Alior Bank SA

WSE:ALR

Earnings Call Transcript 2021-Q3

[Maciej Brzozowski, executive]

[Foreign Language] and the bank have got a very secure capital position. The TCR ratio amounted to 480 bps.

I'd like to stress also the importance of risk parameters. The core ratio was at a low level, at the level of 1.5%, and the decrease was considerable as compared to the previous periods. I'd like to stress that Alior Bank continues implementing improvements, and we have improved the situation as regards to loan sales, and it has grown. It will be shown in the presentation. I'd like to stress the growth in loan sales value and the situation as regards lease sale.

On the next slide, I would like to show you the dynamics in terms of changes in our net profit. As compared to Q3 of 2020, the result doubled. It was PLN 150 million. As regards our share in the market, so as it's presented on the slide, it amounted, as regards to consumer finance, 16.9% as systematic growth by 12.3%, and the cash loans, our share of about 12%. As I've said, our share in mortgage loans has been growing and -- by 2.9%, and very stable results as regards to corporate loans.

Now I would like to give the floor to my colleague, Dariusz Szwed.

[Dariusz Szwed, executive]

Good morning. A little bit about business related issues. Q4 was a good time. And as it was after holidays, we are very glad that we've reached such results.

So first of all, mortgage loans. This is something which is of great interest, and I'm really glad that you are interested in those loans. It's, of course, a positive pressure for us. So, quarterly, there is this 2% decrease.

We can explain it because, as you remember, Q3 of 2020 when Alior did not increase own contribution and it allowed us to reach historical results. So now we have reached the level of PLN 940 million. It's a bit less, but quarterly, we can see that sales have grown, and the same situation applies to our clients -- the number of clients. And I must say that these are very important clients to us, because in terms of relationships with clients and building these relationships, it's a very good situation because we can cross-sell products.

I would like to also say that we are very proud of our sale of cash loans. Because of the pandemic, the level was low last year, but starting from Q3 after holidays the sale of cash loans rebounded. So we are very glad that we have reached this level. And CF, this is a great advantage, and we can see that there's been a decrease. But Q4 is always the strongest one, because people tend to consume more and buy more as of the end of the year. So we do hope that, as of the beginning of the year, the sales will keep growing. However, it's still at a good level.

We are satisfied with -- a little bit more about the sales of mortgage loans. I presented some general information, but now here are some details. And there is this growing dynamics, which has been a great success. We are very glad that you are reading our analysis of our presentation. We are building a good basis of mortgage loans. This is one of our pillars, which is very important. The other one is lease sales.

So market share is stable, 4 percentage points. As compared to the same quarter in 2020, the share was higher, but the own contribution was higher at that time. So we are now working on improving our offer. We -- in fact, we decided to extend our offer by adding on new cities so that the results are better.

This quarter, we also have modified the margin for the best clients in this Q -- quality-related ranking. We've decided that we would give them lower margin. And effective building of the lasting relationship, our stable client base, this is a very important thing. These high in calories products which are sold to our clients, this is of great importance because we continue selling them more and more.

Personal accounts, this is what we aim at developing. This Jakze Osobiste account is a very important product. We'd also like to talk about the importance of not only a growing number of clients, this is a good starting point. But what we are satisfied with is also this new advertising campaign on TV which promotes mobile remote payments, and this campaign has brought good effects. It's been highly appreciated, and the number of clients is growing their toll payment, and other types of payment, it's growing considerably. It went up to 230,000.

And as regards digital channels, it's worth mentioning, as we remember, the pandemic has played a role here. So we need to take account of that. The world has changed considerably. Also, the number of our digital clients is growing constantly, and year-on-year we can see that 20% of mobile app users more. This is what we have as a result, and we still manage to maintain this trend. This is an overall trend, but we are, however, very proud of that, and we are proud of the fact that people tend to use more and more this mobile banking app, and more and more clients using BLIK application. This is what we are really proud of.

A bit more what we are doing as regards some programs which are presented on these slides. So we are very satisfied with the fact that clients who have so far -- have used this Huawei phone app, now they have access through our own apps, Alior apps, to these kind of services. People appreciated highly these services. BLIK online products is also something we are very proud of. And any client who has a loan, has access to BIK products report in this cybersecurity aspects. Considering them, this is very important to have access to this kind of reports, of course.

And something which is also important and needs to be stressed is, we are back on TV. There is this TV campaign. More and more ads will be available, which will show you more details. We missed it a lot. We can see that these campaigns are really efficient. The number of transactions is growing, thanks to that. Maybe not directly, but indirectly, it has had an impact on sales growth. I we will continue with this.

And here, NPS, something to be proud of. Why not? Growing trends as regards indicators, and an average for banking sector is 25 points. Now it's 36. So we are maintaining this trend. It will not be an easy thing, but we will continue maintaining the trend.

And now our corporate customer, this is something we would like to explain in details. Looking at the biggest consumers in this sector, this volume-wise sales has been lower -- lower in Q3. The conclusion is simple. Because in Q2, in fact, we have 2 consortium related loans which increased this volume. And in Q3, we got back to our average level, PLN 1.1 billion. But we would like to achieve more. And this is a benchmark we would like to achieve -- PLN 1.5 billion. And this is what we will face in the next quarter, and I think we will manage to do that.

As regards micro customers and these kind of loans, a slight decrease. As I said, we have maintained the previous level. And this increasing trend is now slower, but we would like to maintain it. And looking at this year between PLN 0.39 billion and PLN 0.38 billion, PLN 0.4 billion (sic) [ PLN 0.41 billion ] -- it's something which is within our ambitions. But, of course, we have higher ambitions. And, of course, when we have to act within a high-risk regime situation this is different. So, just conclusion is that, the level of our sales are a bit below our ambitions, but we have appreciated what has happened so far, and we have ambitions that it grows faster in the future.

About our corporate clients, the same situation as in the case of retail customers, so a lot of growth. And what I'm really satisfied with is the number of clients who are using these accounting and transaction systems. And this is one of the best clients because, thanks to electronic banking, our customers can remain loyal to our bank. We will keep polishing this system and it's functioning.

And now, as for people who are -- pay their taxes and ZUSs, the number of these clients is growing. And this is a good sign to us, telling us that everything is getting back to normal. And I do hope that -- we've been through a difficult time, but then, everything will rebound. And not looking back, we are really glad that our clients now are better, and these trends are gone.

So what I would like to stress is the growing number of customers by 5%. As compared to 2020, its growth by about 13,000 customers. It's a net value, which is also a good reason for being satisfied. And some public programs, as we have to cover this -- there are BGK guarantees, and we've also already reached almost 100% of coverage. So, however, this 99% level of our ambition is something we would like to maintain, as we said before. So new sale -- in this new sales situation, as regards to the small segment, this gives us the overview of the situation as regards to security of the portfolio for the future.

So now climate change and climate-related challenges. We can now talk at length about it, and -- but briefly speaking, Alior is there. We are present there. We've set very ambitious objectives and goals as regards to these EU programs and governmental programs. Whenever there is a need for a loan, we are there for our retail customers. And we don't make a difference between retail customers and for the corporate ones. We are available to both type of customers.

And as regards this Clean Air program, we've been a pioneer, and there's another bank which joined us. However, we have seen a growing volume of loans sold, and we believe that the TV campaign that we are going to see and enough aid is going to reinforce us in the segment. And customers must really raise awareness, and they are more and more aware, and this should bring tangible benefits for Alior.

As for environmental activity, we always want to be present there. We announced that in our strategy. And we refresh our strategy for 2020, and we're going to say that eco related awareness is going to be stronger. And we reinforce it via lottery where one can win a car as a price, just to build sustainability and environmental awareness among Poles, and we will always try to be at the forefront.

A number of figures that are related to our support environmental causes. We have concluded over 187 loan agreements for over PLN 56 million. This is a path where we're going to be present and build, growing volume. We're also present in housing cooperatives and housing condominiums where our customers can modernize and upgrade their housing in heat insulation. So over 600 -- 6,000 households are using our support. And we have estimated our contribution to the reduction of carbon emissions, and we, indeed, have had around 13,000 tonnes per year, which is something there to draw attention to.

What's new for business? We have a MasterCard with -- plus with MasterCard Plusem. We're very happy with that business product. The first month of sales has shown that our customers appreciate this product. We have issued over a 1,000 of cards in this year, and we hope to be -- to have a stronger presence in here. And this is a very good product where customers can be really satisfied with.

And let me just dwell a little bit on our remote channels in lending products, because this is very important. This reduces waiting time and lifts the burden of our staff, who can then focus on customer relations with business customers. So this volume and a number of decisions for new sales in the small business segment year-on-year is very impressive. We haven't just stopped at that. We will continue to grow, and we want to make sure that the decision time is as short as possible, and the credit volume and the loan volume is as high as possible. We want to join forces to deliver that product.

And let me draw your attention to the fact that in our sales center for customers, over 30% of all of the aftersales instructions are handled in remote channels, and we're going to grow that channel as well, and fuel it with new solutions.

As for transactions for business customers, just a few words about that, because this is another thing to be happy about. Year-on-year we have 2-digit growth, which are quite impressive. I will not dwell on that very much, because you can see that. It speaks for itself, and we are very proud of that as well.

And a few words to complete is something about our group companies, Alior Leasing. Like I mentioned, mortgage loans, this is where our volumes are growing most, when we look at the balance. Today, the main driver of growth in our loan portfolio comes from mortgages and leasing agreements.

In quarter 3, we had a little bit of a slowdown because of the things that have been happening on the automotive market, but 95% of our sales are cars. But we have had interrupted supply chains because of the pandemic. We know how difficulty just to buy a new car today. And the prices of second hand cars have gone up, and the demand is high, the supply is lower.

And we do hope that in this quarter, we're going to do our business. That means that we will at least in between PLN 280 million and PLN 300 million per -- and we want to stick to that volume. We hope that this will be attainable. And we can see that leasing with corporate banking have been collaborating quite increasingly, and we will find new financing options for new items. This is a hot piece of news, and we hope that this will translate into our sales of 2000 -- PLN 280 million to PLN 300 million.

We have seen some decline in growth in second and third quarter because of the holiday period in debt funds, and we had some short swings in debt products, and this reflected in a smaller appetite among our customers. And towards the end, we also materialize, as mentioned about the increased interest rates. This always means that customers would shift from investment products to savings products. The interest rates were have not really been raised for our deposits, so we have no short term plans on that. But the -- mentally customers always expect increased rates on term loans.

Looking at the last month sales, I think nothing bad should be happening here on the horizon. And to complete that, our brokerage house, we continue to trend from last year where we had the highest commission growth. We can see that this year, today, this is one of the most significant contributors to our commission income -- and my colleague will tell you about that very soon -- where we had lower plans in retail and corporate customers. We have actually made up for that by business indicators. And therefore we will -- we talk about that, then a little bit about risk. Thank you very much.

[Maciej Brzozowski, executive]

Ladies and gentlemen, as regards to risk. Let me begin very simply that we continue to do our business. And on the first slide, you see our loan portfolio and a cross-section of our portfolio. Overall, we have a slight increase in individual customer segment, that's 60% up to 40%, that's a relationship. And as for the segment of retail customers, I'd like to draw your attention and highlight something that Dariusz just mentioned, that we have an increase -- a noticeable increase in mortgage loans, housing loans. This is something that I mentioned before, and something that makes me very, very happy, because that means that step-by-step, we are changing the structure of our balance sheet to make sure that it is less sensitive to all kinds of turbulences that might occur.

As for the business customers segment, quarter-to-quarter, we haven't seen any significant changes. But I'd like to echo that -- and echo what Dariusz Szwed just said. We have been increasing our presence in leasing services, and this can be seen in our structure of the portfolio.

What happens later? What do we continue? Look, please, at the left upper corner, a significant decline in impaired loans. Because our bank is growing its working very hard to lift that balance, to lift that burden. This is at 12.75% of difference, which is quite visible. And like I said before, we have been taking a number of steps -- write-offs, and we sell some of our debts.

As regards the reserve coverage ratio, it has grown by 7.55%, and this is a very satisfactory ratio, and hopefully, it will remain at this level or it will slightly decline due to our actions within the nonworking loans.

The cost of risk, which is very important here, and I would like to highlight that, do pay attention to the following. It has been very stable throughout this year. This is yet another quarter, like you saw that it, was 1.48%, and now we have 1.58% in quarter 3. There was a slight increase in quarter 2, 171%, which was explained by the reduction of our NPL levels, and there were some additional connections related to the write-offs. So that was explained during the previous presentation.

As regards the cost of risk by segment. You can see it in the lower right corner. So for corporates, it's 32.1%, and in retail it's very -- it has been very stable 1.02% in the third quarter, and 1.14% in the first quarter. So it has been very stable, which is really very important in terms of risk. So there is some stability in what we have been doing, which, of course, also means that we will continue this type of action to reduce these factors and these ratios. This has been the overview of our cost of risks. And let me just highlight again that we have seen a decline in cost of risk and an improvement in the quality of our loan portfolio, and we are very happy to acknowledge that. Now, next slide.

We present the benefits that we derived from our changed policies and risks. So there has been a stabilization of the cost of risk at a lower level, like we show here, so 1.61% after 3 quarters. And looking at what we think this might develop in the future, let me say the following.

In my opinion, we have been watching our customers -- customer behavior, and they're behaving very well. Even though last year, we were very much afraid of the COVID situation and some turbulences that those customers might be having, because of COVID. But now the behavior has improved. They have been repaying their loans. So there is no Armageddon that everybody had expected last year. And if this persists, then we hope that we will maintain the risk factors by the end of the year at this very level.

And of course, it is too early now to say that we're going to change our strategic targets. We have been really very cautious at 1.9%. But if the macroeconomic scenarios and customer behaviors maintain -- are maintained, then I think things should be improved, and it should be closer to what we have now rather than closer to the target that we indicated in our strategy.

So I do not want to be overly optimistic, but if that persists, then the situation should be very nice and pleasant, when it comes to our situation in this respect. And let me just reiterate that we will continue to take measures to improve the quality of our portfolio and improve our creditability assessment, to improve our portfolio further while sticking to our sales targets, which we will continue to fulfill.

As for further slides, you can see the cost of risks. At the bottom right in this graph -- I will not really comment on that. We have already done that -- we have cost of risk in the individual segment, and so you can see what it looks like.

And then a few words about the quality of our loan portfolio and a little bit about our delayed or overdue loans. We have a declining trend in overdue loans, which is, again, very good news for us and for the market.

And one other thing, very briefly, as for capital ratios, the situation has been rather stable, 13.48%, so Tier 1 coefficient. TCR 15.30%. And we have quite a margin versus the statutory minimums that are required. As for LCR, we closed this quarter at 156%, and that is a -- thank you very much. This has been my brief info about risk.

[Radomir Gibala, executive]

Thank you very, Maciej. Hello and very good morning to you. First, let us take a look at our profit and loss account. Let us start with income. Historically speaking, Alior Bank -- 80% of its income was derived on interest income. And now you can see it's closer to 75%, which means that we need to take more -- pay more attention to commissions and fees. And year-on-year you can see that our income has grown by 3%, whereas the commission income has grown by 20%. I will present that in more detail on another slide, but just a few words about interest.

As you can see, the interest income has been growing quarter-to-quarter by 3%. And the first word of comment that I would need to make on the slide below, this is still burdened with returns of commissions on day-to-day lines or current lines. And of course, it is slightly lower. As you can see, it's PLN 51 million versus the previous quarters. And we hope that this trend will persist and the burden will be lower. And this result is still affected by lower margin in our portfolios, and we have been operating on lower interest rates.

And now let's talk a little bit more about our income. And here, as you may note very well, because we present results for 3 quarters, but the interest rates have grown, so we have tried to make an estimation. This is the last point. If we assume that only 4% EPS growth, the result will be higher by PLN 130 million to PLN 50 million. And it's based on the assumption that there will be a slight growth in the financing cost, but it exhausted, as I said, all this area related to 40 bps.

Moving on shortly to costs. Of course, there will be a dedicated slide on that, and we will dwell on that a little bit more. But just short piece of information, we decided to make provisions for returns on historical loans. As a result of this small court of justice ruling, we decided to remain conservative. And looking at this forecast, we decided in Q3 to raise the bar a little bit. And I think that -- and I do hope that it will be the last increase. And as you can see, provisions in previous quarters were a bit lower. As regards to ratios and -- we will talk about them later in this presentation as compared to the strategy which we have presented, but now let me move on to the next slide.

Well, a bit about the interest income. When you look at our graph on the right-hand side, it is interest margin, it's been improving quarter-on-quarter. And we do hope that, thanks to our structural moves, it will be possible to improve it and the volume will keep growing, the margin will grow, and returns will be maintained at the level I indicated before.

So considering this, we need to take into account what Maciej said, the cost of risk and cost of financing. These cost of financings are at the level of 14 bps. So this is like a high level. It remains to be high. But considering the impact of interest rates, which will increase, this cost can grow.

One more thing, looking at this slide, loan to depo ratio, it's been growing slightly, which you can see it's been showing this -- reflecting this positive trend. This rebound -- people using this deposit basis and its conversion into loans, which is at the level of 86%.

Moving on further. The fee and commission income, as you can see, how it's marked on our graph, and year-on-year comparison. You can see clearly that there has been clear growth. We are based on the transactability of our clients. Especially in Q1, there were holidays there and people were using intensely our products. You can see here on insurance and lease sales, and what Dariusz talked about. It's as well seen on the example of commissions -- on brokerage commissions, which reflects a rebound on the equity market, capital market.

So moving on further, let's dwell a bit at costs. As you can see, expenses. Well, quarterly, as Dariusz said, we got back, in fact, to increased expenses on marketing, PLN 4.5 million more. Campaigns are back, ads are back. And then we are maintaining our cost-related discipline, as you can see. Lower BFG contribution. This is something that is upheld.

But as regards the putting off some projects to -- for later to the other season, well, also office maintenance and communication and other costs, this is everything that is part of our savings plan. And this is well reflected by the cost-to-income ratio, which amounts to a 44% -- 33% -- 0.025. It looks even better in Q3 because it amounts to 42%. And here, we have maintained our forecast, which means we will stick to what was said during the strategy update, which means that in 2022, it will not exceed 43%.

Short comparison quarter-on-quarter, working, this is what it's called. Well, where do we have this result from? As compared to Q3 of 2020, we started from PLN 82 million. So as you can see, as regards structural factors, how do they work? Commission related results PLN 20 million and cost -- the general administrative expense is PLN 14 million, and better macroeconomic environment gives us PLN 38 million. And after the deduction, you can get PLN 150 million as of this quarter.

So as I said before, we refer every quarter to our goals which were set in spring this year. And Dariusz talked a lot about the business volume. I will not repeat that. But as regards assets, we maintained it at the level of PLN 89 billion, and this is now mainly thanks to our actions on lease sales and mortgage loans, but we are also expecting some changes in corporate segments.

And 2 things about profitability. The return on capital is at the level of 7.8% after 3 quarters. We said it would be more than 5%. Please pay attention to the fact how this perspective has been changing. And these 2 quarters, we can said -- these COVID quarters. And the COVID environment has had an impact on the result. So now we are more ambitious, and our aim is to have a higher cost of capital. So as regards the interest margin, it has not yet reached the level we talked about, but the environment itself and our efforts will be there so that it becomes higher.

So -- but once again, I would like to stress one thing, please, related to the cost of risks and cost of financing. The cost-to-income ratio at the level of 44%. So this is very comfortable situation, and we feel that we'll be able to maintain this ratio in 2020. As regards to risk, Maciej talked about it. I will not repeat myself. So within this unchanged macroeconomic environment, we are able to think in an ambitious way about fulfilling our objectives for this year.

So some key messages we have for you. It's a constant message we can say. We keep being innovative, introduce digitalization, and keep working on improving operational activity and our loan portfolio. We take advantage of the better demand for mortgage loans. And here, I'd like to remind you that our share in CHF loans is very favorable. We are one of the banks which has -- which are more positively sensitive to some trends related to that.

And now I would like to finish my presentation here. Thank you very much for your attention.

[Maciej Brzozowski, executive]

It was a pleasure for us to present our results. And here, I would like to start the Q&A session.

[Unknown Executive]

What impact of the small court of justice ruling can we expect in the long run? And what impact it will have on the income result, interest income?

[Radomir Gibala, executive]

So as I said, the current returns are stable and be able -- at the level of PLN 50 million quarterly, and we assume that it will be maintained in the future. But as regards historical returns, they have been decreasing. We have created this provision -- this reserve at the level of PLN 16.8 million, but as for now, we don't think we would need to create more reserves. Maybe there will be some other nonmaterial amounts which will be taken into account, and we'll inform you about them.

[Unknown Executive]

Another question. The ECL reserves within the business client basket, do you think that they will be canceled or not, these reserves?

[Maciej Brzozowski, executive]

We can talk about it at length, but the first thing is to improve the loan portfolio quality. As I said, less clients are in a worse situation than we assumed. If it continues like this, we don't know. It will all depend on the economic environment. And as we can see for now, the risk-related situation is good. It has been good so far, but everything will depend on economic developments in the future.

[Unknown Executive]

Now another question. After the interest rate increase, have you noticed as a bank, lower interest in mortgage now?

[Dariusz Szwed, executive]

We don't think it could be related because, historically speaking, Q4 -- and when analyzing previous years, fourth quarter was always a quarter where these loans were not sold so much, less application from our customers. So I don't think we should worry here, and we don't see any link between interest rates and mortgage loans.

I think that clients are still -- customers are still interested in these loans. We modified the margin, we lowered the margin and we targeted it to bigger cities. And even though the interest is lower, we think that everything we have done so far in order to prevent the decrease, will make the situation even better. Thank you very much.

[Unknown Executive]

Thank you for your answer. It's a very interesting question for the future of the bank. As regards a better situation of financial -- related to financial results, do you consider paying the dividend for 2021? And can you -- when can you start paying this dividend?

[Radomir Gibala, executive]

I think that this year, we don't plan to pay the dividend, but looking into the future, we do think that we will be able to pay it. However, it's now too early to talk about it, and we will inform you about our plans.

[Maciej Brzozowski, executive]

But we are really happy to get this kind of question. Some time ago, we wouldn't get this kind of question.

[Unknown Executive]

Okay. Thank you. After 3 quarters of 2021, the C2E ratio was quite low, at the level of 42.9%, much below 46% according to forecast. Is there a room for improvement here? And if yes, in which areas within your bank?

[Radomir Gibala, executive]

I think there is room for improvement as regards operational efficiency, but we also take into account higher BFG burdens concerning the contribution for next year. The level of 42.9%, this is valid only for Q3 and incremental value of 44%. We consider here the contribution for BFG which were paid in Q1 and Q2. When looking at next year, and despite the costs, we do allow that C2I ratio might decline in comparison with the current level. But we constantly maintain the 46% more or less, and not more, because when it comes to measures, there might be some pressure on costs. But as that was for the upper part of the equation, and as for the denominator, if we assume that the first increase, then this is already high, and we feel, like I said, that we feel some minimal comfort, that we're going to retain it under 46%.

[Unknown Executive]

Another question from this row very quickly. Which costs and groups, of course, are most -- are being most likely to be affected by inflation?

[Radomir Gibala, executive]

Well, what I'm going to say will be understood quite commonly, because when we look at the current consumer inflation rate, then certainly, we need to brace ourselves for salary and wages pressure, and I also mean rents and also IT costs -- direct and indirect. And we can also consider other costs, but these 3 categories will really be very important when answering this question.

[Unknown Executive]

Next question. Do you feel inflationary pressure on bank salaries -- on your payroll?

[Maciej Brzozowski, executive]

Well, I think it's not just our bank, just any business in Poland must feel this kind of pressure. This is a normal phenomenon in times of inflation, and we are going to monitor that and react accordingly.

[Unknown Executive]

And a question which is asked very often from the media, are you planning to change interest rates on your savings accounts and term deposits?

[Dariusz Szwed, executive]

Well, like I said, we are going to have this process on a wait and see basis. We're going to approach just looking at our competitors, because we are going to have quite a few announcements from banks on raising interest rates, and we will respond, of course. But we will do so in order to maintain our financial performance at the current levels. We do not want to increase the financing cost too much. So we're going to balance that with increases to make sure that we do not harm our profit and loss account. But we have very ambitious assumptions as for raising our term deposit base. And without raising the interest rates we will be -- we'll have difficulty to do that, and of course, we will communicate that to you, of course.

[Unknown Executive]

And a question about the cost of risk. When is the cost of risk going to decline in [ HB ] ? Are there any particular exposures that are going to be hurdles? And what about the current cost of risk and KB? Does that reflect your structure of the portfolio?

[Maciej Brzozowski, executive]

Well, it is a paradox. Any bank is going to have any exposures that are difficult, but that's more of a joke. And the cost of risk for business customers, we will see that this is a mix of current quality and NPL reducing measures. And like I said, and like I showed this on slide, when we do write-offs, we can see that in aggregates and in figures that are somehow aggregate values. And in the coming quarters, we are going to see the effects of improving portfolio quality. And I believe that the rates is going to be slower in NPL reduction.

On the other hand, we do not feel that there will be much pressure on cost of risks arising from the increasing interest rates. And also, we need to remember that the government aid is going to window gradually, but maybe not fully, because we keep hearing about some new programs that might aid the business sector. So this is my answer to this question.

[Unknown Executive]

Another question on loan. Do you expect the problems in the leasing business are going to last?

[Dariusz Szwed, executive]

Well, yes, as I said before, the supply chain has been slightly upset due to the pandemic, especially in electronic supplies, and this is a situation that we see currently in the market. So it's an extended production cycle for new cars, and waiting time for new cars has increased, and also an upheaval in market of secondhand cars. But the levels are much higher than the sales levels pre-COVID. So this is one reason to be proud of.

And secondly, our ambition is to make sure that our leasing company keeps growing and keeps expanding. And in the coming years, we would like to double the portfolio that we now have in our leasing companies. And thirdly, our ambition is to make sure that our leasing company grows its profitability, so that becomes an important link, not only in growing our portfolio, but also an important link in growing our profitability, so that a group of Alior Bank can derive benefits from leasing. And we really have leasing as a very strong focus. We want to go beyond the market when growing, and then we are going to ensure high rates of return from our investments.

[Unknown Executive]

And one other question. The share of CHF loans is marginal in your portfolio, so for Swiss franc loans, and do you feel any pressure in that regard?

[Dariusz Szwed, executive]

No, we don't feel any pressure in that regard. Alior has a low share of mortgages in Swiss francs and no issues, no concerns have been noted since, no increased pressures have been observed. And as you know, Alior Bank went out to the market towards the dawn of the -- towards the dusk of the mortgage lending in Swiss francs. So we are in touch with our customers and with the banking supervision, and we work according to recommendations. So no concerns here.

[Unknown Executive]

And one more question. Would you confirm that sensitivity that you presented -- sensitivity on your performance, PLN 300 million to PLN 350 million, and we're talking increased interest rates by 100 bps?

[Radomir Gibala, executive]

We presented our estimates at 40 bps, and we confirm the same estimate at 100 bps. So that will be PLN 300 million to PLN 350 million. But do remember that there is a risk that the higher the estimated interest rates, then the sensitivity is going to be lower.

[Unknown Executive]

This is the end of our Q&A session, and we invite everyone to submit further questions to our relation -- Investor Relations mailbox.

And thank you very much, everyone, for participating in the conference.

[Maciej Brzozowski, executive]

Thank you very much, and see you next time.

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