BNP Paribas Bank Polska S.A. (BNP) Earnings Call Transcript & Summary

Good morning. We would like to welcome you very cordially to our earnings report conference. We're going to talk about H1 2022. We're meeting here in very interesting times for the industry. We're going to speak about the current time, about the future. We'll talk a little bit about the past in terms of what has transpired in our bank in the last 6 months. So we have a typical agenda, so I won't mention everything. We can go on to the merits, the most information -- the most important information, as is clear in Q2 of this year, the bank generated a net profit of PLN 258 billion. This is down 7% from Q1, but it's much better than the corresponding period of last year. I think this is a robust result. It's not a phenomenal result. But having regard for the circumstances, the additional burdens, I think it's a very decent result. We've been growing in terms of our lending activity, both on a quarterly basis as well as on a year-to-year basis. And our revenue is up by 7%. And this is because of net interest income. We had a very good FX result and stabilization of fees. If we look at our activity, there are a few things I'd like to mention. Everything else is listed in the slides and the materials. So we believe that our agile transformation is going well. The work in this format is fast, dynamic. It's engaging. We're able to give various solutions, roll them up more quickly, are dedicated, and this is something that's positive. We focused on sustainable development. On the next slide, we'll talk about some of the numbers. PLN 5.1 billion of new green financing. This makes us one of the leaders on the marketplace. This is something we want to maintain and strengthen. We can see that our customers are more active in digital channels. So we're more technologically involved. We have a good result in terms of attracting new clients, also record-breaking in terms of corporate claims. We have clear revival recovery in SMEs. So we can say from the business and commercial side for the bank, this was a good period. I mentioned the volume of green loans. This is the work -- the result of the intense work done in all of our client-facing departments. So we're working with big customers, individual customers. And I think we still are the first bank to offer mortgage loans for a fixed rate for a 10-year period. And so this was a clear response to the expectations of customers and the regulators in order to ensure that customers do not face interest rate risk for the longest period of time possible. And of course, we'll come back to this. We had several big corporate transactions, and so we are strengthening our position as one of the leaders in terms of structured financing as well as M&A activity. And here, as a team and the volumes of transactions, the number of transactions are stable, and this is clearly growing. As you know, the beginning of the war in Ukraine, we were quite active when it came to refugees, on our employees of our sister bank. We opened -- we are opening and continue to open dedicated accounts for Ukrainian nationals. We believe that we should provide them very good conditions for cooperation with the bank to ensure that they feel at least in this aspect, very good in Poland -- very well in Poland. I mentioned about the absorption of digital channels. We have more than 1 million users of the digital applications. So in our remote channels, we're automating also processes in terms of customer inquiries and requests. And so there's a lot of progress. We have more and more bots, robots handling processes in the bank. We're talking about these loan vacations or credit vacations, and I'll talk about those a little bit later. What else can I say? If we look at other pillars of our strategy together, I've mentioned agile, everything is going well here. I'm also pleased by things like appreciation for the fact that we look at diversity and inclusion. We're emphasizing that, perhaps this could be translated more differently and both internally, and we want to make sure that our customers how -- regardless of how they differ, we want everybody to feel well in our bank for them to have equal access. We have certification of access in our branches to all customers regardless of the type of difficulties and obstacles they face. So if we look more specifically at the figures, you can track some of the trends. We can see the number of GOmobile users is growing very strongly. And so it's a friendly application. I use it. We're developing its functionality. We have peer-to-peer BLIK. We have a large number of customers who are happily using that and willingly use and that you can see the number of BLIK transactions. It's growing rapidly 22% up from quarter-to-quarter. And so this shows that this had been noticed and appreciated. So if we look at retail banking, and so we can say that the total result for the 2 quarters, first 2 quarters is very robust, even though one was better than the other. And we can see that the interest in funds, investment funds is soft because of the growth in interest rates. So there's nothing to brag about here. But if we look at the sales of cards, we can say this is quite robust growth, and that's good. And so this is a product which is attractive to customers. And at the same time, it generates profits for the bank. If we look at other forms of lending to individual customers, we continue to continue to see that cash loans and similar loans are continuing to grow, but we have a clear decline if we look at mortgage loans. And so this decline, this is -- there's no secret. The secret -- or this decline got even bigger after the close of the first half of the year. So this is a clear trend on the market. This is a result of the higher interest rates, which are curtailing demand. And we also have the burdens of this specific product where you have the regulatory risk, when we have credit vacations or loan vacations, which is something that's painful to the industry. I mentioned the record-breaking numbers of institutional clients that have been attracted. So in corporate banking and SMEs and so we're clearly moving forward here. We were talking with our managers yesterday. And so the bank is standing on 2 very strong legs. So the retail leg, including personal finance as well as on that institutional leg, where we have AIB and convert for clients as well as then SMEs. So our market shares have risen in loans and deposits. And this shows that the bank was in an upward trend. The number of customers is up more than 4 million customers. This is very important to us because growth can be achieved by adding new customers and then expanding the scope of services offered to them. And that's something that's happening in the bank. So the net banking income is nearly 7% quarter-on-quarter in Q2. It's -- well, it's 36.2% year-on-year. So this result is relatively lower, especially year-on-year compared to our competitors. This is a result of the fact we have been very conservative in terms of the security for interest rates on our portfolio, and that's something that's generated as a result here. But if the trend reverses, especially with interest rates, then we're going to lose this compared to other banks that have a different hedging policy. If we look at cost, we have the IPS component. So formally known as, this is the commercial banking system protection, but we can call it -- so PTA or IPS. And so basically, we make payments to that institution of PLN 180 million in Q2 of this year. So we have -- if we overlook this one, costs would have grown less, but there's also cost pressure linked to inflation. We're monitoring that situation, and we're actively managing that. We'll continue that. But with certain cost items, there are not many things you can do, especially like energy costs. In Q2, we've added provisions for the Swiss franc risk, PLN 140 million more than in Q1 and having this, coupled with the IPS effect, that means the profit -- reported profit is lower by 7% than in Q1. So if we were to, of course, adjust for that Swiss franc impact, it would have been higher, PLN 258 million net profit in current reality is a very robust result. I hadn't said that previously, but I wanted to say that. Maybe a few ratios, which are very important. So the cost of risk, we can say that the situation is very much under control we believe and the quality of our portfolio. This is marginal growth. In Q2, it's more or less at the same level. And even though we have the slowdown in the economy, we don't see a threat to our purview. Of course, Mr. Kemblowski will speak to that in just a few moments. The ROE in H1 is 9.6%. So it's a little bit lower than in Q1, but we have to remember the IPS is PLN 180 million cost. And then we have higher provisioning for Swiss franc loans. And then we have the cost income ratio is essentially without any change, various cost-side pressure. And this is something that has made it more difficult to improve that ratio. So where are we, generally speaking? Ladies and gentlemen, I mentioned we're in a very interesting point in time for the banking sector. I believe we're also in a very difficult moment, and a number of factors are taking place. At the same time, these are macroeconomic factors. So we have economic slowdown, a recession on the horizon, high inflation. And as a result of high interest rates, there is inconsistency between the monetary policy and the fiscal policy, which makes it more difficult to manage such high inflation. We know it's much higher than other close countries. If we look from the left side so we have the IPS, the cost of IPS is significant, but the idea of building a private system to protect commercial banks is a good idea. And our bank is involved and has been involved in this project from the beginning. It's a grassroots initiative of banks in the sector. So private banks as well as banks controlled in one way or another, but the state treasury -- and it's good that this institution is being set up. And this will make our sector more stable. But this is a charge to this year's Q2 results. Then we have credit holidays. I'm not going to say much about what they entail because that's something that everybody knows. I believe and have believed from the very beginning that it's bad to roll out credit holidays in this way. It's socially unjust as well as when we talk about trying to maintain the strength and stability and soundness of the banking industry. So these credit holidays are available to all borrowers. So people and powers who have difficulties as a result of higher inflation and maintaining their budgets as well as it's offered also to those people who are very wealthy, and so they've bought exclusive properties and expensive. And so it's also available to people -- for people who have taken out fixed interest loans when interest rates were very low. So it would be very difficult to justify why those customers should receive assistance or relief from banks and their shareholders, and their situation hasn't changed. And so these are customers who are paying 2.5% per annum. Well, if we look at interest rates right now, that's a very attractive level. And so directing assistance or aid to those persons is something that's improper. One can, of course, enter into polemics about the number of installments that could be suspended. I'm afraid that this initiative, generally speaking, will have an adverse impact on the ethics of discharging liabilities because it shows that financial liabilities do not always have to be paid down at the contractually agreed deadlines. And that suggests they don't have to be paid at all. And so I am troubled by this. The entire sector is troubled by this. And so in our statements, we wanted to civilize these credit holidays and direct them to people who need them and our voice was not heard. So we continue to hope that there will be no other ideas leading to similar repercussions that would be implemented through legislation. As you know, the credit holiday estimate for us the cost of that PLN 700 million to PLN 950 million. And so we're going to monitor this situation as we posted PLN 700 million. And depending on how things develop, we'll adjust the posting here. And so we have additional money for the borrower support fund. This is something that's been around since 2016. It hasn't been used practically at all. And the number of customers interested in utilizing the support is the number of people on the rise. That's why the fund was set up. And then we have the Swiss franc. Here, the situation is very chaotic. That's why we're monitoring it regularly. And we're adding provisions every quarter. In fact, in order to build a buffer for the situation, it's clear that systemically, many things have not been regulated. And so this chaos leads to concern, and that's why we have this approach of setting up provisions. And then you have the benchmark reform for WIBOR. You know that Prime Minister announced this at the Catavizza conference in April. This is very vague. And now more and more details are coming out. Nowhere else in the world has such a benchmark reform been done in this period that the Prime Minister has defined. And so the Polish Bank Association is participating in that, people from our bank are also participating in this, and we're hopeful that we're going to be able to convince all of the stakeholders that this reform should not take force as of January 1 of next year because it's undoable, unfeasible. It will lead to chaos in the Polish financial system. In the external world, these things should be done in a cogent fashion well thought through. Methodologically, it should be done conscientiously and the period left up until the end of this year, will not allow for that to take place. And so end my -- this part of the section with the reflection in terms of the circumstances in which we're functioning and I'll support this with some numbers. Ladies and gentlemen, since 2016, the bank has paid some PLN 4 billion in -- PLN 4.7 billion in fees, dues, taxes to the various state treasuries. And of course, we haven't paid a single zloty of dividend. And the situation is that the likelihood of paying a dividend is very low. The conclusion is realistically the legal and economic framework that's been created in Poland, to speak as gently as possible, is not fair, not just for investors, for shareholders, for banks. And I think one should think about that in terms of the narration, which is being put forward around banks. I think it's a very aggressive unjust. It's unnecessary in which we forget about the role played by banks in the economy, what role they should be playing in difficult times and how they should support the economy when the economy is emerging from a difficult period. I think we're decent people. We've done a lot of good. We've made mistakes. But well, fundamentally, we do not deserve such a narration or such a situation. So let's go on and look at the macroeconomic environment.

Thank you very much. Ladies and gentlemen. Good morning. So the environment is deteriorating, and we're moving into a period of recession. So if we look at the accounts for the National Bank of Poland for Q2, they show a shrinkage of the economic activity over the last 3 months. All of the indices available suggests that this decline will be continued in the current quarter and probably in the subsequent quarter. So on top of these environmental or the cyclical things linked to the structure of our GDP looking at inventories, one of the most important factors in terms of the length or the depth of this slowdown. This is the supply of energy carriers such like natural gas for Poland and EU. This is an important factor. And at present, there is no good response, whether or not that supply will be available. And if so, to what extent? This is something that we will pay attention to in subsequent months. Unfortunately, this recession -- upcoming recession is accompanied by high inflation. It's not only because of high supply-side factors. We you have domestic factors as well. They're not just external. We have a very high nominal increase of wages. The fiscal policy very strong, and this is contributing to this. And in subsequent months, this will continue to be the case. And so this does not make the situation easier. Of this -- so it doesn't make it easier for the Central Bank or for the monetary policy council. And so the inconsistency in terms of the policy mix is very important, and it's very significant and very bad in these uncertain times. So this cycle has been in place for some time in terms of tightening monetary policy. We're certainly closer to the end of this cycle than we were at the beginning. That does not mean, however, that the interest rates will stay at the current level. So on top of the macroeconomic factors, so inflation, economic growth in subsequent months, we'll have to pay attention to what the conduct will be on the financial market, including the FX market. If we look at the last 15 months or so and what the Polish zloty has been done, it's hard to resist the impression that everything is okay. In terms of the fundamental factors, we have to have in mind that the fundamentals will get better from the FX market point of view, and this will be an additional factor, making things more difficult to pursue economic policy, including monetary policy. And then last but not least, from the point of view of the banking sector, what does this macroeconomic environment mean? It doesn't mean good times, it means more challenges. That means more difficulties. It means more concerns in terms of the pace of lending activity. So if you look at retail loans or household loans, the slowdown or the decline in demand. Well, the signs are very clear, but this recession could affect corporate loans demand, which had been growing very fast in the last several months or 12, 15 months. And so this growth rate could be softened.

Good morning -- of the year. We delivered solid financial results despite the headwinds and the creation of IPS. It will help us to cope with the new challenge. We will -- which will occur in the second half of the year. And I'm referring to the first one, which is the credit holidays impact is going to be huge for the banking sector and on the bank as well. In terms of business, so a very good performance for the business. Our loan book grew by 14.2% year-to-year. We strengthened our deposit base, which grew by 13.6%. Capital decreased by 8% the impact of the negative valuation of the bond portfolio. Tier 1, close to 11%, 10.99%. I will speak about it later. ROE, 9.6%. Net result, PLN 553 million, up by 81% year-to-year if we are excluding the impact of CHF up by 37% year-to-year. NBI PLN 3 billion, up by 31.9% year-to-year. The main driver being the net interest income resulting from the positive impact of the interest rate hike and the growth of the loan book. Good performance in terms of fees and commission, which grew by 19.8% year-to-year. As a consequence of the normalization of the cost and also the creation of IPS costs grew by 31.2% year-to-year, excluding BFG contribution and IPS, the cost grew by 14.6%. Decrease in the cost/income ratio, we keep on increasing the coverage ratio in terms of CHF mortgage loans we book additional PLN 223 million. And the quality of our portfolio is stable no deterioration in the portfolio. So cost of risk, PLN 165 million. As regard our loan book. So overall loan book grew by 14.2%. On one hand, the good resilience of the institutional customer's loan book, which grew by 15.7% year-to-year and another very good quarter, plus 3.2% compared to the first quarter. As regard individuals customers loan books, the situation is a little bit different, year-to-year positive growth, so 12.1%, but we are still getting some [ senior loan ] slowdown. And quarter-to-quarter, the loan book grew by 1.8% in terms of market share, we reached 6.2%. As regards the CHF mortgage loan portfolio, we are keeping on increasing the coverage ratio. So we book additional provisioning, and the provision region level of PLN 1.5 billion, coverage ratio close to 34%, which is in the market. The good news is that we are still keeping and negotiating with our customers. So already close to 800 customers agree about the proposal and the negotiation has been totally finalized and completed with 564 customers. In the first half of the year, we have decided to strengthen and to stabilize our deposit base. So deposits grew by 13.6%. Recently, after the stabilization, we have decided to optimize the structure of the deposit and which is opening the new trend quarter-to-quarter, meaning that individual loan -- individual deposits grew by 3.4% compared to the previous quarter. And in the second quarter, a slight decrease in terms of institutional customer deposits. The mix in terms of deposit is also changing as a consequence of interest rate hike. So the share of the term deposit is increasing. As a consequence of interest rate hike, investment products are significantly impacted, year-to-year investment product decreased by 38.4% and quarter-to-quarter 14.9%. Net interest income. So net interest income grew significantly year-to-year plus 44.3% with the main driver being the growth in our loan book, increase in the interest of the interest rate, but we have to refer also to some additional parameters such as our hedging strategy, which is impacting the evolution quarter-to-quarter and also year-to-year. As you can see we are also gradually adjusting the cost of the deposit. So the cost of deposit increased in the second quarter compared to the first one. And the margin or net interest margin is increasing and we reached a level of 3.29% in the second quarter. There is good resilience in terms of fees and commission. We delivered another very good quarter. Year-to-year, fees and commission grew by 19.8%, which is a good performance, and we performed in all the segments, all the activities. Q2 compared to Q1, minus 1.9%, which remain a very good level. In terms of net trading income, so year-to-year, minus 18.7%, but we have to take into consideration 2 components. The first one is coming from the very good performance in terms of transaction with our customers, which grew significantly and reached a level of PLN 196 million in the second quarter. But in parallel, we have another phenomena, which is coming from the cost of FX swap, which is explaining the decrease in the net trading income and another negative parameter, which is coming from the negative valuation of equities. In terms of net investment income, a slight decrease by 23.7%, which is coming from the lack of sales of bonds in 2022 compared to 2021. Cost. So the cost grew by 31.2%, resulting from the normalization of the business, normalization of the costs such as BFG, IPS creation and also the level of inflation. Excluding BFG and IPS creation, the costs are growing by 14.6%. Quarter-to-quarter, the main driver of the growth were the legal cost and also some consulting and IT cost. What is really important is that we are keeping on changing our business model. And as you can see, the level of staff is increasing quarter-to-quarter. And we are keeping on working on this topic.

Good morning, ladies and gentlemen. Q2, if we look at the cost of risk, it's 37 basis points. And it's not a very big difference from previous quarters. What's more important here is what we have inside that because the changes are quite substantial in terms of that [ PLN 37 million ]. So we had the released the reversal of COVID which we have some things that didn't materialize. So we made the decision that we should maintain that any longer. So that's really a reversal of PLN 200 million. And then we have PLN 27 million as a result of implementing having lifetime approach. And a portion of that was qualified as belonging to Phase II. We have a positive impact of PLN 15 million as a result of selling nonperforming portfolio. And then we added PLN 15 million in provisions for Swiss franc loans. We're talking about loans that are undergoing restructuring and recovery. And so the performance of credit risk. The overall portfolio is good, but we're talking about the legal risks linked to this portfolio. So generally speaking, we can say this is where we could end, but thinking about what else could happen in the not-so-distant future and how the economy might function. In terms of the growth or the lack of growth, we'd like to anticipate what might happen. So we've selected a group that could have problems, potential problems. And so we've put it into Phase II in terms of the level of provisions. So it's PLN 2.2 billion and PLN 85 million. These are customers who are operating normally, but they're at risk of high energy cost increases. So we're talking about anticipating things and not about the materialization of provisions. What also we've done, we've looked at the potential change in of macroeconomic inflation change of interest rates or severing supply chains and what could happen with PD namely in terms of various portfolios in the bank. And here, we've been anticipating another PLN 128 million of provisions. As a result, we have to think that the PLN 85 million and PLN 128 million, this is not something that has materialized. This is more of an approach like we had with COVID but for different reasons. Now if we look about or think about where we are, what we have in front of us and looking at the NPL ratio of 3.2%. And so you can see the limited amount of new defaults in all segments up until now and good restructuring of the current portfolio, which means that at the end of the day, we have nominally an NPL portfolio of under PLN 3 billion. So we can say that regardless of the customer segment, everything is operating well and correctly. So if we look at the various phases, and so this is only Phase II. This is where we actually did basically some changes, and this was a deliberate decision. And so this is something that we've done. So in each one of the segments of the client, we've improved. And so coverage continues to grow because new defaults are of very finite quality, where the portfolio is getting older. And so the older it is, the level of coverage grows because we added PLN 150 million provisions. And so we're above 60%, and we believe that this is a very safe level. In other words, the capital ratio during the first part of the year, capital ratio increase. I'm going to focus on Tier 1, which reached a level of 10.98%, which is a plan on the one side, with the increase of the business and the growth in RWA and the negative impact coming from the relation of the bond portfolio. All in all, capital ratio are still well above the minimum capital requirement, which is the most important thing.

So ladies and gentlemen, we're coming on to the end of the presentation, and then we can go on to the Q&A session. I'd like to say when we talk about the amount that the bank has paid since 2016 for a variety of burdens in millions, it's actually more than PLN 4.7 billion is what is the main figure was correctly given on the slide. So what awaits us certainly uncertain times, so uncertainty for a variety of reasons, the geopolitical situation, the macroeconomic situation, inflation and what's going to happen with inflation, these credit holidays. So they've only been in place for some 2 weeks and so how they will roll out and their impact on the banking sector is something we don't know yet. We have more uncertainty linked to mortgage loans, FX loans and our challenge is the decline in capital as a result of these revaluation or remeasurement of bonds portfolio and treasuries. And so this is important when we think about the capacity of the sector to finance the economy. And then we have the reform of benchmark. I hope that we're going to be able to utilize a more reasonable framework, I'd like to say 2 things. First, our bank is an organization that's gone through a major transformation. We've gotten much stronger. We've shown our capacity to generate bigger income on our base, and we have that capacity to grow. Had we not gone through all of that in the past, then our ability to absorb what we're going to face would be more limited. Now we're able to absorb what's happening. And we believe that even in a very difficult time, a well-prepared organization can grow, can grow market share and can go through difficult times in a pretty decent shape and can get stronger than its competitors. And we believe -- or I believe that we are such an organization. My second reflection is that having in mind what's happened recently with these credit holidays above all, the banking sector is in such a state that it will not be able to endure any other ideas like this. And so I'm imploring those who are responsible for this to be very reticent coming, when looking at new ideas that could compromise the strength of the banking sector in terms of how the banking sector treats and serves individual customers and institutions. This is our task, our responsibility, and we want to do this properly. And that would be more or less it in terms of the material we wanted to present to you today. So we have other information in the materials. So I think we should go ahead and move on to the Q&A session, and we can start the Q&A session with a question about whether it's the question from any of the people who are present here in the room today.

We have a large number of questions from people who are participating remotely.

I'm from Puls Biznesu. My question is about the dividend as a result of the fact that you've not been able to pay a dividend for so many years. The macro conditions are worse and worse, for how many more years can we forget about entirely that you're going to pay a dividend?

So we're not forgetting about the ability to pay a dividend. We think we should pay dividends to our shareholders. But it's very difficult to say when that time will appear that the bank will be able to pay a dividend responsibly and, of course, sharing the right level of profits with its shareholders offers.

[indiscernible] I wanted to ask about the corporate credit loans about the future there. What sort of decline do you anticipate? You said you expect some declines. And what about the quality of the portfolio? If I remember well, in Q2, it was a high -- slightly increase in NPLs for farmers. And one more question. Could you give us some numbers about how many applications have you received for these credit holidays? If you have that data, how many have you received so far? And also from this borrower support fund.

I'll start with the corporate loans. And from the second part of the question, we believe that the corporate portfolio has a very good quality. Our customers should be able to make to navigate the economic slowdown. We do not anticipate a material increase in the cost of risk linked to this portfolio. In terms of the decline, I think, as follows. The upcoming quarters will be a special challenge for retail customers, especially for mortgage loans. I don't anticipate that this market will be big. I believe that if we look at corporate customers, a lot of things will be happening. So I think that in upcoming quarters, the corporate business will be the business that will continue to be able to grow. This doesn't apply to all companies. But to the stronger companies, they might be able to take advantage of the situation in order to grow their market share and to do M&A activity, and we're totally ready to do that. If we look at the credit holidays. There's a lot of questions about credit holidays also from the online. So I'll try to respond to that one. First, let me remind you that we haven't been dealing with this for a full 2 weeks in terms of the time that these credit holidays are available. And so the number of applications is in line with our expectations. I'd like to emphasize that we're actually processing them very smoothly. We haven't had any stormy times. And so it's all being done online, customers are communicating with us by online, and we're actually handling and processing those applications smoothly, how -- what the final outcome will be nobody knows. As you know, the largest number of these credit holidays applications. So the first day, when it started was the July 29, that's when we've seen the biggest number of applications since then we've seen a decline in the number of applications. But I think we need more -- a longer observation period in order to be able to say how many applications will be filed or submitted and what will be the total cost of these credit holidays. If we think about the number of applications for the borrower support fund, this is a relatively small number compared to credit holidays. Of course, it's substantially bigger than it was in the corresponding period of last year. I'm not sure if we should quantify that so 221 applications this year. Thank you. I remember 200. I didn't remember the end. So that's the magnitude of this phenomenon. And so we have money in the borrower support funding. We'll have to add, but I think I responded to all of your questions. So thank you.

I'm from Business Insider [indiscernible]. I wanted to ask. I have 3 questions. Can I ask all of them?

Let's go ahead and try that.

My first one is about the interest margin. Is this the peak in terms of what's happened with deposits and interest rates? The second question is about the coverage ratio. It's up 33% right now. I wanted to say how much will it grow? It seemed at one point in time that, that would be the optimum level. And the third question is about the capital situation. In terms of Tier 1, it's falling your Tier 1. And the question is, is there a risk that you're going to have to raise equity.

In terms of increasing the free float that the bank has to expand by the end of 2023. Maybe I'll begin in terms of the final question and then I'll ask Jean-Charles to add some words in terms of what's important. We don't see any risk which would cost us to breach the equity ratios, which would lead to a necessity to raise equity. We're going to continue doing activities which will optimize the utilization of the equity of the capital. And our forecasts show that we should be on the safe side. So we do not plan to raise equity in the foreseeable future. The first question was about the interest margin. The second question?

About the coverage of the Swiss franc risk.

I don't think there's a person who could tell you what level of coverage is the right level. Finally, if we look at the level of coverage amongst the Swiss franc banks, where we have a higher level of coverage. But at the same time, participants in this game are continuing to bump up that coverage ratio, and this is something that we'll probably continue to do, but maybe not the same level that we saw last year. Much depends on what happens, the development of these pilot settlement agreements, we're doing better and better here. We're doing it more and more efficiently. And this is starting to have material impact.

In terms of reducing the Swiss franc risk, now is the margin at the highest level, do you think?

One factor to take into consideration what will be done in terms of future interest rate hike and also the pressure we have on deposits. So we saw in the market that there is a pressure in terms of cost of deposit so today, it's too early to say this is a peak or not. We have a few phenomenas to monitor. So generally speaking, we can say we'll see. There is pressure on deposits. We don't know what's going to happen with the interest rates. So we'll see.

I'm from Santander, I can hear you. My observation. So generally, my question is as follows. What sort of competitive edge does your bank have over other banks that's enabling you to grow more quickly? And then I have a more detailed question about the corporate segment and whether stopping to sell mortgage banks to the external customers. Is that something that's significant? Is that going to have a major impact on your sales? And I might have another question, but...

So the competitive advantages we have, well, this is a longer topic. So we have a growth strategy, and we've clearly said that we want to grow and we want to grow in all market segments. That's how we're managing our resources, our people to ensure that this is possible. We're investing more in technology, the quality of our solutions is improving regularly. And this makes things easier, and this is a necessary precondition in order to achieve growth. And so we have better processes. We're able to do things more quickly, more efficiently, more effectively. There's still a lot for us to do, no doubt about that. In our institutional business, we're not afraid of large amounts, especially if we're thinking about syndicate transactions, and we're able to do big transactions, complex transactions very quickly. And this is a result of the quality of the people we have on board as well as working together with the BNP group, Paribas Group. And this is a very strong corporate banking group. If you look at our structure, you can see that this component of the business, the institutional business is bigger than other banks from the peer group. So we're a very strong corporate bank, we're stronger. I don't want to mention the names of the competitors, but we're a stronger bank in this area. And so I think that the quality of our people, the spirit of growth, the investments we've made in technology, these are the things that drive us, drive our -- the attractiveness that we have, and that's why we're growing faster. You were asking in particular about corporate. I don't really understand the aspect you want to ask about.

I understand the first thing. But now the question about mortgages. Is this an important thing in terms of your sales?

Let me tell you, the mortgage loan market has basically fallen off dramatically. If you look at the BLIK data, this was a decline of 55% year-on-year, and it's actually getting bigger and bigger that dip, that decline. And there are a number of factors that are driving that. First is interest rates and the cost of mortgage loans to be borne by borrowers. And many borrowers have decided not to take the loan because they believe that it's going to be very difficult for them to finance that with their household budget. The next thing is creditworthiness. As we know, the creditworthiness is calculated using the current market interest rates plus a buffer. It's more difficult. And this is clear for customers to have creditworthiness with this level of interest rates. We still have high level of prices for apartments and people who want to build themselves, you have high cost to build. So all of those factors taken together mean that the mortgage loan market is at a dramatically low level. So all those things. The fact that we've limited our willingness to give loans to our existing customer base. And then thinking about growing mortgages, well, this doesn't have material importance right now. I'm a pessimist. If we look at mortgage loans over the upcoming quarters, also for next year, much will depend on what's going to happen in terms of the benchmark reform.

There was an idea presented there where if the benchmark reform would be pushed back in time. But then as of January 1, banks should issue loans according to a new benchmark where that benchmark hasn't been selected. This is something that could dissuade banks from giving loans on a floating rate. We'll have to think about this from a different approach?

Well, the mortgage loan has turned out to be a product where we've had the biggest noncredit risk materializing. So the regulatory risk. So if you look at Swiss francs or now Polish zloty loans or credit holidays, well, there's a bit of shadow cast onto this product's image. And so we can say we have highly sophisticated consumer interest protection. So we could say that this protection is excessive in some cases. That's why I don't foretell or see a beautiful rosy future for mortgage loans.

I wanted to talk about the fragile loans in the retail section, what type of clients were in this portfolio?