Alior Bank SA

WSE:ALR

Earnings Call Transcript 2020-Q3

[Unknown Executive]

Good morning, ladies and gentlemen. Welcome, everybody at the financial performance quarterly conference.

Let me introduce the members of the Management Board who are going to participate. Agnieszka Nogajczyk-Simeonow, CFO; Maciej Brzozowski, COO; and Mr. Dariusz Szwed, Chief Sales Officer.

[Dariusz Szwed, executive]

Welcome at the third quarter press conference. It's another quarter where we cannot see you face-to-face. However, using the electronic means, we will do our best to make a presentation to you and answer any questions you might have during Q&A session or via online channel.

The third quarter was very -- we generated very good performance in each month of the quarter. It was a positive result. So the 88 point -- 88.7% -- sorry, PLN 88.7 million (sic) [ PLN 81.8 million ] there was a net profit and CFO is going to tell you more about the financial highlights. And the clear profit is even better than the one we are presenting. So we are very satisfied, and we managed to exceed the market consensus.

And then the safety ratios, the Tier 1 and TCR, capital ratios are at a stable level, do not represent any threat. And the cost of risk declined on a quarter-to-quarter basis.

And of course, in the second quarter, we set up the provisions, it was one-off event. However, the time and development of pandemic showed that our line of thinking was correct.

And now talking about sales. Though it is disturbed by the COVID-19 performance and despite summer holidays and despite COVID-19, we hit more sales records. We managed successfully to implement all our plans. So we'd like to thank our personnel in the third quarter. 99.9% of branch offices were opened. So congratulations go to all our employees.

And we mentioned during previous conferences that we are going to focus our efforts on developing our loan portfolio. And then the increase in value terms was 45%. In the third quarter, we sold almost PLN 1 billion of mortgage loans. And then these products, we will -- I will come back to this later on. We have more and more lessees who show their trust and confidence in Alior Bank. And the cash loan, which has been our strength -- always has been our strength, we exceeded the threshold of PLN 1 billion. And we are developing this cash loan aspect, I will tell you more later on.

And then investment funds, the Alior TFI, which is the asset management company, and after the -- in the first quarter, the assets diminished by almost PLN 300 million. And now we made up for the loss. Now the assets under our management are -- reached almost PLN 1 billion.

Now briefly about financial performance. Then on a year-to-year basis that we measure and also that we showed during our quarterly press conferences, that's the area we can boast of. So the increase on a year-to-year basis in the business areas, which are measured, the retail customers, the business customers and online customers, they were -- we recorded growth.

And then the only area where you have a slight decline then, that's an overall market trend. However, if you look at the average, our declines are much below averages -- market average.

So when it comes to the cost of risk and also the sales management, we are trying also to make up for the portfolio.

Now liquidity ratios, also positive -- follow positive trend for quite a long time now. We monitor these ratios and also the supervisory authorities. And Tier 1, we are above the regulatory minimum by 438 (sic) [ 448 ] basis points and TCR by almost 5 (sic) [ 500 ] basis points.

And in the second quarter, we have to remember that we had, in the second quarter, we had a lot of donor funding and still the customers have, in their accounts, they have probably 8 funds.

And then we are burdened by the market. We have to be efficient. However, the revenue-side initiatives that we are taking -- I'm already on the seventh slide now where you can see that we are doing and we are taking these initiatives correctly, we are working against the market trends. We will focus now more and more on the fee and charge income and we try to respond to the market trends on a current basis. We don't want to be a burden to the customers because we are here to serve our customers, and we are constantly working on optimizing our deposit and loan interest rate.

We don't forget about the cost side. We analyze the cost areas where we can cut costs so that we don't generate too high costs. This is a dynamic process. We are working on a continuous basis, and we are trying to pick up the areas where we could economize costs without, of course, any impact on the quality of customer service. This is a trend that we are going to track -- to follow in the months to come. So the lending policy must match the market realities and should not represent a burden in a longer-time horizon.

And now, briefly, about quarter 3 performance. We are very proud of the performance in the ranking, in the awards and distinctions category that Forbes Poland granted the first prize to our bank as being #1 in the field of a bank-friendly to business. So this Forbes list was made at the turn of July. Nevertheless, our personnel performed very well and we are very proud of their performance.

Then in the third quarter, we were granted an award for our currency exchange office, which is online office. So we are developing our currency products, so all the innovative products we have in our currency exchange offers.

And then the brokerage house was granted a runner-up award by the Bankier.pl portal. And then the profitability rates in the brokerage house are be widening on the year-to-year basis.

And we are doing -- we also received the European Property Award for the best design of the branch format in Poland. So we have already opened approximately 15 branch offices using the new format. Very positive feedback from our customers, I must say.

And then when it comes to the online and mobile improvements, we check the pulse constantly. We keep abreast with times and market developments. So I wouldn't -- I would like to avoid to be arrogant and say that we are pioneers. But nevertheless, we are very active in developing innovative products. And we also give access to our customers. We are #7 in the market when it comes to lending products. And then we have very novelty products when it comes to brokerage products. And we are trying to be ahead of the trends, especially when it comes to the mobile application. We give customers access to innovative products so that the customer could invest from the place wherever he is or she is.

And then Forbes gave us an award for an option of opening up an account using VideoSelfie mechanism.

And also we provide new functionalities attached to a credit card. So we offer the market novelties to the business customers. We want to give our business customers a helping hand so that the customers could sign remotely lending contract or also to sign remotely a bill of exchange. And the customers are very satisfied with these 2 initiatives.

And then some of the banking processes are based on the digital signature offered by Autenti.

And then another project that we run jointly with our parent company, which is PZU Group insurer. So there are employees -- I mean, the PZU Group employees, they have access to their accounts. So all this is handled by our HR department. We offer lending products and then the repayments can be done using their wages. So each month, the number of new customers recruiting from -- recruited from PZU Group employees is growing on a month-by-month basis and we are hoping to further develop our customer base.

And in the business banking, we are offering an option of opening up an account remotely. We have a promotion for newcomers, for new companies, to encourage them to open up a business account with us. And we as the management board that is responsible for the cooperation with our customers, so we opened up PLN 2 billion credit line. And this is a pool of funds to be utilized for working capital loans and also for investment loans. And they are offered on a preferential basis, there are certain soft terms. And if someone is not able to offer security or collateral to the bank for the loan being taken, we use here the guarantee products of BGK Bank.

And then, please now a handful of figures. As you can see, we are now reaching the quarterly figure. This is very important for us. It gives us the losses in the loan portfolio, gives access to the customer who is going to stay with us and do daily transactional banking with us. So we understand the market. We know how it operates. And, of course, the risk must match the market developments. That's why this joint cooperation generates very positive results.

And the sales to business banking customers in the last quarter was $2 billion (sic) [ PLN 2 billion ]. On a year-to-year basis, the growth is -- it's up by PLN 2 billion, which is very satisfactory. So the sales volumes are really good, really handsome. So the current level of PLN 1.5 billion, we estimate to be a very handsome.

And then the cash loan on a quarter-to-quarter basis, we recorded growth. However, the decline in cash loan category on a year-to-year basis, it is only because of the COVID-19 disruption. However, we have already exceeded the threshold of PLN 1 billion. Today, it's PLN 1.016 billion the value of cash loans. So the sales level is stable. The cost of risks declined.

And now talking about mortgage loans, we have already reached the average quarterly share. Now it's 7.5%, whereas in January, it was still 3%. So we improved by leaps and bounds or it was a quantum leap, if you like.

So we continue acquiring new customers and on a yearly basis, we acquired almost 200,000 new customers. And on a quarterly basis, we acquired 70,000 new customers. And the number of current and saving accounts, the growth rate is slower. However, this is a continued positive trend.

So we use here ratio new to bank. This is a priority for us. We want to acquire new transactional customers. We want to measure using the 2 more indices. So the number of customers with positive revenues on the account, it's growing. And then the number of customers with credit cards, that is also growing.

Then when it comes to the growth in digital channels, I would like to turn your attention to 2 figures: a 50% growth on a year-to-year basis and then the mobile banking also the reason to be proud of; and then online sales slightly declined on a quarterly basis. However, on an annual basis, it's growth.

We are giving a facelift to our product offer. We are offering an account for the young people. And the League of Legends credit card is targeted at the most valuable customers for the bank. We want to educate the young customer from the early days until the late days of customer's life.

And then when it comes NPS, in the distribution network, has been stable in the third quarter at the level of 81%. However, NPS relational, it declined in the third quarter. So the customers mentioned that the major reason was because of customer dissatisfaction with the interest rates. However, we are now operating in a low interest rate market environment. That's why we offer promotional -- promotions and then the deposits are linked to investments. However, we are not able to offer a product that would be highly praised by the customers.

And then when it comes to SMEs and corporate customers, we acquired 200 customers in the third quarter. However, it is hit by the COVID-19. So we still have to work on this.

And we modified the corporate banking network. We set up new corporate business centers, seeking cost synergies. The initial performance has been very positive. And I must say that the new relationship with new customers is based mainly on the loans.

And now the customers stopped taking loans. So the customers developed a wait-and-see attitude. They keep their funds on the account and watch the market development.

And then the Alior applications, the customers use the Alior Connect product, which means that the customers connect their accounting and financial systems with the Alior system.

And then in the crisis situation, the micro and small businesses, they respond very quickly to the market developments. They don't have requirement for capital -- for working capital. And now being at the beginning -- in October and the beginning of November, the performance is improving. So in the quarters to come, it should be better than in the third quarter. So the number of these customers is up by 13%. In the online channel, we acquired 2,000 customers. The total number of these customers is to 205,000. So the number of companies -- set-up companies is smaller and they also open up smaller number of accounts. And then the customers who are with us, they are becoming more and more transactional and then the number of the micro businesses who pay their liabilities using Alior Bank account, then the share of the customers with the credit card is up by 4% on a quarter-to-quarter basis.

I will not repeat all I have said before about our collaboration with BGK, but in the third quarter, we have signed agreement with them for those customers who want to use factoring. And that fund also covered the factoring contracts. We have received a PLN 250 million from them to support those customers who need it, the new guarantees coverage. So that is -- the situation is not changing. The whole portfolio is covered up to 55% year-on-year. It has grown by 3 percentage points.

Now the subsidiaries. It was a very good time for Alior Leasing. We are developing a new strategy. We want to stay on this market and we want to increase our sales. The strategy will probably consist in closer cooperation with the bank. I think this channel of sales has not been used in full yet. But we expect permanent growth of sales and a better financial performance from this channel.

Alior TFI. The third quarter, they closed with assets in PLN 120 million. But today, we've already made PLN 1 billion. So we have joined a group of funds that manage PLN 1 billion. So I think this is -- today is the day when we have done that. So congratulations to people who are selling that product. Of course, congratulations to the customers, too. So we are now making the customers quite happy because this constant growth is a good thing. So thank you very much.

Now I will give floor to Maciej Brzozowski, who will discuss the credit risk.

[Maciej Brzozowski, executive]

Good morning, ladies and gentlemen. I will discuss the credit risk situation in this bank. So first, you'll see the quality of the credit portfolio structure, PLN 62 billion the total in the third quarter. 58% of that is the retail segment, 42% business segment.

As regards the individual client segment, the situation is a bit -- the situation here is that 55% of the loans goes for the consumer loans, 35% is the residential loans and consumer finance make 9%.

So here, you can see the growth that Mr. Szwed mentioned before, the growth in mortgage loans. This segment of customers makes PLN 36 billion over that number.

As regards to business segment, it's PLN 26.110 billion. It is much more scattered because 26% is made by micro loans, 12% small loans, 13% medium-sized, 25% is large companies, 3% is the renewable energy sources and Alior Leasing 21%. The structure is close to the one we saw in the third quarter last year.

Impaired loans, 15.15%. Of that, the retail customer -- business customers, 23.96%; and individual customers, 8.81%.

The coverage provisioning in the individual segment is quite stable, 66.56% (sic) [ 66.57% ] in the third quarter; and business customers, 46.91%.

The risk -- the cost of risk. This is an interesting thing. As you can see, the triangle in the screen, this is the result we made in the second quarter when the bank made massive write-offs. Other banks did it, too, but a bit before. We did it in the second quarter, so the result 9.71% for the business and for the individual customers, 3.07%. In the third quarter, we have seen a recovery and we went back to the previous levels, and individual customers, 1.79%. Altogether, it's 1.86%. So as you can see, the effect caused by the COVID write-downs have been compensated and we are back on track.

As you see the next screen, well, it shows the continuing improvement of the sales quality. One of our main products designed for the individual customers, and so despite the COVID, we can see quite good indicators here.

The micro companies, there was a slight increase here. But this is the group of customers, which are a bit small sensitive than others. They suffered most from the lockdown in spring -- last spring, after March, right?

Now the next question is our approach to risk management, and what is our vision of the types of industries we are serving. So we have divided them into low-, medium-, high-risk industries. So what I want to say is that we keep monitoring on the current basis all these branches just in case we need to move one from this category to another category. Last March, we were afraid that most of the industries will have to be locked down. But now we see it's not that bad, really. So we are increasing our cooperation with the medium-risk branch -- industries.

And as regards to the structure of the portfolio. Under the epidemic time, we can say that the medium- and low-risk industries make more than 80 -- well, 87% and the high-risk ones make some 13%.

Now the biggest customers, you can see in the screen, 83% is customers who are not very susceptible to the COVID impacts. Others -- the rest are more affected.

So this is another news that I want to announce that we also have in the micro businesses -- you'll see some numbers there, which show that we are rather in low-risk industries. The high-risk makes a rather small part of our business.

Now I mentioned the cash loans before and here is the share of those loans, which are exposed to risk of losing their job because that's the main cost of risk. In our opinion, more than 60 -- well, nearly 80% of the customers are those who are almost not sensitive to the risk -- not exposed to the risk of losing their jobs. So that is a good information for us.

Another risk measurement is the credit holidays. Like many other banks, we have offered and distributed such aids to the companies as credit holidays, up 14.6%. There are some numbers in the screen for our bank. But despite the fact that we were -- we feared the size of the returns from holiday -- credit holidays, it's not so bad. They did not suffer those severe losses because of the COVID, so the situation is much better than we had expected. And this is good news for our bank and it's a good source of optimism for the future. Of course, we don't know what will happen, what exactly will be the situation, what exactly will the customers do but we will soon see it. Now, it's quite optimistic.

Of course, the bank, like other banks in this country, we're distributing the statutory credit holidays and we have not seen a very high demand for such aid. And we -- the number of applications, about PLN 150 million, that's the amount -- total amount of the applications, not surprising, of course. And I hope and I wish our customers to be well off enough not to be forced to apply for such holidays. We don't want them to lose their jobs and to lose the -- our source of income. So let's hope the national economy and all of them will recover successfully.

As regards the changes in our lending policy. Well, after the second quarter of this year, the bank has implemented stricter lending criteria. As I said before, we are -- we've divided the customers into certain groups of industries, those which are safer and which are less safe. So we added some more criteria requirements to them. This is a very important part of our work.

Now the segment of higher risk. We are reducing the financing for those who've got the civil contracts.

We are also limiting access to credits -- to customers who show a higher risk of losing their incomes because we cannot accept customers who one day cannot pay. This cannot be done, of course.

And of course, the next thing is life insurance to customers from the high-risk customers. That relates to the mortgage loans mainly.

Of course, we are also measuring the credit worthiness of the customers. We have a lot of tools to do it. We are much more careful in analyzing the credit applications. We try to get more precise information about each applicant, so that we are on the safe side.

As regards the collaterals, as Mr. Szwed said before, we are expanding our cooperation with the BGK, especially when we work with smaller-sized customers. So we are happy that this cooperation with BGK is going on well. And of course, we are also getting ready for the liquidity loan secured by the bank guarantee fund. That is something that reduces the risk on our side.

And finally, the credit holidays. As I said before, it was a good support, a real aid to our customers. Many of them use it, but we do not expect why those people should not come back soon after the holidays are over.

So as regards to the credit risk, that's all from me. Thank you very much.

[Agnieszka Nogajczyk-Simeonow, executive]

Ladies and gentlemen, I will try to add some numbers to what my friends have said before. This is an abridged version of the profit and losses. When you compare the numbers for this quarter and second quarter of the last year and also I will compare the first 3 quarters of this year with the same time of the last year. Of course, the 2019 and this year are very different because the situation is different, which factors make that difference and which factors are responsible for the performance of this year.

In the third quarter, as you can see, we are closing it with a profit of nearly PLN 82 million, and we are happy about that. Because in this quarter, each month was also closed with a profit, which shows that we know how to compensate for the losses of the previous quarters when we had -- well, not losses, but we have to make high provisions for the COVID situation. Of course, our situation was influenced very much by the reductions in the interest rates, but that was, I think, discussed by my colleagues before.

Let me say a few words more about the interest rate reductions. As you remember, in the second quarter, a report was -- the current report was published, which included the bank's estimation of the interest rate reductions. We estimated it had some PLN 116 million and perhaps PLN 133 million.

In the third quarter, this reduction of the interest rates was PLN 208 million and PLN 125 million was in the third quarter alone. Its effect on the final result was PLN 169 million, over PLN 100 million of that was in third quarter alone. And this slide shows some more details quarter-by-quarter.

As regards this incremental performance, the comparison with the 3 quarters of the last year and this year, I want to say that although we see a 10% decline here in the interest income but without those extraordinary events, the interest rate reduction and if we did not have any European court decision and credit holidays, our interest income in the first 3 quarters of this year would have been higher than last year by some PLN 60 million, and that would make a PLN 2.5 million growth. So that would be very nice, really, if these events did not happen. Of course, that also shows in the indicators for the quarters. In the third quarter, the interest income was the lowest. Well, it's clear why. So this decline is explained in this way.

Now the fees and commissions. The situation is a bit better here in the first 3 quarters. The performance here was better than in the last year because the commissions on the payment and credit cards, we also see the growth in the fees and leasing and loans. And we're happy that our cooperation with PZU also is growing on sales -- of insurance sales. Now in the third quarter alone, it's nearly PLN 330 million, the result. And the currency exchange and credit cards were doing very well, too. So that is the picture.

And here, the cost of operation, where if times are hard, it's -- we have to do this cost and comment on our costs and what we do about it. Of course, we are struggling to keep the costs low. We want the bank's business and the whole group to be as cost-effective as possible. We are optimizing all sorts of costs. So during the year, since September 2019 until September this year, we reduced number of branches from 212 to 169. We have chosen those branches, which were profitable and had some prospects for future and we will develop them. And of course, we also took account -- into account the localization of those branches so that our customers are as comfortable with them as possible.

People are less interested in visiting branches. People switch -- most people switch over into remote and online methods to contact with the bank. And that will, of course, require further optimization of our costs.

Now payroll, this is one of the main items in our costs. There was a small growth in the 3 quarters this year, but this is a very extraordinary year. So we've done a lot to optimize these costs. The number of full-time workers has been reduced down to 8,031 at the end of last September. We try to optimize the payroll cost. We want to add more tasks to people who are already employed so that we use that resource more efficiently. There are some, well, holidays and we have dissolved the provisions for the bonuses optimization, in general.

Now the depreciation. As you can see, these costs are higher in the third quarter. We decided to review some projects, and we decided to have an accelerated depreciation in connection with the team, Alior Poland, that we've stopped cooperation with them. And that was announced at last press conference. So anytime we make some decisions here, we will be kept informed.

So of course, we optimized these costs. Now the -- these costs -- material costs have declined in comparison with the last year. We are looking closely at the marketing costs because this is where we can give up some expenditures rather easily like business trips, et cetera, may be cut. But we are closely studying our budgets. And they are -- the budgets we make for the coming years are closely controlled and watched. I can assure you of that. And that, of course, these austerity policies relate to the subsidiaries and the bank.

And now the risk costs, Maciej, will you sum up the risk costs very briefly.

[Maciej Brzozowski, executive]

Yes. I want to stress what has been said already before. But I want to stress the trend, what you can see in the top left corner of the slide, that cost of 5.94%, that cost of risk was caused by the COVID write-downs. And now we have dropped back down to the previous value, which is about what the bank usually had in the previous times.

Now of course, we -- I'm now talking about the particular quarter of the year, not the whole year. In the next quarter, we expect this number to be about, well, 2%, maybe a little bit less, a little bit more than 2%. That's what we expect. But please remember that this is expectations, unless you can see the COVID-related situations, which is quite unpredictable and our economy will react maybe in an unpredictable way, too. We have to remember about that. We have to keep that in mind. We should not fall in love with this good information we have -- from the market we have today. But well, let's just hope -- we think will go well -- things will go well. Now we have seen a -- without the second quarter, this decline would be quite substantial.

In terms of the individual client, we are making numbers which are similar to the previous times.

This is about the cost of risk, and that's all from me. Thank you.

[Unknown Executive]

Thank you very much for this part of our presentations. That's end of it. And now we are ready to answer your questions. Please ask questions now.

[Unknown Executive]

We have some questions. The first one, what BANCOVO and Cash, what numbers it reaches?

[Maciej Brzozowski, executive]

These are 2 companies, which are hardly comparable. BANCOVO follows a different business model. But there are some good prospects for development there. And we are restructuring the work of that company. Cash is, again, it's different. It's a platform dedicated to companies where the workers can use our products offered by us and also that includes the PZU Group. Both these projects have made the sales of almost PLN 100 million. So for Cash, this is the beginning and we expect it to develop dynamically. For BANCOVO, we are still looking for some solutions for them so that their efficiency is best for the group.

[Unknown Executive]

Second question from Santander. Why are you undecided to take the guarantee from PZU PLN 4 billion?

[Maciej Brzozowski, executive]

Well, we have not decided. We have renewed. We have used this guarantee, which is not to really guarantee this readiness to extend guarantee in case of any circumstances that would require possible capital support. But for the time being, there is no need for such support, but this is -- we are a part of the PZU Group and this is confirmation that PZU Group insurer treats our bank very seriously.

And within a part of this limit, it's not a guarantee. Only when something happened the guarantee could be extended. And historically, it was done as a capital backup for Alior Bank acquisitions. So it is a remnant of the past. The more that on the part of Alior Bank does not generate any cost, which means that this is free of charge. If there is any emergency or if there are any other factors, you would have to enter into an agreement -- guarantee agreement with the PZU Group and then the charges to us would be on arms -- would follow the arm's length principle.

[Unknown Executive]

Please tell me to what extent fee and charge income is repetitive -- is recurrent in the third quarter?

[Agnieszka Nogajczyk-Simeonow, executive]

Let me repeat once again, the fee and charge income was very good and a record high income, the PLN 330 million. Whether it is recurrent, I don't know, but hopefully it will be even better in the fourth quarter of this year. And the major items include the foreign exchange transactions, also the fees from credit cards, sales of insurance contracts. And hopefully, the situation in the fourth quarter, the higher number of people down with COVID-19, I believe that probably people will move from brick-and-mortar stores to the online stores and then they will pay with credit cards, and we will get a fee income from credit cards. And we are also keeping our fingers crossed for the activity of our customers on the investment accounts held by brokerage office.

[Unknown Executive]

Is there any room to curtail deposit costs?

[Agnieszka Nogajczyk-Simeonow, executive]

As of today, our offer is from 0% to 0.2%. And we have still old portfolio of deposits, which is depreciated. So we believe that if some of the deposits are renewed, then the cost will be lower.

[Unknown Executive]

And then next question. What about the wage costs. Are they going to, in the fourth quarter, to come back to the level in quarter 2?

[Agnieszka Nogajczyk-Simeonow, executive]

I hope that the wage costs are going to decline. We'll continue to optimize our wage costs and they should be -- in the fourth quarter, they should be lower. That's our estimate. I cannot declare any specific amount. Depends on various factors. The bonus provision has been already released, we want to release the leave provision.

[Unknown Executive]

What is the impact of the PZU insurance group on Tier 1?

[Maciej Brzozowski, executive]

At the moment, it's none. We are not activating such guarantee. So you cannot mention any impact. And we do not expect to take advantage of such guarantees. So that's my answer.

[Unknown Executive]

Okay. And the next question, the cost of risk. For 2021, what is it like?

[Maciej Brzozowski, executive]

So let me refer to the last slide. At the end of this year, we expect cost of risk to be at the level of 2%. I mean, not at the end of the year, but in the fourth quarter. But in the -- so the total for this year, approximately 3%; and in 2021, in the range of 2.2%, of course, subject to the COVID-19 developments and its impact on the economy and on the banking sector.

[Unknown Executive]

Next question, how have you managed to develop the mortgage lending so much. Have you reduced the price? Or what are the reasons?

[Dariusz Szwed, executive]

No. We have not reduced the price. Probably our competitors, they increased their mortgage lending prices and that's why we are more competitive. And as you can see on the slide, the average for the last quarter was more than PLN 200 million and in October, it is, for example, PLN 328 million, which is very handsome. And then we have very extensive backlog, which means applications being processed, which, no doubt, allows us to look with optimism into the next quarter. And of course, the fourth quarter will be specific not only due to the COVID-19 situation, but also Christmas is coming. So that's why we would like to challenge this PLN 1 billion threshold and to exceed PLN 1 billion of sales in credit lending segment -- in the mortgage lending segment.

[Unknown Executive]

Okay. Next question...

[Dariusz Szwed, executive]

As I have mentioned, we respond dynamically to the market development and also to the behavior of our competitors. So the price hikes that we have already implemented, they are hovering around the market averages. So we always keep a watchful eye on our competitors. This is easy to implement in the business banking.

However, in the retail segment, the regulator also regulates this market -- this segment. And as mentioned by my colleague, the CFO, we are very happy and satisfied with the fee and charge income and one of the drivers is the brokerage fee income and no doubt that the whole market benefits from that. So we just wonder what will be the -- whether it is recurrent or not. And of course, the brokerage house always takes advantage on the market fluctuations.

And regarding other rates, other prices, I don't expect any revolutionary changes.

[Unknown Executive]

What -- next question, what will be the impact of the second wave of COVID-19 on the sales volumes and especially on mortgage lending?

[Dariusz Szwed, executive]

Now I said that this year is a record high. In October, the sales was -- of mortgages was PLN 328 million, which is the best month in this year. And I don't expect any drastic declines. I mean the cash loan sales, it's dropped by 6% on a year-to-year -- sorry, on a month-to-month basis. So we are thinking positively, we don't expect any bad news.

[Unknown Executive]

Okay. Thank you very much. Next question concerning sales of higher purchase of consumer finance launched in third quarter.

[Dariusz Szwed, executive]

Another very good quarter. The sales was -- exceeded PLN 2 billion. Most of the consumer finance loans are sold remotely. And because of the pandemic, we developed the technology earlier, we started to invest more actively and faster. And now we are a beneficiary because these volumes are really high and spectacular.

[Unknown Executive]

Next question. Why in the third quarter the amortization and depreciation were so high?

[Agnieszka Nogajczyk-Simeonow, executive]

We, as I mentioned, we review our projects. And in the third quarter, we depreciated the assets under the T-Mobile project and the assets were worth PLN 48 million. And it was accelerated depreciation.

[Unknown Executive]

And the next question. The Management Board mentioned that you don't envisage restructuring. What about digitalization?

[Dariusz Szwed, executive]

So we follow the strategy for 2020 -2022 and we are doing nothing more and nothing less. So we follow the strategy and the number of branch offices is the target figure and we are heading for -- in this direction. So we are doing nothing more than what was already communicated to the market. So you don't -- please don't expect any surprises here. So also, the number of head count level is the same.

And when it comes to the layoffs, there are natural layoffs. And we are trying -- we are simply -- we don't renew the contract. So we just follow the strategy and we don't renew FTEs, which are for -- subject to natural attrition.

[Unknown Executive]

Thank you very much. And another broad question. What lending volume do you expect in 2021, both in the corporate banking and retail banking?

[Dariusz Szwed, executive]

Once again, please? Sorry.

[Unknown Executive]

What lending volumes do you expect in corporate banking and retail banking in 2021?

[Dariusz Szwed, executive]

In the -- in our budget for 2020-2023, we have very ambitious goals, higher than this year. For corporate banking, at the level of PLN 7 billion, which is an increase on a year-to-year basis. However, when you look at the current strategy, the conversion into corporate banking centers and also when you look at the pandemic where you -- when the corporate bodies are offered preferential terms of lending and also this pool of PLN 2 billion, there are soft loans. So I don't know whether we will reach this target of PLN 7 billion.

And of course, a big question mark is the COVID-19-related situation. We don't know how it will impact the comp, how it will impact the economy, whether are we going to have in Poland partial or complete lockdown. So depending on the answers to the COVID questions, this will generate a number of options and variants.

So the business plan that we -- was accepted by the Supervisory Board, this is a very ambitious plan, but I can only assure you that we can -- we'll do our best to reach the targets specified there.

I understand there are no further questions. So I would like to thank you for another online press conference. And hopefully, we will be able to meet with you tête-à-tête when closing the year 2020, it's always when we have full interaction, it's easier to talk.

And I wish you a lot of health, also personal safety. So see you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]