and faster in other banks. And this is very important for us that if we will have faster loan process, we'll give loans in 1 day than 1 week and it will be easier to use our apps and this is a cooperation with bank. There will be increase in assets. There will be increase in loans. And it is -- this step is enough for us to achieve fair level -- for a level based on the number of clients we have.

Thank you very much, Leszek. The next question comes from Anna Marshall at Goldman Sachs. And the question is about net interest margin. Could you please elaborate on the split of the targeted 5 to 8 bps per annum improvement in NIM? And what sort of action does it assume into split between lending and repricing initiatives? Tomasz, if I could ask you again for the answer.

Yes. We've been anticipating in our presentations also of results that in this low interest rate environment, it's the loan growth that is determining the NIM at the end of the day. Now, in the loan growth, what happened in 2020 is we started repricing and also some of our competitors started repricing. And, let's say, margins on new production usually were, let's say, 30 -- 20 to 30 basis points up. Now that kind of repricing should give for example, on mortgages, additional, let's say, 2, 3 bps per annum increase in the yield of the portfolio, or the margin of the portfolio. So this, let's say, even keeping the existing margins on the new production and not changing them, will allow us to get 2 to 3 bps to, let's say, in the NIM. Now the remaining effect is mainly the asset mix. So consumer loans, micro loans, but also SMEs and micro loans. Those are the typical type of segments with a little bit higher margin than large corporate or public sector. And their more dynamic growth will allow for the remaining NIM to grow.

Thank you very much, Tomasz. Switching the language. [Interpreted] Another question and probably from Michal Konarski, MBank. Could you explain what do you understand by 100% digitalization? What is your perception?

[Interpreted] We started measuring digitalization levels in our bank. We define it as number of processes that the customer can realize in remote channels of our bank. Our estimation is that our customers are able to realize or at least initialize all the processes, so 100% processes initialized online and remotely. Of course, other elements of strategy include our real use of digital services. However, speaking about this 100% precisely is initiation and realization of processes in remote tunnels.

[Interpreted] Let me supplement here, Pawel, if you allow me. We have established and developed our road map how to reach this 100%. First implementation will take place in the first 2 quarters, at the beginning of the third quarter this year. Thank you.

[Interpreted] Another question from our guests. I will switch to English here. If you can outline details on cost-saving initiatives that you plan as a part of the strategy? And generally or more broadly, how much do you want to rely on cost savings in the strategic plan? And maybe turning back again to Tomasz on this one.

Right. So the goal generally is to keep costs below inflation, with still ongoing investment. So still building new competencies, both in data management, CRM, IT, those are quants, for example, margin things, those are the key areas where we will want to increase competencies and investment. We have presented more or less the contribution to the ROE. That's 0.8%, if I remember well. So that's what the initiatives are bringing to our ROE. I will maybe not use the word cost-cutting, because, for sure, cost-cutting is something that we want to avoid. And when discussing those initiatives, we clearly identified that simple lowering number of FTEs in the process or just not spending money is not the right solution or not the right approach. Because it will have an impact, if so executed, on the NPS of the customers or on the growth, simply. So the approach that we are actually saying is to focus on process excellence, out -- and process automatization. And we sit down on the processes of the bank, look at the most heavy and expensive ones. And we say, how can we do it simpler, cheaper and more efficient from the customer perspective, right? And that's a very important, let's say, approach. That is probably different to the strategy that we had. So we still have the targets at the end on the cost, and we know what levels we cannot breach. But we actually look at the basics and say, how can we improve that. And that's the first important element. The second is, of course, the physical footprint. Now as I was mentioning and Wojciech also was saying, that's why this 100% digitalization is so important and why we focus on that, is that for the customer, it's always easier to do it in the mobile. And if he doesn't have to -- sometimes he has to come to the branch, because the process in the bank is so that we say, okay, you do everything in mobile, but then come and sign, right? And this is what we want to avoid. So we want them, our customers, to save their time, but also to be able to do majority of the things. And this will change the format and the branch itself. And they may need to be smaller, maybe less of them. We see the trends, how this is going on. So physical footprint is very important. Cash management. This is also a big bulk of costs that we see. Introducing more machines and not servicing that in the branches and cashless branches in some areas potentially. This is what our competitors are doing. This is a large scale of cost. Of course, we need to do it in the right way, because we also earn on cash management. So it's a question of improving the cost-to-income of that process and not fully, of course, eliminating that. Real estate costs, using more home office. Those initiatives are, of course, something that, let's say, maybe 2 years ago, everybody, a lot of managers were saying no, home office is not the way to go. I cannot, let's say, manage my people this way. Now everybody learn. And this is also an additional improvement. So there, I would say, we will try to touch all processes in the bank and think in a process way to make them more efficient and open to be able to deliver these numbers, but we will not want to do cost cutting. We will want to optimize a process, and we will want to keep costs below inflation, still investing.

Thank you very much, Tomasz, for this very comprehensive answer. Turning to the next question that comes from JPMorgan Equity Research. A question with regards to merger and acquisitions approach. And could you elaborate what's your approach in this field? And what sort of conditions and M&A activity need to pass? And maybe I will turn here back again to Leszek for the answer.

Thank you very much for this question. Our answer is opportunistic that we know that the most important for us is organic growth. We feel that this is the most important during this strategic horizon. But of course, it's always the question about M&A. We don't feel that it's a time for M&A now, but possibly during the next strategic horizon, there will be the question about criteria to identify. This is the question about synergy, impact on our profits, ROA. It is this type of -- this criteria is the most important, but I don't believe that this is within this strategic horizon, this will be important for us to think about the M&As.

Thank you very much, Leszek. Turning to the next question, again from Goldman Sachs Equity Research. And turning again to our CFO. The question comes about any impact of interest rate hikes? How would this impact your strategic targets should you factor in impact of interest rate hikes?

Right. So we forecast -- we are actually thinking that there is a likelihood of, let's say, a 50 basis points increase in interest rates, either in 2013 or 2014. So taking this into consideration, our sensitivity on that, it would be, let's say, a few hundred million zloty on top of that strategy, which would mean some uplift in the ROE of, let's say, between -- depending then on the scenario, but let's say, 50 to 100 basis points in terms of ROE. But of course, I would call it still late in that strategy and not our basic assumptions to do plans.

Thank you, Tomasz. Moving to the next question comes from Tomasz Noetzel, Bloomberg Research. The question goes more broadly about our ESG strategy. And a couple of sub questions that we have here. What are your plans in terms of disclosure on the KPIs? And should your management performance be in any way tied up to ESG? And what sort of goals and focus will you have in, let's say, near term? So maybe I could ask Magda here for the answer.

Great. Thank you very much for this question. And the detailed strategy regarding ESG, we will be presenting at the end of the second quarter of this year, of course. But what's important, the goals for management Board and top employees will be strictly related to ESG politics. What else I would like to emphasize it like clearly as a second-largest bank in Poland, there is a lot more than we can do, but just to highlight to date, we have committed more than PLN 8 billion across sustainable finance. And also, we are a market leader in ESG-linked bond issuance. That's we invited at the end of the second quarter to present in more details about this strategy in this year. Thank you.

Thank you, Magda. Turning to our next question again from Goldman Sachs. This is eventually split question. So we'll have a part that goes into fees. And could you elaborate on the potential dynamic on the fee and commission line over the strategic horizon? And here, I would point to Tomasz. And the second part of this question, what sort of scale of benefits do you see or have you seen so far from your cooperation with PZU since 2017, if you could quantify? And here, I would also point to Wojciech.

So starting from the level of fee -- dynamic of fee and commission, probably 5% plus is the right way to think of it. We were managing between, let's say, 3% and 4% in the last strategy. Surely now the sector is more or -- less competitive, let's say, in that area, and a lot of banks are lifting. So I think that such a range is reasonable.

Right. Coming to details of our cooperation with PZU. I would split the answer into the summary of the previous strategy and what we plan and what they do and now on, and what do you plan in the horizon of the new strategy. The -- as I emphasized during the presentation and then in the closed strategy term, we invested into bancassurance processes, migrating our bancassurance products to PZU. And also in cooperation with our partner, we set up processes for account opening in bank in actual banking model. And the results are as follows. We opened like in the historical horizon around 36,000 of accounts with our PZU channel in actual banking model, the plan for. And also they -- another figure is gross written premium. In the 2018, 2020, it's around PLN 190 million, of course. That's the past. In terms of future, as I said, we strongly invest in processes. We started to pilot stand-alone insurance. We will invest in bancassurance processes, especially in digital ones. And also, we will -- in actual banking model, we realize also the customer acquisition via PZU channels. The numbers we plan to achieve is to being comparable. In terms of gross written premium, it's PLN 1.3 billion in gross written premium in strategic horizon. That's the assessment and also acquisition of 120,000 customers via PZU channels. This gross written premium is estimated to be translated into revenue in accountancy terms at the level around PLN 0.5 billion in the strategic horizon. Thanks for the question.

Thank you very much, gentlemen. Moving to the next question. [Interpreted] Now we're going to handle a question by Ms. Szortyka from PKO BP, analytics department. I wondered how can the bank assume so -- wants to increase its share in the higher margin market segment, but the risk level planned is on the level of the historical cross cycle. How do you deem you'll be able to improve the profitability levels while maintaining the risk level?

[Interpreted] Well, let me start by saying that over the past years, the risk cost and the cost of Pekao group has ranged -- and let me skip the COVID here, but has ranged between 40 and 50 bps, closer to 40 actually. So 60 bps is a significant growth compared to that. How do we approach it? Well, some explanation is what Tomasz already said when talking when talking about the interest rate commission. That's due to a shift in the asset mix. But actually, as we showed in the presentation, that higher profitability, higher risk segments are going back from 25% up to 33% of the portfolio in our strategic horizon, meaning that quite obviously, their impact on the whole portfolio will be pressed. Just like we said, the 7% share increase, well, in the 25%, we forecasted some risk in this as compared to the past few years to allow for growing the portfolio while using the marginal utility, as accounted for by risk. And that calculation yielded 55 to 60 bps, which is what we presented in the strategy. Thank you so much.

[Interpreted] Thank you, Marcin. And now next question from Tomas Noetzel from Bloomberg Research. So let us shift the languages once again. The question is really about the revenue diversification and more specifically about the ambition of Pekao in the e-commerce space? And what sort of market share after acquisition or investments in PeoPay would you like to have and what sort of competitive dynamics do you see in this space? And maybe I would like to ask Wojciech here to outline our thoughts.

As we observe, and that's why -- that's why we made the move towards this space, the e-commerce on transactional side and on lending side. Those are markets that we perceive as booming and, I think, due to technology state of the Polish solutions is comparable to Eastern Europe, I think. And that's why we -- that's why we decided to invest in the PeoPay because we see the opportunity to grow e-commerce and commerce solutions for individual customers and also for micro and medium companies. That's one leg of the commercialization of the investment. And the second leg is sales finance. I strongly believe that in the market, there is a space for a new player, for a newcomer in this part of consumer lending, which we are exactly -- I perceive it as a missing part of consumer finance footprint for our bank. Our aspiration is to be the top 3 players in this market. I mean, the e-commerce and m-commerce. In terms of blending, I mean in terms of sales financing and e-commerce lending, I estimate that the annual sales and so much of the market is something between PLN 10 million and PLN 12 billion and for our -- and I know this market from -- and I know that to be the -- we have to invest there. So our aspiration for sales finance is to get like PLN 1.6 billion to EUR 2 billion sales when we set up this business. Thank you.

Thank you, Wojciech. And moving to the next one. We will have about IRB implementation and what sort of impact on the capital would you see associated with such implementation? And maybe passing over to Marcin.

Thank you, Pawel. So first of all, I would like to clarify that we do not have any intention to complete IRB effort within the scope of this strategy. Just to clarify it. As a matter of fact, we will put more focus and attention for preparation for IRB. But you are probably aware that there is -- first of all, you have to complete your set of models, which will be used in credit processes, but also for the capital requirements calculation. And then you have 3 years' experience period, which is required when you can apply actually for IRB. So having also in mind that our focus in this strategy is automation and digitalization, also a greater emphasis on the new ways how analytics can be performed, we assume that at the beginning of the strategy, we will still be focusing on redevelopment of models in some segments. And then only afterwards, we can count this experience period. So that's why our IRB implementation moves outside of the horizon of the strategy. But also answering more directly to your question, based on our simulation, which we have up to now, we could have up to 150, maybe 200 basis points impact on the capital ratios. So this would be kind of a quantitative impact, but outside the horizon of the strategy. Thank you.

Thank you, Marcin. I'm also monitoring the time. I see we are getting very close to end of our event today, but maybe last 2 questions that we see also as a team across from a number of participants. Number of branches, and what's your plans about your reduction further in terms of your branch network? And maybe on this question, I would like to ask Wojciech.

Thank you. Thank you for the question. The direction is clearly marked. We are going digital. And in the previous strategy, we were closing branches with a pace, which is like double than the market. I mean like -- as it was mentioned, it was like around 20% in the closed strategic horizon and resulting in a number of branches closed 200 plus. And in this, of course, we've got plans for the new horizon of the strategy. But I would refer this to Tomasz and speaking statement that that we are analyzing possibilities to optimize the distribution model, not to suggest -- we are not thinking about the distribution model and with a goal of just simple closing branches. We've got numbers which are double-digit for 2021, which was internally communicated and is being executed. In the strategy horizon, we clearly plan to migrate customers to digital channels and optimize distribution models -- optimize distribution model and developing alternative channels like digital, as I said, also the telephone ones. And also, we've got plans to reasonable growth of the franchise model. Thank you.

Thank you very much, Wojciech. And the last question before we wrap up today's event, I'm sure many of our buy-side participants also are asking. Pekao is trading at discount to domestic peers, even those with some of the higher FX loan portfolio. And do you believe that ROE of 10% by 2024 is enough to narrow the valuation gap? And what do you believe is needed to unlock value potential embedded in Pekao? And maybe here, I would like to ask both Leszek and Tomasz to comment.

Yes. The short answer will be yes, that this 10% of ROE is enough to go to the level of price before the pandemic.

Yes. I would confirm that achieving those targets would narrow this pricing gap, which isn't obvious for us. Because generally, I believe we were improving very much numbers. I think that a lot of damage was created to our share, because of changes in the dividend policy. We were remembering also the history, one of the most dividends or maybe the only dividend-paying bank for a number of periods, and that also shaped a little bit our investor, let's say, shares. But thanks to this, we are now balancing that strategy very much. So between growth and dividend policy, and I believe that delivering those numbers will -- and especially execution. We focus on execution from today onwards. So this will be the closing of the gap or above that.

Thank you very much, Leszek and Tomasz, for this answer. So maybe switching once again to Polish for the end of our event. [Interpreted] Of course, all the questions that have not been answered because of time constraint, we will try to send you the responses from Investor Relations department. We are available in the upcoming days and weeks. Virtually we can meet and provide all the answers also in more details. Right now, I would like to thank you and thank all the management Board for participating in this presentation, for providing the answers to the questions that have been asked, and I will also like to thank all the guests of our event, the analysts, shareholders and new investors. Thank you very much and we keep in touch in the following week and quarters, we will present you the progress of realization from our strategy. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]