mBank S.A. (MBK) Earnings Call Transcript & Summary

[Presentation] Good afternoon, ladies and gentlemen. Welcome from the 32nd floor of mBank Tower. Today, together with all the members of the Management Board of mBank, we will discuss our new strategy for 2021-2025 called from an icon of mobility to an icon of possibility. Let me introduce you our management Board members. Mr. Krzysztof Dabrowski, Head of Operations and IT; Mr. Cezary Kocik, Head of Retail Banking; Mr. Cezary Stypulkowski, Chief Executive Officer; Mr. Adam Pers, Head of Corporate and Investment Banking, Mr. Andreas Böger, Chief Financial Officer; and Mr. Marek Lusztyn, Chief Risk Officer. Gentlemen, before going into the Q&A session, I would like to ask you what are the key elements of this strategy from your perspective? Cezary, will you start?

Yes. I think that whenever you strategize for the future, you have to well define where you stand. And I think that this is -- the starting point of mBank is very strong. I used to say that mBank is the most successful organic growth institution among the Polish banks. I would say, even in the broader sense, financial institutions. But you have to ask yourself also what banking represents in today's world and how it appeals to the clients. I used to use a phrase that the glory is gone for banking. But I have to admit that there are some features of banking, which are still very appealing to the clients. And we anchored our strategy around 3 S, which is going for security, secrecy and stability. Stability is pretty obvious. All the -- everyone is interested in stability of banking sectors. The regulators, the public, the clients, ourselves as a sort of almost over focused. Security is something what is expected by the clients. And in today's very complex world with digital being the prime channel for conducting the bank, I think that the importance of security, the mindset of people in the organization of the institutions is equally important. And I believe that security sort of characterizes banking. There is another aspect, which is secrecy. We used to be well known as a sector for banking secrecy, which has been over the years, significantly diluted. But still, when you compare banking and banks to the range of the newcomers to the market, including the big techs, the way we treat the information and we treat the data of our clients is of a completely different nature, and the clients expect that secrecy will be assured. The second aspect of this strategy is that mBank is very strong among the e-commerce clients. If we compare ourselves to most of our peers, depends on the criteria one can say that on the transactionality side, we are -- on the balance sheet -- in balance sheet terms, we will be around less than 10%. When it comes to transactionality, we'll be somewhere between 10% and 15%. When it comes to the e-commerce penetration, I would risk an opinion we are above 20%, which is a very good starting point for something what is new, growing and is a big promise for the future. I don't want to go into more details. We have a good platform, which is mOkazje, which we set up a few years ago. And the whole discussion will be about enhancement of presence in e-commerce's [indiscernible]. And finally, there is this famous saying by Peter Drucker that strategy is being eaten by culture for breakfast. And we are very much committed to our culture. mBank culture is distinctive. On average, our people are much younger than the average population of bankers in Poland. Our customers are younger. And we have to appeal to relatively younger generation of Poles. As a consequence, based on what we have created already, the very distinctive culture, we have to make a real effort to continue as sort of a live, very trustworthy open dialogue between [indiscernible]. All this should contribute to the continued innovation of the bank. And this is something what I believe will be one of the crucial ingredients of our success over the next 5 years.

Krzysztof, can you continue?

On the technology side, we have plenty of work in the context of the new strategy. So one important aspect is our core platforms. We spent quite a bit of investment in the past years to prepare for this moment. Because while we are happy with the platforms themselves, we are not that happy with the underlying hardware platforms we are running on, and we would like to migrate to something more modern. And those migrations will be done in the context of the new strategy as a part of our modernization efforts, and they will lead to our cloud readiness and cloud migration. So we need to do the first step in order to do the second and later steps. And this will be basically the core of our journey from the platform perspective. At the same time, we think that the quality of our systems and IT products is very important to ensure the stability of the bank. So significant investment and effort will be put on the quality and -- of the software product and also on fixing the legacy that we already have because we are no longer the new bank, we are already a bank with a bit of history. Very important challenge to the whole industry is the cybersecurity. And we treat it very seriously. Already, we had a tremendous investment in this area in the past, and we intend to continue doing so. And this is divided into basically 2 areas. The first is the cybersecurity itself understood as protecting the bank and bank's infrastructure. And the other leg is the -- protecting the money of our customers, both when it's under bank's control, but also in the context of the certain scams when it's not under bank's control. We still intend to do our best to help our customers not to lose their money. All of this will be underpinned by the advanced data analytics platforms that we already deployed, but we intend to extensively use in all of those areas.

Thank you. Cezary?

Retail part of the strategy we built around demography and life cycle of our customers. We do believe that demography is our biggest competitive advantage against other banks. We have acquired customers, which are, on average, younger, better educated, living in a bigger town. And due to the relatively young age of our customers, 3 out of 4 of them is still before peak of profitability for the bank, which is achieved together with the years. And we believe that this group of customers will generate for us bigger and bigger revenues with each year. So that will be a driver for our fast organic growth in the future. We would like to stay for this customer the first choice bank and assist them through the whole life cycle, adjusting our product and services to their needs. Of course, as a bank, which is focused on organic growth, we would like to add over 1 million new customers up to the end of 2025, just to renew and maintain relatively low age of our customer base. And last but not least, just to foster our mobile first approach, we would like to move on a mobile platform as much sales and services as possible, and that's in a couple of our approach, new strategy.

Thank you. Adam?

Good afternoon. Well, if you look at the corporate banking in terms of strategy, we have 5 feet pillars that we are focusing on. The first one is digitalization. And then you may ask, okay, what's new because you can hear that all the banks and companies trying to digitalize. But I think that the lesson learned from the COVID is that we cannot digitalize just part of the process. And we decided that we focus on the full, which means end-to-end digitalization, which means that the customer start the journey in the component systems or our home banking system. And I hope at the end of the strategy, mobile banking will be, I would say, even more popular than the home banking system. And finally, it will end up in the operations in [indiscernible] without any paper. So we'll not use the storage, anything for the paper. And during the digitalization, we go to the second pillar, which is the new credit process, which will be mainly dedicated to SME and mid-cap customers. And we would like to dedicate the process that from the customer's perspective, because they are the most important in this part, is predictable. So the customer look at the promise when the loan will be granted or if not granted outside will be within defined period and when the loan will be disbursed. Internally, we'll limit the paper that -- reason one is the cost, the second one is the ESG. Because one of our internal target is to limit the paper consumption in the corporate banking. Of course, this is, let's say, joint effort with Marek's team. And thirdly, we will -- in the second part of the strategy, we will implement benchmarking, which is in a natural tool and kind of planning of the customer potential/needs and also the cross-sell. This will help us, of course, to improve the cross-sell and profitability on the customer level. And a very important aspect is the fourth pillar, which is to be present in the ESG, I would say, sectors. And I have to flag that we are already at a very good point -- starting point because we are probably, and I would even reason that we are, I would say, #1 in terms of financing the green sectors. We have the limit of PLN 4 billion, which is almost consumed. And within the strategy horizon, we would like to provide our customers directly for the green transaction in the amount of PLN 10 billion. So this is one part of the new sectors. The second part is do we like to develop in the, I would say, new areas. One was mentioned by Cezary, which is e-commerce, but also healthcare. Our customers that would like to digitalize others and so on. And in this area, these new sectors, we'd like to triple our exposure. And finally, we believe that we'll end up in a better profitable business. So the capital that is, I would say, allocated to our business line will generate, over the new strategy horizon, better return.

Thank you, Adam. Andreas, what would you say?

Well, mBank is a modern bank, but we are also a mature bank. And all of us, we are convinced that this is the right starting point for growing further. And on that growth path that we have had in the past and that we will have in the future, we will also invest more money. So the revenues will come. The spending will also come because we want to foster for the future. Obviously, that spending will be lower than the increase in income. And that will be measured and encoded on the cost-to-income ratio, which is a measure that's very close to our heart, and that's very central to the way we steer the bank. And the cost/income ratio at 40%, which we envisage shows that. And that's something we have historically achieved, which we want to achieve obviously in the future, but what's for the future even more important is to turn that efficiency into profitability. And the profitability, we have anchored the strategy on, and also the planning behind is on a modest scenario for interest rates, for example. So because we said even if interest rates would not rise significantly, this bank needs to deliver on profitability. So we have an ROE target of more than 10%. But for example, the underlying interest rate scenario on this is a central bank rate that is not higher than 1%. So we're already above that. There is upside on the interest rate side, but it was very important for us to have that anchor. Maybe one comment because the question will anyhow come on Swiss francs. Swiss francs is clearly a topic. It is separated in the noncore unit. The noncore unit also has not only strong provisioning but also strong capital allocation. The strategy does not foster for adverse or heavily adverse scenarios on Swiss francs. But for the path we are currently seeing, there is a very good opportunity for the bank to grow.

Thank you. Marek, please?

ESG is a fundamental part of our strategy. We want to be a leader in responsible banking. And we are going to achieve so through, first of all, reducing our own emissions to net-zero by 2030, the latest. And also, we would like to help our clients achieving their net-zero emissions. We have committed to do so with scope-free emissions by 2015. As far as the credit processes are concerned, we are going to further innovate the customer journeys or across asset classes. And last but not least, we are going to do so on the very safe and secure balance sheet.

Thank you very much, gentlemen. I can see that we have already some questions from the audience. The first one, to what extent mBank's strategy is affected by the fact that mBank is part of Commerzbank Group.

Not that much. I think that there are 2 aspects which we have to be over. Commerzbank Bank is going through the restructuring process. And the major challenge for Commerzbank is really to lower down the cost/income ratio. And that's the way investors look at Commerzbank. We are in a quite opposite situation. So our cost/income ratio is premier in the market. This is, as Andreas has said, the anchor of our strategy, not only this one, I think that the bank has a track record of managing the cost/income in a very intelligent and forward-looking way. So that very much puts us into the difference between these two. At the same time, I have to admit that being the part of the Commerzbank Group, we've been given something what is described as a space to play because we are having this efficiency, plus we have a track record of growing in the magnitude of sometimes double-digit level. So I think that the way Commerzbank looks at us is very much the growth case. We think that they are focused on their own issues, which are very much related to the German market. we being the part, we are delivering the growth part of the Commerzbank Group.

Next question. To what extent mBank's strategy is affected by the legacy Swiss franc mortgage portfolio?

Two aspects, and I will share with Andreas the response. I think that one is that, wow, that's the reality we have to cope with. It's a heritage portfolio, which goes back 15 years back and obviously needs to be managed. For those of you who are less aware, this is a portfolio which, from the purely credit risk perspective, performs, I think, the best among the classes of assets we have on our books. So this has not created a credit risk. It creates the legal risks, which are part of the, I would say, unjustified battles, which are going through the Polish market. I don't want to go deeply into this. The legalities -- all these issues I've been discussing with this group of analysts and investors in the past. What I wanted to stress is that a year ago, we adopted this approach where we division between what is our core business where we are growing and what we are doing for the future and what we have to manage with some energy lost, I would say, referring to the Swiss franc portfolio. And with this, I will pass to Andreas.

Well, I think it's important to have that robustness. And towards this, we are managing. I think one leg that's may be overseen by investors that are not that close to the market is, we don't have a business where we were producing a combustion engine and suddenly, we find out our core product doesn't work anymore. That product stems from the early 2000s...

It's not electric car on the horizon.

And so we have moved to that already. So the practice of handing out these loans is discontinued since 10 years, and the portfolio is far older than 10 years. So for the day-to-day business of mBank, it's not that much of a disruption that this topic exists. It's more, as I said, about robustness, managing this, managing the legal risks, but it doesn't disrupt the daily operations.

Yes. Well, I can add also that our approach was relatively cautious. We've been flagging our stance since the very beginning. I think there is this legal aspect, which I think needs to be well understood. As you know Polish -- the judiciary is in a disarray. So it's very difficult to sort of prejudge which line of jurisprudence will be worked out. So it's difficult to operate in this environment. The number of cases which have been predicted in the second round is very, very minimal compared to the number of cases we have. So it's not trivial, but that's something that is separate. We need to manage this understanding that it does -- it should not impact our growth, and that's the anchor of our strategy. So we are writing down pieces here and there over the years. In our perspective, I think that, as Andreas has said, we don't expect that with the current level of the provisioning which we have done, we don't believe that we'll be hugely exposed.

Because at the end of the day, to sum up on this one, we have already written off PLN 2.2 billion through the provisions for legal risk. On top of that, we have a significant amount of capital, which is allocated for the non-core. And all that considered, and barring the most extreme negative scenarios, that should not impact at all the growth story that we have ahead of us.

And the legal fight will continue because potentially, with some verdicts, which have been sort of circling around, it impacts adversely the whole concept and all the paradigms of banking, which we used to operate in and which is a standard -- international standard of making the business.

Another one is on CapEx. What is the CapEx expected for 2021-2025? And where are more investments going?

That's a good question because that's also obviously intensive debate. I'll start with the framework and maybe, Krzysztof, later you can add a bit what we do on the IT side, for example. So the CapEx will be higher than in the past years, but we will not go crazy to say it like this. As Cezary was saying, we have a very disciplined way of looking at cost/income ratio, but we also have a very much proactive view when it comes to what we want to achieve in the future. And that needs to be balanced. So it's about doing more than in the past, but not going overly overboard. We are discussing this with investors since years that the amortization part, for example, for CapEx investment is naturally growing in the bank because this is for us investing in the future. And for us, as a modern and digital bank, obviously, it's clearly a big focus point. And as -- on a CFO view, but I'll hand over to the IT view, it's a mix of all -- so you have at least 6 cylinders here to go back to the engines. It's a broad investment case to bring the whole organization forward. But also it has, according to the strategic priorities, it also has its focus points that were mentioned before. But maybe, Krzysztof, if you want to, on the IT side, give a bit more flavor.

Yes, I think the -- on one hand, we will invest in the, let's say, basic sciences, you could call it. So I mean our improvement of our platforms, all of the cloud journey, et cetera, and the quality. These are the investments that are not directly related to the new features of our platforms. So this is one part that is reserved in our CapEx. The other part is also growing because our business needs are growing. Unfortunately, our regulatory burden is also growing, which also means that we need to invest in this area and already in the recent years. We devoted quite a bit of extra CapEx in that areas. On top of that, there is an inflation, and it's not even a Polish phenomenon. It's unfortunately European or even global phenomenon. So part of our CapEx increase is coming from the fact that the overall prices are going up. And the IT labor market is also quite tough in the recent years. So overall, part of our growth will, on CapEx side, cover the increased prices, but we intend to grow even further to have enough CapEx to invest in growth of our business.

Next one is on net interest margin. 20 -- the strategy for 2020-2023 assumes net interest margin of 3%. Now mBank assumes NIM of 2.5%. Is that solely driven by lower assumption on interest rates?

There is various drivers behind that. Obviously, we had an interest rate environment before the pandemic that was more benign. Then we had a rapid decline 10 basis points, and now we're on the upward trajectory. We needed to anchor some where we -- as I said at the beginning, what is the moderate to conservative case. In that moderate to conservative case, there is some interest rate raises in, but there is also a more efficient use of the balance sheet in that should bring a net interest margin up. But on the other hand, what we see evidenced by the strong digital business and by what's happening on the retail and also on the corporate side is that we are more and more seen as the premier transactional bank, and like a magnet, we are actually -- even if we don't pay for deposits, we are actually absorbing these deposits because clients are coming to us. And then that's a question of, obviously, wisely and efficiently managing the balance sheet with the right risk appetite, obviously. And this is why on that mild interest rate environment, we said we're going to 2.5% because we are currently a bit above 2%. It's naturally the trend we should have in. If there are more interest rate raises, obviously, NIM will also move.

Thank you. Another one also connected to interest rates. Do you see impact on the lending growth from higher rates? How do you see competitive environment panning out? What made you comfortable to target 8% CAGR growth for 2021-'25 versus 6% CAGR growth in your earlier strategy?

Kocik, do you want to start?

About the lending, I believe that we are still on the level of rights that will not heavily impact the volume, especially that we have the heightened potential, which we didn't explore up to now. Because when we compare the data from a credit bureau score and our customers, which are relatively younger than average in banking sector, we see a huge demand on mortgages. So the -- our goal is not increased the lending just to achieve a certain position, but just to fulfill demand, which is generated by our customers. And that we, together with Marek, run such an estimation, and we're based rather on our internal potential than just targeting certain market share. So this is how we are coming to certain volumes and center growth rate on lending portfolio.

So with the retail strategy, to coin it as demography is destiny, obviously, the financial part of this is there is a demographic dividend because clients just grow into that need patterns. And naturally, we have a tendency in retail to grow at double digit when it comes to credit demand. The demand on the corporate side is very much steered by our risk appetite and by the efficient measures that are taken to have a proper book that has a very good risk return profile. So that's more of a single-digit business, but the underlying -- the under current -- the trend in retail is a double-digit growth, clearly. And this is why the 8% that was shown, we think, is still valid.

And last but not least, even despite of the nominal interest rate increases, Polish zloty still has one of the lowest negative real interest rates. And therefore, even the increases that we have just seen are not necessarily actually influencing the loan demand that we see and foresee.

I will still return back to what Andreas and Cezary have said. We've been signaling since some time this, demography is destiny, as a very important factor in our thinking about the future. And now it has been, to some extent, coined in the strategy of 2025. And the reason for that is that we've done much more -- much deeper studies of our client portfolio of the developments around the future client portfolio. And the fact that historically, we evolved the bank from being the premier convenient transaction bank into the mobile. And now with a good understanding of our 5 million customer base, we decided that we will be very much focusing on their needs as they grow, as they get into the age and what are the products which these clients will be acquiring, which products we can offer effectively to our clients. So they will not be shopping around but rather will stick into us, and that will produce the flow, which as Cezary has said, based on our information, I would say on the retail side, it's almost done.

What are your thoughts on operations outside Poland?

Well, mBank has one big privilege. I think that the platform which has been created some years ago, which allows us to operate outside of Poland in the format of the branch network based on the passporting to the other markets, has proven to be successful. I have to say that both Slovak and Czech operations seems to be obviously not the core of our focus because Poland is the most important market. But they have proven to be the model for the presence in Pan-European banking in the future. The problem we have is that Poland unfortunately has imposed the banking tax. And this banking tax is a big -- well, creates a limitation for the further expansion. In some markets, we will be forced to pay double banking tax. And I think that due to the fact that Poland has evolved into or didn't distinguish between being present outside of the country in the format of the subsidiary, and the branch being -- subsidiary being considered as, I would say, old-fashioned solution, that definitely impacts our approach to the further expansion.

Another question to Andreas. What would be the upside to cost/income, assuming the reference rate jumps to 2.5% in the first half of 2022?

Well, there is a clear upside. But I think today, we want to talk about the longer-term strategy and not to guide on what's happening in the next 6 months. So upside is there..

Next quarter is not for today. Don't use us for your calculations.

Yes. Sure. What do you see deposit/funding costs by 2025 in your base scenario compared to 2021?

So I take this. So what we have in there, I said it's a mild interest rate raise. In interest rate raises, obviously, you can think about everything as static or you think about the interest rate pass-through also to the deposit side. And we have assumed a certain interest rate pass-through, but that interest rate pass-through -- the more interest rate rises, the more significant it gets. But as it is a mild scenario, it has a pass-through. So we're not expecting this to be flat, but it's obviously not one-on-one. So we think -- we are convinced, and we're also seeing it that we are a clear beneficiary from higher rates. And it's not going through the -- out through the other door.

We've been disproportionately recipient of the high liquidity in the market. Over the last 2 years, I think our market share has grown by 2%. I remember when I was joining the bank more than 10 years ago, our loan-to-deposit ratio was in a magnitude of 140%. Today is slightly above 70%. So that creates the approach and attitude to what will be the pricing of our funding. One thing which people should understand, if you compare mBank's funding structure and most of our competitors', it's more complex and has a piece of housing funding bigger than the others, which was to some extent our choice. I think that the bank has to be positioned in the way that you still rely on a variety of sources, you have to familiarize the market with your presence. [ Morale ] plays an important role. So when you go into the details of our structure of our balance sheet and funding, I think it's more sophisticated than most of the other banks in Poland.

Clearly.

Okay. Another question on financials. Is target ROE of above 10% based on equity adjusted for equity allocated to Swiss franc unit, that is some PLN 2.9 billion?

I like the question. It reflects our internal debates. We have decided to give out ROEs for the full bank. We manage noncore also, but this is not about like there is currency A, currency B, the noncore part obviously has a higher underlying ROE. So this is about the full bank. As you see it right now, it will run down to some extent, but the full bank will be above 10%. That's the goal.

Thank you. Previous strategy mentioned 50% dividend payout. Looking at loan growth versus ROE, is current strategy assuming dividends?

It is. It is, and the aim remains at the 50% that was stated before. Obviously, it's all subject to the capacity or to the capability from a regulatory point of view to actually pay the capacity that's been factored in.

What's your growth aspirations for asset management business?

We would like to increase asset under management between PLN 1.5 billion up to PLN 2 billion on an annual basis. So it is more or less through this 5 years between PLN 8 billion, PLN 9 billion. And we believe that there is a further potential there, very much dependent on our successful setting up the investment value in asset management vehicle, which is going through the licensing process. In this respect, we've made a kind of a mistake in the past, all blame on me. Because we've been very much focused on the open architecture, promoting the local asset managers independent. This market as all we know, has collapsed, unfortunately. And we ended up in a situation where we would be potentially dependent on our competitors providing that type of product. So we decided to make it internal with a strong support from the outside of the country. I don't want to go into details today, but we are working with the top-notch asset managers on a variety of relatively sophisticated products, which we need to bring to the Polish market. And the second aspect of this is that we believe that profit of our clients and the age structure and the -- as Cezary has mentioned, the growing needs -- because just to give you the perspective, the average Pole is 41 years old. The average customer of mBank is 36 years old. Around 40, you get at the stage where you build -- you start to build up your assets. So we are in a very privileged position, and the figures which have been signaled by Cezary, which we have anchored in our projections, well, in my opinion, they have some upside potential.

How important e-commerce is for your fee generation capacity by 2025?

That will not be the key for the fee generation by 2025.

Would you consider in building ecosystems around e-commerce, for example, similar to some peers in the region to boost, diversify further revenue growth -- revenue generation capacity.

Yes, the intention is really to use the current mOkazje platform, which is basically a discount offering into something more professional and profound. Obviously, one have to be realistic that the domestic market is backed by a variety of marketplaces. So our intention is to make it intelligent, smartly potential with partners. But we strongly believe that the fact that we are having 2.5 million consents from our clients, we need to operate. It creates a value, creates a value, which I think intelligently needs to be addressed. I don't think that some comparisons like Tinkoff in Russia or [ SpareBank ] is a right reference. We are not having that level of muscle. We are more or less below 10% market share -- market player. And I think that comparisons with some markets with a different structure is not necessarily a right reference, though we strongly believe that with an enhancement of mOkazje, Paynow, which is our payment gate to which we have referred, creates an opportunity, which, referring back to the question, will not frutilize by 2025 with a significant additional fee income. That will impact, hopefully, but I would say it will be rather after 2025.

Is your risk appetite going to change till 2025? What cross-cycle cost of risk? Marek?

So in principle, the strategy up until 2025 assures that we are not changing the risk appetite as we were describing, answering the previous questions, it's mostly the demography of our customer base that is going to drive the volume growth in retail and more selective choice of the industries that is going to play the role in corporate. The innovation in the risk management space will be primarily focused on improving the customer journeys all across the customer segments. So to make sure that it's cheaper, faster and more predictable. But the change of risk appetite is not part of the current strategy. We see within the 2025 the return of cost of risk to around 80 basis points range. And also looking at the -- through the cycle cost of risk, we believe that that's the fair level for the current asset mix of the bank.

Are you more optimistic about institutional or retail banking until 2025?

I think the question has been already responded a few times. I think that the message is that on the retail side, we have a natural competitive edge. And the growth rates are above 10%, and corporate banking is in a regular competitive market, where we are one of the players without significant, I would say, differentiation to the market. But I would say smart enough with more focus on the investment banking. So if we are, on average, we expect to grow for 8%, and we take more above 10% and corporate single digit, both sides are equally important for us. That also spreads the risk. But in principle, one should say, okay, that's the reality of the market. And that's the advantage which we have. Andreas?

I would have even answered we're optimistic on both. It's just one will grow a bit faster than the other one, but the other one also has its dynamics.

I would say that it's not about being optimistic, but naturally, the retail market will grow faster. And we will be, I would say, our importance in the corporate bank in the market will be the same, but take into consideration the pace of the growth of the corporate banking. So we swim in, I'd say, 2 swimming pool to some extent.

But with some synergies because at the e-commerce area, we cooperate very closely with corporate banking and I believe that we really need 2 legs, and both of them are strong.

And I have to say that there is a kind of a hidden reserve on the corporate banking side. It has been already signaled by ourselves that we believe that our current portfolio -- lending portfolio seems to be advancing vis-a-vis the ESG, specifically on the environmental side expected criteria or taxonomies or whatever will be invented with the potential that the banks will be charged of additional capital on this front, which is not known yet. This isn't being cooked right now, but this is not something that has been already decided. And if this evolution over the next few years will happen, I believe that, that will create additional potential for the bank in competitive landscape.

Another interesting question. What do you find to be the key differences between 2020 to 2023 strategy and 2021-2025 strategy?

Well, I would say, if I may reveal, the previous strategy was a strategy at the time when we've been put on sale. And it was to address potential interest of the investors. It was done in prompt to in the context of a transaction. It was reflecting, I would say, then the stage of the development, but to be perfectly honest, it was sort of speeded up. Our previous strategy still had some horizon at that time. And this issue, which we've been signaling since, I believe, 3 years, those of you who follow our communication should remember this demography issue was very much signaled, but was not yet at that time fully worked out. And we spent additional 1.5 years, obviously, in the very difficult circumstances with the pandemic all around. And I think this is a much more matured concept right now. So I would say the strategy of 2023 was something like the strategy underway. But if we talk about something, but is really, in my opinion, changing the landscape? And I strongly believe that this concept of managing with a strong focus on demography, sooner or later, will be, I would say, a leading concept of management of retail. We believe that in this respect, we are unique. We thought through the issue. We made our in-depth studies, which obviously still needs to be fine-tuned. But this is something -- this is a concept, which I believe will be the winning concept of the future. So this strategy, we are -- well, you make this effort really to appeal to the investors, to the analysts with a strong belief that this is a strategy we are presenting in the future.

There is one more topic because if I'm not mistaken, when we were creating the previous strategy, the ESG probably was at the Page #90, just mentioned. The difference is that today I would say this is not something that you are flagging that in the future, there will be ESG, there will be green financing. To be honest, the ESG, mainly the E part of this abbreviation is the daily reality. And in 1 year's time, many banks, many institutions and many customers will lose the competitive advantages if they will not implement ESG.

Which not will be trivial.

And I know that we have a lot of analysts just to give you the figure, our corporate portfolio is more or less PLN 30 billion. ESG is not only about the corporate, but just to give you the figure. And we are signaling that we want to have like at least PLN 10 billion. You can add 6% as mentioned, annually, the target. So it means that the ESG part will be the biggest portfolio and will gain significance in the, I would say, our day-to-day business. But this is not only about the -- okay, now there's new industry. This is going to be a completely different world in 5 years' time in this respect.

Thank you very much. It seems that we are heading to the end of this meeting. We have the last question. You said the glory for banking is gone, what are the biggest challenges till 2025?

In my opening remarks, I said, yes, I used to say the glory is gone. I strongly believe that we are regaining, and we are regaining for a number of reasons. One is that if you start to think how many functions are being allocated to the banks in terms of social responsibility, like we are following -- we are sort of a, kind of a soft police. We are -- soon we'll be responsible for managing the climate change. If you start to think about the number of issues which are located with it, we are the guardians of secrecy. When I said security, secrecy and stability, these are the features which are allocated with the banks right now by the regulators, by the public, by the society. And I have to say, after sort of a gloomy time, which we have experienced over the last few years, I believe the banking is regaining, obviously, in the different format, in a different information, but this is on the horizon. And I believe that the glory will be back.

Thank you very much. Thank you for your questions and for your attention. If you have any more questions, please, please contact Investor Relations. So again, thank you very much for this meeting, and see you next time. Have a nice day.