MONETA Money Bank, a.s. (MONET) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of MONETA Money Bank regarding 1H 2026 financial results. Please note that this conference call will be recorded. [Operator Instructions] Today's speakers are Mr. Tomas Spurny, Mr. Carl Normann Vokt, Mr. Jan Fricek and Mr. Jan Novotny. May I now hand over to Mr. Tomas Spurny, who will lead you through the conference call. Sir, please go ahead.

Good morning, ladies and gentlemen. I have the pleasure of opening today's conference call. So let me start with a summary of where MONETA stands. If I can ask you to turn to Page #2. During the first semester of 2026, we delivered net profit of CZK 3.3 billion whereas that constitutes an improvement of more than 8% against comparable period of previous year. The improved profitability comes on back of increasing operating income. The operating income came in at CZK 7.2 billion, and we have improvement on net interest income coupled with improvement on net fee and commission income, which you will see throughout the presentation. operating expenses, the cost base is stable, came in at CZK 2.9 billion as a very small increase of 0.2%. With respect to the balance sheet, we focused the bank on growth in lending activity. The portfolio grew by more than 9% and each level of 3.10 billion. At the same time, given our targets with respect to coastal funds, and gradual improvement in the net interest margin of the bank. The funding base increased to a level of 481 billion, which slightly more than 4%. Increasing size of balance sheet 525 billion, actually stable against the last quarter, but we cannot forget that in the second quarter, we made a fairly medial dividend distribution. Now turning into capital. We have a capital adequacy ratio of 20%. This is an improvement of 4.5 percentage points. This comes on the basis of completing the structure of our capital optimization structure -- optimized structure of the capital. We issued EUR 150 million of AT1 instrument and this obviously translates into a better capital position. Nonetheless, with CET1 ratio at 13.1%. This stands and access to the management target. And we also enjoy a comfortable merial position on an individual basis, well over 28% with significant excess. And that is coupled also with solid liquidity position, but the LCR stands at the 100% and the performance in the first semester translates into stable return on tangible equity and also stable return on the -- with respect to ROE. Now let me turn to key messages that the bank would like to convey with respect to the first semester and the rest of the year. For the rest of the year, we are targeting lending growth in the range of 7.5% to 9.5%, with the current run rate stands at 9.1%. And this is in line with the strategy of the bank to refocus it a little bit into high-margin products with concerns to a self-employed small businesses and entrepreneurs, and you will see it in the balance sheet section how that evolves. With respect to deposit growth, we have conservative target of 2.5% to 3.5%, and this is linked to the fact that we would like to keep the cost of funds as stable as possible. And we also have to keep in mind the target to improve the NIM. And for this is where we currently stand on the deposit strategy. That could change should the expansion of the loan book exceed our expectations, Nonetheless, this is the current position of the bank. With respect to net interest margin, the target disclosed by the end of the year, range of 215% to 220%, which is a function of, I would say, 2 developments, financial pricing of the legacy exposures. And obviously, also the current -- supported by the current lending mix. I think you will see a full result of that in 2027. We also continue successfully with the distribution of third-party products, which is simply put insurance and wealth management. The wealth management is quite important, the year-end target is a range of 92.5 billion to 95 billion of distributed volumes coupled with the sales target of 22 billion where during the first semester, we distributed 10.9 billion assuming there will be no negative events in the capital markets or increased instability we are fairly confident to be able to get there. With respect to the operating income on the next page, we are targeting operating at income level of 14.8 billion. This would translate in the year-on-year growth should we achieve of 6.1% and this incorporates number of factors. On the cost management, against the maximum cost level, which we communicated through the February 3 guidance, we would like to save a minimum 75 million. So this also hopefully support some upside that we are seeking to communicate at this -- at the moment, and we would like to keep the cost income ratio below 40%. We stand committed to the cost of risk or risk management result of 20 to 35 basis points of man. There are several factors that need to be mentioned here. Number one, the bank no longer has management overlays, which the root of those Osteoid gradually, we released overlays because there is associated with did not materialize. So in the future, and this is reflected in the guidance. You see elevation of the cost of risk, and this is clear from the guidance that our expectations are at that elevated level. For this year, we stand behind the range. I think we will see somewhere around middle of the range or slightly higher. Nonetheless, this is incorporated into the upside on the net profit of the bank. What is positive here is the fact that we increased lending and with the increased lending, you have at inception of those loans into the balance sheet. We have obviously higher level of provisioning related to stage 1. The second positive is that we keep the balance sheet clean of NPLs, bank has historically lowest NPL ratio. And if you look at the NPL disposal target, they are well above in the first semester and by the end of the year, we would like to accomplish disposal of NPLs in the total amount of 1.1 billion for the year. We are on the road to accomplish them. Taking all these factors together, we expect or we elevate the minimum profitability target of the bank for the 2026 to 6.8 billion and we certainly hope to achieve it. So now these are the key messages. Let me turn into the operator. Let me speak a little bit about the operating environment. And we start with GDP, unemployment, indebtedness and government that is it. So for this year, the prediction of GDP growth, 2.5%. We saw growth in the first quarter of 2.2%, and we are waiting for the first semester numbers, given the overall market expansion in lending activity, I would say that the second quarter will come in better than the first quarter. There is nothing really to comment with respect to indebtedness of Czech Republic. Perhaps more importantly, the government deficit, as you know, had been predicted at 310 billion. The current deficit stands at 184 billion. And I think there will be pressure to meet the 310 billion number, given the policies of the current government, given the pressure to increase investments into rearming. Czech Republic and some additional factors that will play into that part of the picture. We see Nasal but steady increase of their employment. So far, when you look at an organ part of the presentation, this does not translate into increasing past dues in the bank, but we are cautiously, let's say, monitoring this, and we'll adjust credit policies should increase, continue and become material. Now let's go to inflation and interest rates, we see abating inflation. The numbers so far look good despite the conflict in the Middle East. Nonetheless, the key benchmark rate that has been increased by Czech National Bank, Czech National Bank cites several reasons for this action. Number one, growth in wages number. Number two, government deficits and spending. Number 3 uncertainty with respect to impact of the conflict in the Middle East. Broadly speaking, we expect that the key by increase to 4%. Additional 25 basis points, and there is a very high probability attached to it and the Central Bank communicates very clearly that we would like to slow down the lending expansion namely on retail. The Central Bank also mentioned that it would like to slow down cost of housing in Czech Republic, which has been studied. So those are, let's say, the cites reasons behind beyond this action. If you look at the yield curve, the black line represents the midyear position, we're actually above that. So we can call it parallel shift. I think that we might see additional increases in the medium to long-term rates. And if I had to simplify a lot, this is the lingering fear from increasing inflation and I think we will live with higher rates for some time to come. Now briefly on the operating platform. This is on page -- the summary is on Page 10. I would say stable. What we see on development of customer base. It's the raises and this is directly linked to the rates that we offer on deposit products where we are at lower end of the market. We continue to close and relocate branches. This becomes evident once you look at the development of our digital banking performance and ability to distribute products that through that channel, stable ATM coverage of the country. And with respect to employment, we have slight decrease. However, there is a significant shift within the bank from front-end positions when the reduction is again caused by the success of digital channels. And we see shift into IT-related functions, as we try to stay on the vanguard of digitization. Secondly, as we put more transactions and higher volumes through the bank, that impacts risk management. It also impacts back offices, and it also impacts some other functions where we seems to increase efficiency and improve consistency through projects, implementing our precision intelligence. Nonetheless, this is I would say, medium- to long-term road as we are experimenting effectively in that realm, and we will evaluate the results and for new in the upcoming quarters. Turning page to digital platform. I think what is notable on the digital platform is that we significantly improved the volumes that we originated through digital channels, 56% growth is, in my view, respectable. With respect to other elements of this, I would say, the most notable success is on servicing transactions where we are able to shift the servicing from human interaction into the digital around. And second, I think what is important is the bank continues in growth of intermediation, and this is evident from the 9% growth with respect to payment, payment transactions in the bank. Now let's look at the branch network. What you see on the branch network is a steady decline of branch visits. We do not calculate into this number interaction of our sales force with respect to some of the elements of the business model, we will do it. So the numbers will improve nonetheless. I think the trend is very clear that branch visits are becoming less important. With that in mind, the branch network remains quite important with respect to our ability to distribute third-party products where we have fairly high element of advisory and the human interaction is important. And secondly, the branch network remains material to our ability to originate credit, both in terms of volume and in terms of growth. We posted nearly 37% growth within the branch network on origination. And for the transition postbranch network for is lesser coverage and better locations. So we will close branches, but we are also modernizing the network in terms of seeking better engagement that is to improve the traffic in whatever remains in the next 3 years of the branch network as such. Turning into contact center. I think 1 of the important things to highlight here is e-mail communication as we are converting and improving our serviceability through the digital channels, you see quite material decline in email interaction. We have steady, slightly increasing volume of calls in the call center, and this is 1 of the areas where we wish to deploy artificial intelligence to really work on preventing the cost, and we're then reducing them to better understanding what we have to improve in the product structure or in the servicing capability through the digital, we decreased the staff. We, I think communicated that while in the previous quarter, while we improved quite significantly the performance metrics of the contact center and slightly improve the client satisfaction with that platform. On the ATM network, very briefly, what is transpiring here is investment into deposit machines, It's not only us, it's not only MONETA, it's the other key partners that we have in the hand network are all investing in deposit taking capability. This is evidenced also by the fairly strong growth of deposit taking through ATMs and it's also linked to the fact that Moneta and other banks, as you tend to make branches cashless and to provide 24/7 deposit-taking capacity. Here, I would highlight that we remain at the vanguard of innovation as the bank introduced recently capacity to take euro-denominated deposits. And by November of this year, we would like to enable our part of the network with respect to euro withdrawal capacity. So far, we are covering the belt of Czech Republic, which is adjacent to Germany and Austria, as many people see employment in those countries. So we want to provide the convenience on the euro deposits. I sometimes jokingly say that we are implementing euro ahead of Czech Republic. And with that in mind, let me summarize the performance of net profit 3.3 billion. The bank aims at I would say, a robust growth rate in terms of key products on the asset side around the loan book. We have realistic expectations with respect to deposit expansion under the current scenario and all factors taken into account, we improved the minimum net profit target by 200 million to 6.8 billion. And I will turn over to Jan who will walk you through the details of our P&L composition.

Thank you. Good morning, ladies and gentlemen. I am on Page 16, and it's my pleasure to walk you through the profit and loss statement section. Let me repeat the key financials. In the first half of the year, Moneta delivered net profit of 3.3 billion, representing a year-on-year improvement of 8.1%, Earnings per share of CZK 6.5 and stable return on tangible equity of 23.3%. Improved profitability was delivered on the back of revenue growth of 6.5%, reaching 7.2 billion which is a combination of net interest income growth of 8.5%, stemming from ongoing lending growth accompanied by improved net interest margin. And also, net fee and commission income growth of 6.2% driven by ongoing solid performance in the distribution of third-party products. On the other hand, operating income decline as a result of result of financial derivatives only partially mitigated by higher client FX income. On the cost base, we managed to keep our cost base stable below 2.9 billion, which, together with the revenue growth resulted in the cost-to-income ratio improvement to 38.4%. And on the credit cost line, we report the credit costs of 414 million or 28 basis points of the average loan portfolio which is at the midpoint of our guided range, 20 to 35 basis points. Moving forward on Page 17, we can analyze in detail net interest income development. In the second quarter, we delivered year-on-year growth of 9.2% and also improvement of 5% against the previous quarter. This was accompanied by a higher net interest margin, reaching 2.1%. The key driver of the growth is the interest income from the lending, which went up by 10.3%. And this is a combination of the lending growth focused on the high-margin product accompanied by repricing of the mortgage book. Treasury income went down year-on-year, in line with the average to be report the decline. And last but not least, higher interest income is a function of the deposit base expansion. On Page 18, we provide a similar view on the net fee and commission income development. We had very strong second quarter, delivering year-on-year growth of 10.8% and 5% against the first quarter of this year. Drivers of that are provided of the -- on the right side. First of all, the third-party commission income went up by 23.8% together. And out of that, the commission income generated by the wealth management products increased by 49%. And from the insurance products went up by 7%. The fee income category shows a year-on-year growth of 25 million which is a combination of higher penalties by nearly 15% and 3% growth of transactional and casing fees. Fee expense is up year-on-year by 50 million, which corresponds to the one-off bonus to be obtained and recognized in the second quarter of last year. On Page 19, we can look at the wealth management product distribution in more detail. In the first half of the year, the commission income improved by 33%. And this is driven by higher trail fee by 46.6%, reaching 371 million which is a function of the expansion of outstanding amount of distributed wealth management products by 31.5%, reaching CZK 188.5 billion at the end of June. And also in the first half of the year, our customers invested with us 10.9 billion, which generated opening fee of 173 million, up by 11.6% year-on-year. On Page 20, we provide performance in the distribution of insurance products. the commission income improved year-on-year in the first half of the year by 2.9%. And also this year, we sold more insurance policies by 1.5%, reaching nearly 95,000 of insurance policies sold. On the right side, we provide more detail about performance in individual categories or product detail and you can see that the improved the performance in 3 of 4 categories, namely income generated by the payment protection insurance increased by 9.2% year-on-year. from the pension insurance by 17.9% and the commission income generated by other insurance products increased by 6.1%. On the other hand, we suffered a slowdown in the distribution of life insurance, resulting in a lower income by 11.7% year-on-year. On Page 21, we can continue with the cost base development. As mentioned before, we achieved a stable cost base below 2.9 billion. And the composition shows that 2 categories report an inflation and increase, namely regulatory charges up by 8.7%. This is in line with the deposit base expansion or mostly driven by the deposit base expansion. And also personnel costs are up by 8.8% year-on-year. This I will comment in more detail on the following page. On the other hand, this inflation was mitigated by the savings reported by other 2 cost categories, depreciation and amortization charge is down by 8.7%. And also admin costs are declining by 7.8% year-on-year. On Page 22, we can look at the personnel cost development in more detail. The reported growth of 8.9% is a combination of higher recurrent costs by 8.3% stemming from the average salary increase of 6.3%, partially mitigated by a lower workforce by 2%. And in the second quarter, we incurred 75 million of one-off costs representing performance-driven variable compensation for the management. And we completed this section on Page 23, where we report admin costs development in detail. In the second quarter, we reported a decline of 9.4% year-on-year. mostly visible in the IT costs and marketing costs. In case of the marketing cost saving, this is rather temporary due to a different timing of campaigns this year. versus th last year. So this was my last comment to the profit and loss statement section, and I will now hand over to my colleague Jan Novotny for the branch development.

Thank you, Jan, and good morning, ladies and gentlemen. I have a pleasure to walk you through the next section of today's presentation, the balance sheet section. As my dear colleague, Andrew Gerber is out of office this week, I will cover both region and commercial updates. And let me start on the Page 25, showing the evolution of the loan book for growth. I will start in the upper left corner. Our own portfolio has grown by more than 9% year-on-year and more than 6% in the last 6 months, and we get almost CZK 310 billion balance. We grew also our funding base by more than 4% in the last 12 months and by 2.7% in the last 6 months. . On the bottom of the page, we can also see a very positive evolution of our yields. We have increased the average yield by 8 basis points in loans, while at the same time, we have decreased by 7 basis points in our average cost of funding. Now moving to the next page. We have exceeded our balance sheet by 4.5% or CZK 22.4 billion in absolute amount. The chart is also showing the key growing parts on both assets and liability side with a key contributor to net customer loans, plus CZK 25.7 billion in assets and customer deposits of plus 16.2 billion on liability side. Overall balance sheet has expanded to CZK 525.2 billion at the end of Q2 2026. The next page, Page 27, is showing that we have achieved a strong blending volume growth with a focus on high-margin products. The new volume origination has reached 51.7 billion, which represents 43.9% growth year-on-year. On the right side of the page, we find the split by segment and product with the highest growth in mortgages of 62% and SME was 58%. Now talking about the portfolio growth. So let's move to the next slide. The current lending strategy results in more than 9% growth, and we have reached CZK 309.6 billion at the end of rest half of this year. We were successfully in growing in all segments with 4.2% growth in retail, 27.5% growth in small business and 16.5% in SME. Now let's look a little bit more in depth on the growth on the retail loans. And this is what you can find on the Page #29. Retail and portfolio growth was driven by mortgages, plus 4%; Consumer loans almost plus 10% and also auto loans by plus 6.4%. The only product group, which was not growing is the droll category. However, this is fully in line with our strategy as some of the products are in an of note or market condition does not allow to grow it profitably. Next page, Page 30 is showing similar spread also for the commercial portfolio. Investment in small business loans were instrumental in driving nearly 19% growth in the commercial segment. The good news is also that the bar was driven mainly by Express business and secured business loan. Those are the progress where we achieved very good margin with, at the same time, a very favorable and efficient capital allocation. Moving to the next page. Our overall loan portfolio yield went up to 5% at the end of Q2 supported by retail yield increased to 4.6%, thanks to a very successful repricing of the mortgage book and stable commercial yield at 5.7%. So that was about the loan book and oleate drop into the funding base. We have achieved 4.1% expansion that was supported by growth in all 3 segments with plus 1.4% in retail plus 11.3% in commercial and plus 10.9% in wholesale funding. On the next page, Page 33, we are showing the evolution of the combined position of retail deposits and wealth management. Overall volume has grown by 6.4% to a level of 427.7 billion, thanks to a very successful effort to move some of the customers reliability from deposits into profitable wealth management products. If you look into the split of the retail deposit, this is on the Page #34, you can see that the retail deposit base slightly increased by 1.4% as a result of current pricing policy. We have managed to grow year-on-year in both current account deposits, which plus 1% year-on-year and savings and term deposits with plus 1.4% year-on-year. Next page is showing similar split this time for the commercial segment. Here, we have grown the balance by 11.3%. And similar to retail, we are growing both product lines with 14.8% year-on-year growth in current accounts and plus 8.1% in savings and puts and now we are having to the last page of the balance sheet section showing the average cost of funds evolution. Overall cost of funds stay stable at 2.18% as the competitive market situation currently does not allow for further decrease of funding costs. And with that, thank you very much for your attention. And please let me hand over to Normann for the risk section of today's presentation. Thank you very much.

All right. Thank you, Jan, and good morning to you. We now move to Page 38, outlining key risk metrics for the first 6 months this year compared to '25. On the top left of this page, so cost of risk amounted to 28 basis points, which is an increase year-over-year by 9 basis points. The key driver of the increase largely driven by the Swan commercial default which was mentioned earlier, but also higher new lending volumes in the reporting period. Overall, the 28 basis points sit within the provided guidance of 20 to 35 basis points. . If we move to the top right on the page, if you look at the lower loss provision coverage, Here, we saw a drop from 1.37 to 1.15. This drop was largely driven by the release of the management overlays but also of the continuation of our performing loan sales. Total nonperforming loan coverage stood at 124.5%, which constitutes an increase by almost 11 percentage points and remains on a solid level. And last but not least here, the NPL ratio dropped by 30 bps from 1.2% to 0.9%, which is the lowest level recovered ever at MONETA. We continue on Page 39 with a more granular view on cost of risk for the last couple of quarters. So if we just look at Q2 in absolute amounts, cost of risk amounted to 254 million. Looking at the breakdown between retail and commercial. In retail, we saw a fairly low cost of risk of 14 million driven by the release of the management overlays for the mortgages, which was 130 million, which came out on the balance sheet. In commercial, we have the opposite evolution. Here, we had a significant increase compared to previous quarters, larger-drive by this 1 commercial defaults, which account for 80 million, where we created a 100% coverage, but also above plan new originations in the commercial space where we were booking our stage provisions in line with our provisioning model. Looking at the first half altogether, it was mentioned earlier, 414 million or 28 basis points, which is within our provided guidance. Let's take us to Page 40. Here, we have an overview of the loan portfolio vis-a-vis coverages and NPLs. So on the top left, you see the evolution of the gross loan portfolio, which increased by around 25 billion year-over-year or almost 9%. At the same time, provisions -- the stock of provisions dropped from 3.9 billion to 3.6 billion. which is a result of the release of the management overlays where we have 0 balances now at the end of June, but also NPL disposals during the reporting period. Nominal provision coverage we covered earlier on a solid level with 124 percentage points and nonperforming loan portfolio dropped by 560 million or 16% and reached an end balance of a DTI of CZK 2.9 billion. This takes us to Page 41 with our NPL work since June 25. I will just focus on the second quarter. As you can see here, we saw a lower formation in the second quarter. despite the fact that we had this 80 million increase of NPL because of this 1 commercial customer. At the same time, we continue to collect as part of our ongoing activities, but also NPL disposals where we sold NPLs worth 306 million which contributed to the ending balance of 2.9 million, staying flat quarter-over-quarter. And the last page, in the risk section, Page 42, Yes, we have the delinquency ratios 30, 60, 90 plus days past due, all of them remain on a very low level, thanks to the still fairly low unemployment rate despite the fact it has been increasing in recent quarters but still on a comparatively low levels. So summarizing the risk section, I think we can state overall with the cost of risk recorded for the first 6 months, we ended up on the midpoint of our guidance, number one. Number two, the Q2 results was impacted by the 1 default I mentioned as well as the higher new lending volumes core performance solid, judging from the delinquencies and NPLs on a very low level. And the management overlay is obviously now fully being fully released. Mean that going forward, the cost of risk is expected to normalize in future periods. And for the full year guidance for '26 we remain committed to the provided guidance of 20 to 35 basis points. And with that, I hand over to Jan Fricek to continue with the liquidity and capital section. Thank you.

Thank you, Normann. We want to maintain strong liquidity position throughout the last 12 months. as demonstrated across our ratios on Page 44, namely loan-to-deposit ratio slightly increased to 68% year-on-year from 65%. And this slight increase is attributable to successful lending growth. Besides that share of high-quality assets and customer deposits stood at 39%. And the regulatory ratios in the charts below, moved well above 100% quarterly remit. . On Page 45, we can continue with the high-quality liquid asset position. We managed to keep the position stable at 178 billion. And besides that, we maintain a healthy share of the excess liquidity invested in the government loans, providing solid support to net interest income. And now I would like to turn your attention to the capital management section starting on Page 47. As mentioned before, in the second quarter, we printed EUR 150 million of AT1 instrument, which strengthened the capital position on both consolidated as well as the individual level. The regulatory capital on consolidated level reached 36 billion against 30.8 billion reported at the end of December last year. And this corresponds to the capital adequacy ratio of 19.95% at the end of June. The composition of newly shows the support of the AT1 instrument. In the charts below, we report the excess capital or the management's target in relative terms as well as in absolute terms, the excess in the relative term sales stood at 4.45% and out of the that -- the CET1 capitalizes reached 2.43%. And in the absolute amount, the excess stood at 8 billion representing the growth since the beginning of the year by 41.5%. The CET1 capital excess stood at 4.4 billion, representing CZK 8.6 per share. And I'd like to emphasize that we have already increased management target by 25 basis points for the announced country cyclical buffer increase effectively from the 1st July of 2027. We had more detail to the capital position on a consolidated level on Page 48. In the top left corner, we report the development of the CET1 capital excess, which increased by 1.7 billion since the beginning of the year. And the 4.4 billion access is maintained on top of the accrual of the dividend distribution of 3 billion. We continue to see the dividend payout ratio of -- or at 90%, unless there is an event preventing us to do so. Let me conclude this section on Page 49, where we report capital position on the individual level. Here the position increased to 51 billion also with the support of new raised AT1 instrument. And this corresponds to the umbrella request ratio of 28.69% with an excess of 6.39% above the management target. So that was all to the capital management, and I will now hand over to Tomas Spurny for the guidance and final remarks. Thank you.

Okay, I am back. So if we look at the P&L, what we guided for the full year and would we expect, as I mentioned, 200 million upside flowing into the minimum profitability target. So at minimum we would like to accomplish 6.8 billion. And if you look at composition of improvement, it is turn on the operating income 1/3 on the operating expenses while we keep the range steady for the credit cost, and this also assumes that the effective tax rate of the bank is not going to change. If you turn the page, we provide a view on the key balance sheet items, driving all of this -- we've guided that the gross performing loans stand at 3.9 billion -- let's call it 3.10 billion at the end of the -- 3.6 billion at the end of the year, and we are at 3.10 billion. So there is nearly 4 billion improvement on the lending, which is positive because we will get some upside from that for the remaining half of the year. And on the deposits, we are actually at the forecasted year-end position. We stand at 454 billion, slightly better. So this gives us some confidence that we will overperform the minimum target communicated on February 3 of this year. If you look at the big picture, I would just like to remind that on a 5-year basis, we would like to accomplish minimum cumulative profit of CZK 37.1 billion. Should we be able to do that, that would be an improvement of CZK 10.4 billion against the previous 5 years. So if you look at it from the vantage point of the last 6 months, I would say, so far, so good. However, we are at the beginning of this journey. We want to thank you for your patience with us. And now if we can do questions and answers, we will glad to address your questions as best as we can.

[Operator Instructions] Our first question comes from Thomas Unger. Please go ahead.

I would like to start with excess capital and the chance of you proposing an ex dividend in the second half of 2026. Obviously, excess capital is ample on the capital adequacy ratio and also 4.4 billion reported now in CET1, but the CET1 ratio is declining with your -- the strong loan growth that you're seeing right now, RWA densities is slightly rising. Is that -- is the position comfortable enough for you to potentially propose an extra dividend in the second half of 2026. That will be my first question. Second question relating to this is also the rising -- the increasing RWA density. I assume that's due to product mix, is there anything that you can do to contain that increase in the coming quarters? Third question would be in the risk section. And here on that single case default provision that 100%. Is there anything else that we have to expect for the coming results, any other effects on the portfolio. And we talked about this in Q1 already. Any potential macro model changes for the heightened geopolitical risks, energy prices, oil prices and so on and so forth? Or are you comfortable with the current position right now? And then lastly, loan growth, evidently very strong, you're targeting. 7.5% to 9.5% for the full year. Is the composition in growing the portfolio that expected to be the same in the coming quarters? And specifically, what do you expect for mortgages? And if I can, just 1 last 1 on the loan deposit ratio, which is also increasing with you being a bit more careful on deposit growth or not as aggressive as some of the players in the Czech Republic. How far can you watch the loan deposit ratio growing before you become more careful on either the asset side or more aggressive on the deposit side.

That's a long question. On excess capital. I think I would like to answer it this way. I think we should get credit for optimizing the capital structure so that we create room for potential dividend. If you look at the distributable excess capital, it constitutes more than CZK 8 per share -- CZK 8.6. So we have the room. And as in the last 2 or 3 years, what we do at the end of third quarter, we look at all of the relevant factors and we decide whether to do an interim distribution. . And other element of the answer is that we have transparently committed to earnings distribution at 90%. So if you look at how we behaved in the last 3 years, we actually exceeded that target, and we simply cannot commit to this because obviously, if we were committed to an interim at the moment, we would have disclosed it. But the conditions are favorable. And we have a capital plan filed with the Czech National Bank, which keeps us comfortable on the CET 1 accounting for the -- or incorporating the expected growth of the balance sheet. So simply put, the conditions are there, and we will do it at the end of September and desirable to do as we did in past years. And arguably density, the increasing density is part of our strategy. Because if you look at the key messages, we very clearly indicate that we changed the product mix. And in fact, the segment mix in order to complete all of the other performance targets. So whether we can decrease the RWS, the answer is yes not to the product makes -- but we are considering, as I mentioned last quarter that we will go on patosecuritizations. And we are working on that project. But at the moment, we cannot comment to the date, except that it will be done if there is demand for synthetic securitization and all of that, we will do it throughout 2027. So this is another factual point where we seem to alleviate any capital pressure that the bank might have. And I would actually cont differently. We wish to create another space to improve the performance of the bank through that. Our cost of risk projection, I will ask Normann to comment.