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

Good afternoon, ladies and gentlemen, and we would like to give you a warm welcome on the meeting on the financial results of Pekao S.A. after the second quarter and the first half of 2023. I will present our speakers, CEO, Leszek Skiba; Pawel Straczynski, responsible for finances, Wojciech Werochowski, responsible for retail banking; and Ernest Pytlarczyk, Chief Economist of the bank. Over to the CEO.

Thank you very much. A very warm welcome to everyone. We start with a slide showing what is essential from the perspective of the quarter that has just ended. That was a time of sales development and development of our offer to the customers. We are satisfied with the good sales results in retail banking, the sales dynamics. Mortgage is growing clearly faster in the second quarter than it did in the first. We can also see an improvement in cash loans. What constitutes a challenge to us at the moment is the First Flat, that is the government program of 2% housing loans. We see a lot of interest and we find it slightly difficult to manage this great demand. It is simply a new program, and we hope that it will bring significant increases in volumes because its response to the previous needs to unsatisfied demand from the past. Our retail offer is also more attractive in terms of new functionalities for the youth. We also have a new product for farmers. It is also important to us that our digital transformation is progressing at a good pace. We see growth in sales, in digital channels, new customers in our banking and improvements in our app. We're happy that the cost of risk remains low in spite of the current macroeconomic situation and the slowdown we are witnessing. Pawel will talk us through the situation showing that we are a leader in European test of banks. So we are the most resistant bank in Europe, resistant to a negative scenario and stress testing. Key achievement in this quarter include a clear increase of net profit to almost PLN 1.7 billion. That results obviously from growth in interest margin. We have very well functioning, increased interest rate, but it's -- they function very well because they translate in greater income of the bank from interest. At the same time, we -- if we compare ourselves to competitors, we can see that we have fewer customers but the money that we have from those customers and deposits, these greater deposits -- a greater part of our customers see a safe haven in the bank and they choose to keep their money on noninterest-bearing current account. And that is a clearly positive factor which boosts our interest margin. And that is to customers. Even if we offer them high interest rate, now it's 10% on interest-bearing accounts. So they prefer to keep the money on noninterest-bearing current account. Additionally, our results include in terms of keeping cost of risk at low levels, we have sufficient reserves for loans in Swiss francs. So the elements related to this type of risk did not have a negative effect on the results of the second quarter. Additionally, we have managed to keep our costs under control, and Pawel will probably will be able to tell you more, even though we had an increase in personnel costs, a significant portion of those costs came from pay rises and the new bonus system, which supports our revenue from sales. Let me remind you the pillars of our strategy. What is very important to us is that we are on track towards the objective. This quarter, we have 3 million active customers in mobile banking. That was ROE 26% growth quarterly. Cumulatively, that was almost 15%. Resistance to risk and range between 50 and 60 points that we are at 51 and efficiency cost to income at 31% or 37% in this cumulative calculation. Digital transformation that is above all, an increase in mortgage sales. We sold almost twice as much mortgage loans in the second quarter than the first one, we also saw a significant increase in cash loans. We are happy that the volume of funding in SME continues to grow strongly at 17%. In 2021, 2022, we also have very good results in this respect and clearly better than the market. Active customers in retail mobile banking, a 3 million people, which is 15% more digitization rate, that is a parameter which we find important. And that is also a specific target in our strategy. It represents a percentage of the processes that can be completed by the customers in mobile channels. At the end of 2024, this should be 100%. And we are selling more loans in digital channels. Over to Wojciech.

Thank you very much. Good afternoon, ladies and gentlemen. I'm very pleased to be able to tell you about retail banking today on behalf of about 6,000 people who are working towards those results. I will tell you about the goals that were set for me some time ago. Those goals focused around 2 very important elements. The first was transformation of retail banking. And the second was the result, Leszek already talked about the results, and I will focus on the transformation. First of all, we are focusing on our PeoPay app and Pekao24 app. So that is Internet and mobile banking. We are already at the stage that we feel comfortable because we are at the final stages of fine-tuning those 2 channels to make them work in an optimum manner. We have a very important functionality to the customer and a dialogue with our consultant be that in a branch or be that by telephone, may request some services and when they click on this link, they can find out more information, be that loan process, be that some service-related process. We have put in quite a lot of work and have been quite consistent in that. And we want to offer to customers whatever they need in mobile channels. So that makes it easier for the customers because they do not have to do any research on our ecosystem, they get link and can go straight for -- to the information needed. We have been transforming for our clients and the electronic channels. We added a range of functionalities which we deliver to our clients. Please let me emphasize something that we communicated a couple of quarters ago as the results conference. We are busy personalizing our PeoPay application to allow the clients to configure that application according to their needs to make it as a pleasurable experience as possible and to allow them to use our application as frequently as possible. Quite recently, there was a talk about security and trust to the bank and the contact with consultants. So we have implemented a service, which allows the clients who are called by the consultants to confirm the consultant's identity to give that extra field of security for the clients. The client will have a look at the mobile application and give authorization for the call to proceed to avoid scam and fraud and the contacts with the bank. These are just 2 selected functionalities that we added to our contact channels. In a moment, I will continue to tell you what we did for the youngsters and kids because here, we follow the rule, the less the better. Now, before we move to the next part of the story about electronic channels, for the youth and the kids, let me talk you through our mortgage loans and our safe loan as part of the first -- part of the First Apartment program. We'll embark on this program with high intensity, and we have been providing service to our clients from the very beginning, clients -- where the clients were interested in the 2% interest rate mortgage. We have accounted for 60% of this program being implemented. We have collected numerous applications, they told the amount is PLN 4 billion worth in about PLN 5 billion large worth in the mortgage loans. We have 490,000 such loans or such agreements signed. So those confirms our involvement in the program. This translated to our mortgage credit action, we are gearing up for the revival of the mortgage loan market. This market is very important for us because we acquired young clients in this way, mainly for a year or 2, several quarters. We've been involved in the Pekao's strategy for the young people. This is how we acquire young people who we thank the board of our banking services, and we start offering products that go well beyond the 2% interest rate mortgage loan which attracted them to our bank and they start the journey with our Bank Pekao S.A. This is not only about mortgage loans. There is also an apartmental -- First Apartment account that we offer to our clients, which is very important for us from the perspective of covering and working with young clients, gearing our banking offer towards young people. And we are happy to see an increased and an increase in the population of our young clients. Let me go beyond the second quarter until end of July, we have opened 790 such accounts, which amount to more than PLN 1 billion. Now let me revisit the PeoPay and our Kids program. We have been present at the universities for many years and the past quarters, we started implementing our strategy for the young customers. There is the [indiscernible] program as well. You can see it on screen. We have established brand new communication line to the kids. And the, If not now, then when, when else. We are also present in the social media, implementing a marketing campaign on that platform. We have also adjusted our application to the young clients. Also, that includes the youngest group. And here, I'd like to revisit the idea of the last better. This is why we have removed many functionalities, making of the application more streamlined because young youngsters do not need to, let's say, transfer money to [indiscernible] various public authorities. So it's not only about the streamlining of our applications, but also we have dramatically re-engineered the visuals of applications, which is now much different than the standard one. We have added many interesting functionalities such as visuals related to gaming. Soon, we're going to launch things like piggybanks, where we want to encourage young people and kids to save money. We have about 1 million young children and the increased rate is 10% per PA. We have attracted -- we have 100,000 accounts for the young people, plus 11% year-on-year. We have won the Golden Bank Award for the best accounts for children and children are very important group for us. We are very happy of the strategy for the young people. It's not only available on [indiscernible], but also works in the field. And I believe that we have achieved quite a good growth rate. In the retail sector, we are the bank which is present in the micro business area, which is actually about sell traders. We have a full scope of products for those clients. We focus on the segment that we have ruled before, but we have abandoned it for many reasons. And I mean here the farmers sector and the agricultural producer sector. In August, we're going to make our credit offer more attractive. We want to make available to farmers a loan up to PLN 400,000 to sell financial liabilities related to agricultural activity and purchase of selected materials and live stock, which is very important, in our opinion, especially in the times where harvest is approaching and harvest always combined with expenditures and also farmers start to plan for the next season. This PLN 400,000 in loans will be encumbered with an interest. Well, the interest rest will be paid by the Agency for Restructuring and Modernization of agriculture. So we're going to be more active in the agricultural cycle. That's it on my part. And now I give the floor to Leszek and I'm very happy to have told you a story about our activities in the retail sector and to speak on behalf of those 6,000 people who work for my story to be told. Thank you.

Thank you very much. Thank you, Wojciech. One more slide, which shows corporate segment. It signals our presence among major customers, issuance of an investment loan, PLN 8 billion -- over PLN 8 billion with CYFROWY POLSAT. Polski Swiattowod Otwarty, PEPCO Group, also our issuance and also Polenergia and Hillwood. We are a very active bank corporate leader, and that was recognized in the form of the award granted to us as the Best Bank in the Poland and sustainable funding from Global Finance, and that was a sign of recognition from Global Finance and we are extremely satisfied that our position on this segment is noticed and appreciated. To sum up the strategy. The financial parameters that I mentioned at the beginning confirm that the ambitious goals identified our strategy being achieved. ROE, cost-income ratio and nonfinancial parameters regarding digital transformation, the number of active customers in mobile banking are close to our target levels. Digitization rate is also very important to us. It is -- should aim at 100%. ESG strategy is being implemented in terms of expanding our portfolio -- green portfolios that includes green bond issues. Payment of dividend in this horizon in visiting our strategy, 50% to 70%. Recently, the General Shareholders' Meeting resolved to pay the dividend for that at close to 75% for this year. And this concerns that as always, we have been dividend paying bank of that, why it's very important for us to stay our policy within the ranges included in the strategy. Over to Pawel now.

Ladies and gentlemen, good afternoon. Also from me, Bank Pekao S.A. is extremely pleased to announce that in the stress test conducted by the European Banking Supervision Authority ranked in the first position among 70 banks that underwent the test. Probably, you are all familiar with the stress test methodology. That is the difference between the CET1 ratio. And compared between the base year and the test scenario at this time, we looked at 2022 versus test scenario in 2025. We're 1 of 2 banks which in the stress test had no decrease in CET1. What is more, we had an improvement at 0.4 points. The tests show that even in the stress test scenario, all capital ratios of Pekao S.A. remained above the ones set by the regulator and the target capital parameters that we set for ourselves. I leave it up to you to analyze the details. In our assessment, the results are due to the confluence of 2 factors. On the one hand, we have favorable market conditions, which I think we are able to utilize to our benefit. And on the other hand, I think this is also the effect of the policy pursued by the management of the bank, policy of prudent management of the bank. Our major asset, our customers and the security of the deposits in our bank is our primary objective. As I have already mentioned this place #1 in the results of stress testing is something we consider as a major success. This is the effect of work of the entire bank. It is not just the management board, but because of the effort of all employees. So I would like to thank all our employees and congratulate them on this. Ernest now, and then I will resume the financials.

Good afternoon. Probably in the second quarter, we reached the lowest point in the business cycle. And now we are in for a self acceleration in the growth. Why have we reached this lowest point? Well, there were a few internal factors, weakness of the consumers certain concerns that the consumers have in the winter season, there was energy crisis, high inflation, increase in energy sources, increase in food prices and so on. And then pickup was expected in spring and we see the increasing intensity of the market. But there are some other difficulties. Our major business partner, Germany is, for example, now facing major problems with the business cycle. Some of the structural nature. That is mainly in the industry and I think we will revisit this topic over and over again. Now if we consider where Polish economy is going to find itself in the upcoming quarters, we will -- we expect to see a certain revival of the market. But we expect economy not to grow that dynamically as in the past. If we look at imbalances, these were internal imbalances, demand pressure, certain overheating of our economy. And again, that was something that happened in other economies. Now we can even call it a desirable phenomenon. Our forecast for the upcoming weeks are lower than those of our colleagues and competitors. And this is also in the context of inflation. For some time now, we have been talking about the inflation and I think we were right because if you look at the numbers and the graphs, you see this -- Disinflation. This is what is happening in the market. The market expect 300-point decrease. The reductions in interest rates are expected to start in autumn. There seems to be a certain agreement concerning the mechanism underlying the decreases, strengthening of the Polish Zloty might be an element which contributes to the general picture of Disinflation and weaker economic growth. All those things start balancing of, we have interest rates that are calculated by Ex-ante method, worked negative, and they will lead to cooling down of the business cycle if we want to have growth in future quarters. That is our macroeconomic scenario. And I think this is also a scenario which will start being reflected in evaluations of the bank and then the forecast for the bank. We know that there is a certain delay in those things being reflected in analysis. With action that interest rate is probably something very most -- very important.

Ladies and gentlemen, the result of the second quarter is about PLN 1,700 million net and the drivers are the same, interest-related, noninterest-related income. We have, however, noticed 2 additional drivers that were negative in the previous periods, the second quarter being an exception here. We have increased the provision for the foreign currency mortgage loans and the current recalculation led to the spending of the reserve at PLN 277 million. Now the coverage of the CHF portfolio by the reserve is very close to 100%, only 0.2% points were missing. So we have covered this 100%. Let me tell you also that Pekao S.A. was the only bank or one of the few that have not made use of the capital. So the Court of Justice verdict did not lead to increase in the provisions as we have built our provisions at the level of 80% of our land portfolio. This was a very high level and the time which have not been seen in the market elsewhere or anywhere. Now our competitors are slowly reaching this level that we used to deem the most realistic one. The second thing is payment moratoria in 2023. This moratorium draws to an end. So it makes it for us much easier to revaluate the provision. And after the second quarter, we will have dissolved the reserve at PLN 80 million. What led to those PLN 80 million resolution is the update of the participation coefficient from 85% that we assumed originally, we've been going down as the payment moratoria claims were coming. So now the participation level is a little bit above the assumed level, namely 70-plus percent. And here's where we do not expect any significant changes in the future going forward. The graphs that you are very familiar with, comparison of the net profit over -- which over doubled -- which more than doubled compared to the first half of the last year. Quarter-to-quarter saw a 17% growth and more than 262% between the quarters, the second quarters of '22 and '23, almost 30% higher return on profit and operation expenses 20% higher with similar growth rate. Operating profit -- operating expenses went up by 12.5%. Cumulatively, they are very much correlated with inflation rate, and I will talk you through this in more detail in a moment. The net interest income went up by more than 20% with a smaller growth rate vis-a-vis the previous years. Net interest margin also at a very high level as well, more than 400 points and the Q&A session, you want that to tell -- to ask me those questions. Indeed, we are expecting the net interest margin going down. We don't know though to what level. The net interest margin that we had in the -- that we saw in the reporting period, we deem this to have peaked, and we expect it to go down. However, stayed at the unchanged level a couple of times. So it is independent on our activities, on our actions and the behaviors of our clients by the very heftily. So it's after our client solely, how they go about their deposits. Do they change products with interest rates or without, these are the individual decisions of our clients and these decisions are reflected in the net interest margin. However, expectations on the decline of the net interest margin have not changed. And I still maintain that we're going to see the decline of it going forward as it is due -- sorry, it is combined with the planned reductions of interest rate although what, let's say, out of sync with other changes. Now the retail loan volume compared to the previous year, went down by more than 6%. This drop rate results from the decrease in mortgage loans. Cash loan volume stayed very similar to the previous year. Corporate loan volumes maintained -- we maintained the same level at about PLN 100 -- short of PLN 1,000 or PLN 100 million. Our deposits in the retail sector went up by 16% and 4% in the corporate segment. The result of the growth in deposits and the credit portfolio is something that you can see when you analyze our liquidity, which is a record high, one of the highest ratings more than PLN 76 billion, but the results that we are showing indicate that the cost of that liquidity is not out of sync, that we can manage this liquidity and -- as a cost optimized -- in a cost-optimized way. We have net fee and commission income at a very similar level as last year. The drivers behind those slow reduction by PLN 22 million indeed are due to the reduction in fees for accounts and smaller margins on foreign currency operations. But we see the managing fees or asset management and brokerage services going up which we have been showing as reductions or declines over the past quarters -- several quarters. Now the operating costs are very much correlated with inflation with plus 12.5% year-on-year. With the 2 main drivers being the maintenance of our properties, such as energy costs. Another driver, if we speak about assets, the property, there are many, let's say, cost factors that go up when the minimum wage goes up as well. The other driver are the personnel costs. And here, we have 2 very important factors. One, in the second quarter, we signed a deal with the majority of the trade unions concerning the pay rises in 2023. These pay rises have been implemented. And there is also a second factor to that. We have implemented a new bonus system and incentive system for our sales force. This new incentive and bonus system for our sales force at the July's conference I said that this is what we see as a classic investment into our sales network and the growth rates that Wojciech covered before, especially in terms of express loans and also mortgage loans demonstrate that the system has been working very well. And we see the growth in the products where we have not been leading or vice leading the charts, but still we can see high growth rates, and this is a proof for us that the new incentive system works very well -- leaving this line quite natural fact that the benefits of this system cover a much greater portion of our employees and then the number of employees included in the old bonus system. Capital ratios, all at very safe levels, both above the regulatory requirements and above the criteria necessary for dividend payment. The dividend payment at 75% of profit from the previous year in accordance with the resolution of the General Shareholders' Meeting did not cause any fluctuations in those numbers. And another topic related to this, our issue of bonds related to the fulfillment of MREL requirement. We are after 2 such issues and the bids that we received were very attractive in terms of pricing. We, as the management board can say with full responsibility that by the end of the year as regards fulfillment of MREL requirements, can feel comfortable. We do not feel hostages of the market. We know that we force to have another mission. Another issue, we do not exclude the possibility of PLN or Euro issues later this year, but such decisions will be made above all based on market conditions. In our assessment, MREL requirements are fulfilled. So we do not feel any pressure that would force us to issue an additional bonds in the future. And I think our shareholders will also appreciate this because that will be seen and result of future periods. We do not change the planned levels of MREL issuances. I have also talked about that before, those MREL issuances are not intended only to meet the requirement levels. We want to treat them as a buffer for future funding and credit products. Cost of risks and a very satisfactory levels, both in terms of the cost itself and NPL ratio as well as NPL coverage ratio. These are very stable parameters in our bank. Once again, I'm able to say that we can expect a moderate growth in the cost of risk in the upcoming quarters. But we do not see a risk of this cost exceeding the range that we included in the strategy that is between 50% and 60%. I also think that the cost of risk that we present to you every quarter with a very similar justification is something obvious to you. You are familiar with our credit policy that Bank Pekao tends not to engage in very risky projects. We are not looking at an extraordinary profit, and we tend to weigh up the pros and cons. We look at potential profits weighed up against the risks. And a very brief summary now, sales results at a very good level. Our participation in this safe loan program, First Apartment program in our assessment will build a customer base for the future. This is again something we have manage,d, but we expect to be one of the drivers of our strategy completion. A high rate of growth in digital channels, which is again a very important parameter in our strategy. Cost of risk at a low level and maintained at this low level kept under control. And our first place in EBA stress test, we are the most resilient bank, the most resilient to negative scenarios throughout Europe. Thank you very much.

Now we can move on to our question-and-answer session. Those who are here in the room are invited to ask questions. Now I have also a long list of questions asked online. Andre? Okay. So I will start with the online questions. There are a few questions regarding interest rate margin. We benefit from the reaction of our customers. We have quite significant income from interest. When interest rates were growing our sensitivity to 100 basis point, change in interest rate was about 30, 35 basis point change in the margin. If the rates go down, probably the best tracking of the development will be by following our quarterly report.

Last quarter, we presented our information slightly later because here, the repricing was slower than our securities portfolio. But this process rapid. The cost of -- is low. The entire aggregated cost of that is almost 2%. So the decisions of customers that Pawel referred to is still something that will happen in the future.

Now there was a question about our plans for mobile and online developments for corporate customers. Internet and mobile for corporate customers.

Generally, in this area of corporate banking, what we are doing right now is based on 2 things. It is a strength of our bank to have very good relations. Obviously, there are some changes in the nature of our relationship between the company and the bank and we tend to be very cautious about migrating customers, centralizing them very quickly because we see a lot of interest, and we can see that in the growing volumes and the migration of new customers. A good relationship in small and medium enterprises, here we See very good service provided to the clients by our representatives. And we have to remember that those SME companies are not only those located Warsaw. We are aware that we invest in self-service solutions that is we add an additional layer to this flexibility by expanding the range of services customers can expect. So on the one hand, we have consultants who work on this relationship level. And then we have self-service, some procedures can be completed by our customers and those are more pain staking are handled by our consultants.

We have a question related to our expectations to the potential payment moratoria for mortgage loan expansion.

As Pawel said, this is about what the market has been hearing, potential decision can be made that the moratoria will be extended by 6 months and they would include income -- income criteria. What is important is not only the share of our clients, but also how much of the moratorium or sales settlements by the moratorium are put aside to repay the loans later.

Cost-related question, why the costs went up so vehemently in the second quarter compared to Q1 and what you expect in terms of operating costs with regard to this inflation.

As I said before, we've been seeing very strong correlation of the growth rate of our operating costs with inflation. I cover the reasons for the increase in personnel cost quite widely. So these are the -- these include the -- the drivers include a new deal with our trade unions and the new incentive system. These costs in our opinion, will have a growth rate strictly correlated with inflation. So naturally, we expect the decrease in the operating cost and step with inflation.

When it comes to personnel costs, one of the items that we negotiated about with the social parties is the inflationary power meter as right at the end of the previous year. So does the first parameter that we negotiate about when we try to determine the coefficient for the pay rises. And the second parameter is what we can read in our internal regulations, namely the inflation pre-program in the state budget. So those 2 give us a certain leeway, a room for negotiations. So between these boundaries that we conduct negotiations.

Of the growth rates of operation costs correlated with inflation will stay at the same level, so -- or the same strength. So as the inflation goes down, our operating costs will also decrease.

Another question is about dividend for this year. Well, this may be a premature question as of August, but can we expect a similarly high dividend as the previous year with the income or profits have gone down very significantly.

So the Board determined the dividend at between 70% and 75%. So there are no signs for this policy to change what the future brings us. We have wait and see. But our objective as the management is to keep our bank as a dividend-yielding bank and to disburse the dividends every year to our shareholders. Well, let me also point out about with the Board -- sorry, the management's proposals have been endorsed by our shareholders as happened last year. Before the general meeting, one of the shareholders put forward as a client to increase the dividend. We have analyzed it and concluded that paying out a dividend of 75% what not and danger the stability of the bank. Please also know that there is a temporal shift once we decided to pay out 50% dividend, we were before the first issuance and the macroeconomic challenges and parameters or situation was different. So this time shift in paying out a dividend led us to a change of our opinion about the bank's ability to pay out 75%. So as management, we have given out our second endorsement to -- of disclaim this request.

A mortgage bank question, which saw another -- yet another loss. Are there any activities in the pipeline to restructure this business unit?

Well, in general terms, the main problem of the mortgage bank is that it has CHF, Swiss francs. And sometimes regulatory activities factors such as payment moratoria. One of the solutions that is still on the table is to remove the Swiss francs portfolio away from the mortgage bank. But as soon as this such type of event happens such as payment moratorium, mortgage bank would eventually encounter liquidity problem. So we can dissolve most of the mortgage settlements, but not all of them.

And now the question, are we interested in the VeloBank or the retail unit of the Credit [indiscernible] Bank or are they too small for us?

I kept saying that organic growth and our strategy is what we hold most dear and closest to our heart. We have a project of taking of idea banks that proved our competencies in M&A projects, but as -- so far, we have seen no reasons to do such things and we've been growing in organic way, which is our preference. We've been placed for a phenomenal 60% market share in the apartment credit program. What is the reason for such a great result especially in the view of other banks opening the retail sections also on Saturdays. We are very happy with our share in the market, which we expect to be about 60%. What happened and what caused our success, we enter to embark program in a great moment in time. We observed an expectation mounting vis-a-vis this program and since we were prepared on time, the clients who are waiting for the applications to be accepted, send those applications out. We have been in touch with our brokers and we've been training them. We also communicate the -- actually the foundations of the program before it arrived. So training content that we passed on our brokers was right on time. We have been waiting for one message indicator that have been announced on Sunday, and that announcement triggered the avalanche of those claims. Also, we saw a 40% share in MDM. So we decided we are absolutely capable of dealing with the matter. As Leszek said, we kind of are able to hold this PLN 4 billion and most of the mortgage applications are those that relate to the program. Being asked if we can handle those, we can say that we've been selling PLN 10 billion worth in mortgage loans, PA. So now we devoted a large chunk of our capabilities to actually handle the backlog and processing those requests and the number of the signed deals is prevalent. When it comes to our perspective, when I look at the stock of those requests, PLN 4.8 billion, going beyond the second quarter now. If I analyze all the conversion rates, which relate to a percentage of the deals, I believe that we are able to sell 5,000 such loans in our program. I think that now we have the opportunity of this program, then a number of applications filed will decrease. Let me just remind you that this program is going to continue on this year, but also next year. We want to remain an active player in the entire program. I expect the scale of interest and it will decrease over time. Now we are satisfied with this stream of customers that is flowing into the bank and we are taking care of them with great intensity.

There is also the question whether we see any risk related to exposure to leasing receivables from Idea Bank.

Now that is transferred to Belgium, so we do not see any risk here.

One more question to Ernest about IT. What is the area of our greatest interest in terms of investment of our IT in transformation projects, what is the most important thing for us at the moment.

As regards to transformation projects, I believe that, for example, this Youth program is a transformation project, very high on our agenda. Another transformation project is the mortgage process. We wanted to streamline the mortgage granting procedure. We automate loan procedures. We have a few automated processes that are related to long granting. As a product that is developed in this product node, we can mention state-of-the-art technology that is definitely the most developed in the market. We are not talking about what customers see. Customers see similar things in different banks, but what happens on the side of the bank, this internal arrangement of individual elements probably is the best here. Ai, and it is not just an empty slogan. We are looking at AI differently from the perspective that the banks had big data. We look at use cases, we want to have implementations as soon as possible. And we have a few principles that we are following. It's a pity that Blazej is not with us. But for example, cloud. Using cloud, our bank has certain strengths -- this discussion has been going on for years. It's a bank, an IT company or not. Well, bank is basically a company that grows loans, takes care of relations, takes a look after customers' data. But there are some activities that are done better by purely IT companies. But we want to use those IT technologies effectively and wisely. Leszek would like to add anything to this?

In general, we can say that we have this bottom-up approach. Wojciech might give you more details because this is his area of specialization. We have managed to bridge some gaps that we had. We want to accelerate and we're processing on to sell loans faster where it is important to improve some steps. And then once we sell loans, it becomes important to use the data with increasing efficiency. The bank must be a place where data are used to earn income. CRM is important to us. That is a very important product run by Wojciech which is very promising. That is not a product that is closed yet. It is still developing.

Yes, I think we have provided a big part of answers to this question. We, as the bank stated in our strategy, said that we would revolutionize CRM. We are now at 60% advancement of this. We are now using state-of-the-art analytical CRM. Very soon, we will go to operational CRM. And strategically speaking, that is one of those elements that we treat as important strategic projects that are already bringing benefits. And in the future, those benefits will even increase.

Andrzej Powierza, Brokerage House of Bank [indiscernible]. I have 2 questions. And the first one, I would like to come back to the topic of dividend. I understand that this year, the uncertainty around MREL, spoke in favor of a more prudent approach to management board recommendations. But looking forward, next year, taking into account the significant surplus capital stability and your good results and stress that showing that capital standing is sustainable. What could be the factors against offering dividend at the upper range of our scale that is close to 75%.

I think that we should not forget one very important element. It seems that next year, major infrastructural investment projects will start in Poland. And I mean development of offshore wind farms and maybe some nuclear projects, possibly minor ones. There is some media coverage on those topics. And in fact, there is more media coverage than specifics. But according to my knowledge, next year, some of those things might start. And this is one of the parameters, which we will take into consideration while recommending the level of dividend for 2023 to be paid in 2024. I agree that unless negative events occur. And if the bank has the appropriate surplus, of capital for its credit action, there should be no obstacles at all. That is as things stand now, but we still have a few months ahead before we make this recommendation and those months are going to be very interesting to all of us. So let's treat this as a rather theoretical academic discussion. And next year, hopefully, we will be able to talk about more specific things.

And the second question, sometime [ pulls ] business reported that another major bank was asked by the Ministry of State Assets to employ over 100 people. Have you also been requested by the Ministry of State Assets or some other entity? And a more general question about changes in your headcount. Do you have any changes there or not?

We have not seen such things like you said, the churn rate is quite natural, which results from various transfers and people who come in and go out. This is due to the fact that remunerations in our bank are slightly above the average in the banking sector. This is why we successfully employ people from -- coming from other banks. We don't see any reason for the Ministry of National Assets to approach us with their request. And the recruitment process that naturally continue include mainly the competencies and experience in the bank sector which we prefer to actually use the most of the talents in people. Allow me also comment on that. You know our financial department directors and you might have seen that these phases remain the same for many years, the management change by the most important directors who basically vouch for the stability of the bank remained the same for the only 2 or 5 years, but these are people who have been in the bank for more than 10 years. So on the one hand, we have our statements and declarations but on the other hand, you can clearly see a sample of the personnel which has not changed for many, many years. These are the directors who are evaluated very highly in higher steam by -- and held higher steam by subsequent management board. So we have no reason to change something that works better and sometimes the new things are the enemy of -- better is the enemy of the good. So our colleague is here an example of the transfer from another bank. Any further questions? If not, well, excuse me, let me pass on one piece of information that I need to drill down concerning the Swiss franc provision. This quarter, I thought we have dissolved this reserve. My memory sent me, we had an extra PLN 400 million -- which amounted to PLN 400 million in the provisions. So those PLN 270 million look well. But unfortunately, my memory serve me ill, we had not the -- we saw not a dissolution of the provision but an increase in the provision. Thank you for those numerous questions. I will revisit those technical smaller questions later. We are going to report the results for Q3 early in November. Thank you very much for being with us for the participation. Goodbye.