Alior Bank SA

WSE:ALR

Earnings Call Analysis

Bank's Q3 Performance and Strategy Outlook

In the third quarter, the bank showed substantial profitability and is midway through its strategy, with a well-prepared leap toward enhancing equity and public economy involvement. Cost of risk remains low, reflecting improved portfolio quality, particularly with corporate clients. The Buy Now Pay Later service is gaining traction, with volumes expected to rise following a promotional campaign. Strategically, dividend payouts are anticipated post-2024, adhering to a conservative approach pending regulatory consent. Interest rate forecasts suggest a gradual decrease over the next years, planning for 5.25% by end of 2023 and approaching 4% in 2024. Hedging strategies are in place to mitigate potential revenue shortfalls, with an expected impact of PLN 300-400 million next year due to hedge portfolio depreciation. Employee costs have reduced despite workforce growth, while administrative costs saw a 7% quarter-to-quarter increase due to various factors including legal risks and inflation.

Alior Bank's Q3 2024 Financial Performance Exceeds Expectations

CEO Grzegorz Olszewski and VP Tomasz Miklas opened the presentation for Alior Bank's third-quarter financials of 2024 by highlighting revenues that surpassed brokerage forecasts. This achievement was credited to a consistent strategy focused on risk reduction and asset structure changes, aiming to keep business dynamics robust. The bank concentrated efforts on maintaining cash loans and growing the business client segment.

Strategic Moves and New Initiatives Cultivating Growth

Commission results remained stable due to disciplined accounting, as the bank strives for long-term growth, particularly in its business customer area. They avoided deep pricing cuts and continued to acquire new clients, despite high-interest-rate challenges. Remarkably, the non-performing loan (NPL) rate has decreased while both gross loan and asset volumes have grown. Encouragingly, Alior Bank showcased readiness to capitalize on improving macroeconomic conditions and drew attention to its competitive cost-income ratio (CI) of 33.4% and return on equity cost of risk (ROE COR), which is commendably below 1%.

Retail and Business Segments Show Strong Performance and Innovation

In retail banking, Alior Bank recorded PLN 1.5 billion in loan sales, including nearly PLN 1 billion in mortgage loans, reflecting year-on-year dynamics exceeding PLN 1.4 billion. The bank claims a leadership position in this segment with an 18% year-over-year increase in customers. Their mobile payment solution, Alior Pay, aligns with the growing trend of mobile banking, which helped boost their revenue. Remote sales now account for over 50% of the business, and the bank's strategy to focus on consumer finance loans proved prudent, allowing for a successful rebound in the market. The business customer segment grew 2.5 times faster than the market, with an emphasis on non-loan products for stronger customer relationships. Alior Bank emphasizes its versatility by diversifying its services, particularly in trading, growing faster than the overall market.

Technological Advancements and Market Share Expansion

Alior Bank benefited immediately from its '2% safe mortgage' product, leading to impressive sales growth and a significant increase in asset size to PLN 176 billion. The bank has actively utilized remote processes for improved client service and risk management, allowing for quick mortgage decisions and better prediction of future risk costs. Furthermore, Alior Bank experienced a robust uptick in remote dispositions, reaching over 60%. Impressively, their market share in agreements reached 12%, signifying profound progress from 2.3%. Alior Bank's commitment to technological integration and market expansion is evidenced by the 40% growth in BLIK transactions, indicating the bank's rising stature as the preferred choice among clients.

Earnings Call Transcript 2023-Q3

[Dominik Prokop, executive]

Ladies and gentlemen, this is Dominik Prokop from Investor Relations and supervision.Welcome to everyone to the conference of Alior Bank after the third quarter 2024. At the very beginning of our conference, we talk about the results of our bank. And the main message will be presented by employees of the bank, which is the CEO, Grzegorz Olszewski; Tomasz Miklas, Vice President, CRO and CFO. And in the second part, after the presentation of results, we'll move to the Q&A session.

However, before I give the floor to Grzegorz, I would encourage all of you to ask questions during the first part of the presentation, and therefore, it will be able to fluently move to Q&A. Grzegorz, the floor is yours.

[Grzegorz Olszewski, executive]

Thank you, Dominik. Thank you, ladies and gentlemen. Welcome to the results presentation for quarter 3. Let's move on to figures that you all know very well. We try to talk about the context of the figures. When we talk about revenues, which is exceeding the forecast of the brokers agencies, this is due to the consistent realization of the strategy in the area of risk, which means we lower the profile. We changed the asset structure so that we maintain strong business dynamics, which means so that we maintain cash loans or the business client business customer segment.

This is what we are still doing. Macro well, not everything is in our favor, which we'll present in a second. However, the risk profile of the bank we managed to successfully reduce that, and it brings us some tangible results, which will be discussed later on by the President, Tomasz. When we talk about commission results, then Radek Gibala will talk about that. This is a result of the consequence of accounting we are trying to maintain this result at a similar level. And we assume, especially in the business customer area, we assume a long-term development.

In other areas, we did not perform a depricing. However, we are gaining new clients. Let's keep in mind that in a situation of high interest rates, we have to remember about acquisition, about getting new clients with regular payments. I'll talk about it later on. When we talk about the indicators, I would like to drive your attention to decreasing NPL. We see the increase of the volume of working loans of performing loans. Also, the gross loans volume grew and assets as well. I believe that Alior is well prepared for the improving macroeconomical situation so that we can benefit from it, especially the second pillar of our strategy, which is the business customer. We want to build on that.

We have some impressive results already, which we'll talk about in a second. I believe we are 1 of the most effective banks, CI [ 33.4% ] then ROE COR very, very good result, below 1%, and this is all a result of a really well prepared strategy. This is the direction we are going into. And that every press conference, we try to explain it in a transparent way, but you can see clearly the benefits already. When we move to the retail customer segment, PLN 1.5 billion on loan sales, PLN 1.5 billion, close to PLN 1 billion on mortgage loan sales. Dynamics year-on-year is more than PLN 1.4 billion. And we are a leader in this segment.

We've only improved that and increase of customers year-on-year. This is plus 18%. And in the total number of regular customers is also growing. In the higher mobile culture, we have also started with our flagship service Alior Pay. We have just started this month, the first campaign promoting this product since the product is already available to the customers and to the potential customers who would like to benefit from it. When we talk about the business opportunities that we had this quarter, first of all, that will be the 2% safe mortgage. We have benefited from that from the very first day then the increase of sales increase of mortgage loans really above possibilities.

I mean, so far, Alior Bank has not been calibrated so that we could generate such sales. So for us, this is a huge success. Asset increase to PLN 176 billion, that means that we have a lower profile PLN 17 billion -- sorry, excuse me, then PLN 1.2 billion of the volume of positive decisions on the safe mortgage. And then by the end of September, we had 6% here in the share of in agreement signed. However, right now on the fifth of October, it's above 12%. Let me go back to the market share. It's 2.3% and now the agreement signed, it's 12%, even above. Then cash flows. It used to be crucial. It is crucial, and it will still be crucial. Over 50% of share of remote sales but the first quarter -- it is the first quarter since a long time when assets are on a higher level than in the previous quarter.

During our last conference, I told you that we slowed down here, but this is the first quarter where this portfolio grew where at the same time, we have repricing and maybe a bit weaker sales in the third quarter. However, what is important is repricing. Repricing has been done. We see that we are able to sell cash loans in a more effective way. And that's why we use that momentum. Consumer finance loans, that is also an important part for Alior Bank. The sales of CF loans is on a very good level. The fact that we are recognized among our partners, we put emphasis on our innovation.

And that means that in the first quarter, as I mentioned, we decided to let it go due to repricing. And now we can see that, that strategy was the right one because the market still would come back to us, and that really happened. When we talk about the relationship with our customers, retail customers, we have year-on-year increase, quarter-to-quarter increase we are especially here in the management Board, happy with the systematic account inflows increased so that this grows together with our bank. This is also confirmed by the number of accounts, [indiscernible] as well as the increase of the number of mobile application users.

We have a quarter-by-quarter, we're growing by several thousand. It's a very good result when we take a look at the market. At the same time, we are going consistently through the evolution. We are changing this mobile application. We are adding on next services, and we're improving sales services. This is as a result, we have plus 50% of the sales here. Right now, we are mobile bank exclusively for part of the services. We hope that this channel is going to be the dominant channel. The BLIK transactions grew by 40%. That shows that we are becoming a first choice bank for a greater number of customers.

And the second pillar when we are supporting entrepreneurship, which is business customer segment here. Here, it's crucial that we are defining certain goals, and we are meeting those goals. We are growing 2.5-fold faster than the market, up to PLN 5 million, which makes a difference for us because we are able to have the full relation with the client so that we have a product there and a deep relation. We are diversifying here, we used to be recognized mainly as the bank. We are still recognized as a bank that understands the sector of housing, of construction, real estate. So we are growing in trading as well, quicker than market.

So this is also a part of the strategy of the bank to diversify our activities so that we are adjusted to different possibilities. When we talk about sales of non loans products, one of the key things in the strategy. So this is the relation with the business customer, but also non-mortgage non loan products. In order to make this relation strong. As you see, it's over threefold increase when we compare this year versus last year. In order to maintain effectiveness, we have to simultaneously have this increase in market share. And as you can see, it's being done in the retail customer. We have remote processes that are able to service our clients quicker. We are able to take the burden away from the bankers.

And in the third quarter, we have seen dynamic increase in the remote dispositions is over 60% right now. And now when we take a look at this good trend in this remote services. It is right now over 60%. As I said, about the mortgage decision. It's good because on the one hand, it's a quick decision for the bank or the banker who is working on the process itself but also it gives us a better quality and the control over the risk process and the possibility to forecast the risk cost for the future, which has this multidimensional meaning that we managed to implement in the Retail segment. We have the goal to build on that segment, and we have consistently improved that.

Moving on to the performing portfolios in each structure, we can see that we have an improvement. So that is -- we are growing faster than the market. That's a very good information. The performing portfolio year-to-year, we have those 20 million commitments. So the market is slowing down. We're growing. For us, this segment is between PLN 20 million and PLN 60 million that's the segment that is crucial for us. It's threefold greater dynamic and it's a great achievement here. But we're also looking for possibilities for chances here since we haven't been in this segment, we are now using this possibility to the maximum. So over PLN 60 million, exceeding PLN 60 million, we are also trying to build the assets.

When we take a look at balance of assets, Year-on-year, we have minus 17% quarter-on-quarter also. We are systemically reducing this balance. At the same time, we are taking care of the balance of performing balance. It's a good news since we are performing the transformation with the weaker macro. So I am an optimist and I'm convinced that this is -- looking at various factors like the situation on the market, a good prognostic for the bank and a good signal in so far as how we can tap into the opportunities appearing with the a speed of economic growth in our country. Improvement of effectiveness, improvement of processes this is a critical thing. Obvious to be a pioneer in so far as opening account. Now we are a pioneer in combining this account on [indiscernible] with other options.

This is important because there are various channels for people to enter into contact with banks also with the use of the mobile phone, but also with the help of a human being to quickly open an account and to implement this process, this is a very important thing for us when we counsel individual customers or the sales of different types of loans. So we get the biggest amount of cash out of that. We make available new ways of identification like citizen or new possibility of FX exchange with the use of BLIK. This is a big simplification for customers, and this is a great chance for the bank to get means. Thanks to BLIK.

So increasing this relationship. We have made it available for all clients. There was a promotion campaign in October for this product. Active quarter in [indiscernible] this is quite surprising in so far as ranking of the banks when we are looking at the assets and our activity in [indiscernible] activities for inclusiveness including people who have come to Poland remembering how important it is so that people who are in Poland who have adapted themselves who've entered the market. It's important for their children to enter the process of education with the operation with UNICEF and the U.S. Embassy. We have promoted a very difficult, but I think quite important exhibition from darkness to light within the implementation of the strategy of the second pillar of supporting entrepreneurship.

We continue our business breakfast with entrepreneurs. This is a very important element of the discussion of understanding the needs of the customers, understanding where do they need to support and building our brand within a micro, small and medium enterprises. And our prices or awards that we received are the consequence of the results when we look at the number of implementation and the speed of implementation. The third pillar, the modern brand within the strategy we concentrate on social activities. But also within governance, this is quite important for us in so far as KPIs related to dividend. We want to be transparent. We want to fulfill the highest standards within corporate governance and we want this to have with the benefit for the shareholders, first of all.

And we approach environmental issue seriously. We work on it. We try to tap into the business potential related to energy transition in the country. So this is all for me, and now I give the floor to Tomek, who will discuss risk area.

[Tomasz Miklas, executive]

Thank you, Grzegorz, this is Tomasz Miklas. Risk area last quarter and the entire year. This is not only the good result of the bank and very good sales result but also very good results within risk. In so far as Tier 1 in capital, over 15%, TCR, over 16% at PLN 3.5 billion, the third quarter it's plus 140 basis points in so far as within issuance of PLN 400 million that you know about it fulfills the requirements that are imposed on the bank at the same time as we communicated, we plan to have an additional PLN 1 billion of additional issuance because the old bonds will expire, so we plan new issuance. In so far as LCR and NSCFR, they are on a very high safe levels 188% and 40% with regulatory minimums on the level of 100%.

Before I move to discussing results for the third quarter with in credit risk, a short piece of information for you. What do these result from in this area, the good results. The first, the credit quality transformation. Within the years, it has improved in 2019, the default rate, so the percentage of our portfolio that enters the default was 5%. And then year after year, it decrease this year, 2.5%, so a reduction of over 50%. The second thing is structure transformation. Grzegorz talked about used opportunities within mortgage loans, looking at all those years, the share of mode loans has grown from 21% to 29% in our loan portfolio.

So this has a great impact also on the risk. And NPL reduction besides the improvement of our portfolio. The sales are going up. In time, we reduced nonworking, nonperforming portfolio in the years 2019, 2020, it was over PLN 1 billion in 2021 and 2022. It was almost PLN 2.5 billion of reduction each of these years this year until the end of third quarter, PLN 900,000, but the year is not over yet because these activities are not symmetrical over the quarters. So we'll be summarizing it in the future. Now NPL indicator at the end of third quarter, 9.39% from the historical level of maximum at the end of 2022 almost 14.5% in 2020, so a reduction of 1/3. So we are not slowing down in so far as the cost of risk dynamic improvement in time. So 2020, 2.8% 2022, 1.5%. So this year, the first 3 quarters, 1.16, one of the lowest, if not the lowest level in the history of Alior bank with some positive events.

One-off events after the second quarter, we have communicated positive events in second quarter. In the third quarter, we also had a group of positive events related to positive restructuring of corporate clients, which resulted in a fact that real money came to the bank in this process. Or within the improvement of the situation of the clients we're able to go back to assess the clients, that the clients are in a normal situation, and there is no threat to repayment. And so far as this year, we do not expect that the cost of risk of the group would go over of 1.1%. A similar result on the similar level is expected in 2024. And in the average, in the midterm perspective, we expect stabilization of the cost of risk at the level of 1%.

If we go deeper, the results of the cost of credit risk, NPL quarter-to-quarter is being improved. It's not only in years, but every quarter brings another improvement. If we look at business lines in this segment of individual customer, very good level, market level business segment, 71% with dynamic improvement. This is an area on which we concentrate so that to reduce this level. The coverage provision -- NPL provision coverage very stable in the entire group and the cost of risk, as you can see quarters at the end of last year were higher levels. This was the time when dynamically percentage rates were growing, and we had to get adapted to interest rates we're growing, and this has improved our credit portfolio that resulted from our organic activities.

This year, this is the moment when clients have adapted to higher levels of interest rates, and this has translated into our results in the last 2 quarters, the cost of risk below 1%. If we would correct it with one-off events, there is an improvement. Also if the cost of -- there are very good results, very good improvement. In so far as risk very strong capital position a lot of improvement, very high safe liquidity and consequent improvement of quality of credit portfolio, loan portfolio, and we decreased the cost of risk and NPL. This is all on my side.

[Radomir Gibala, executive]

Thank you, Tomek. Hello, ladies and gentlemen. I'll allow myself to start with for the slide with income statement. Simplified one. PLN 1.445 billion in bank activity. However, one technical comment. You see the dynamic comparison quarter-to-quarter or 3 quarters of this year compared to last year, I would like to remind you and you remember perfectly well that last year, we looked into loan vacation or the support of commercial banks, which is also mirrored here. So this is a simplified that broaden this dynamic is a bit taken here and the subsequent slide, we will have normalized results.

What I would like to comment here, looking at the slide the interest rate margin, 6.16% in this quarter, net interest margin 5.93%. The second value is very close to what we have informed you about earlier. And the third quarter, over 6%, this nominal difference and the third point is visible. PLN 58 million, some of it is because of reestimation of our portfolio. But other reasons is the growth of financial income, some of this increase in income from financial assets and other elements, some because of better yields that we get on those papers and on those securities, and the third factor that explains this difference is our hedging strategy that we can say that quarter-to-quarter, we have the amortization of the portfolio and it takes a way less in the interest rate cost.

If we compare these, this is the result of PLN 200 million, and it's being improved. This is why summarizing these factors. We have the highest interest rate margin. What this was mentioning its return on equity It's almost 28% and the effectiveness of the bank with CBI factor 33.4%. Now that percentage result, well, I kind of informed it. However, I would like to drive your attention to the right top corner in the financing costs. We have here expressed it in the percentage quarter-on-quarter. So it's 231%. If you take a look at the middle top graph, you see the nominal decrease. The difference is due to the service on those bills, it's around PLN 3.5 million per month. As we also informed you earlier on, we are constantly actively participating as 1 of the main market players in deposit market, and we are adapting our policy to this passive balance sheet.

As to our competitors as well as to [ watch ] them on the trade policy tells us. We've been talking about it since January quite actively, and we're 1 of the first ones to optimize financing cost. What's worth mentioning is the deposit ratio, which is maintaining above 80% all the time which is aligned with our aspiration because we'd like to have a greater part of the deposit base working as a loan portfolio then fees and commissions. Maybe a word of comment to start with. We try to present it in a transparent way, the commission results quarter-on-quarter. And now the nominal value is the decrease. You can see the decrease. However, some of you already have noticed that, in fact, there was additional PLN 41 million in the trade result. This is the result of accounting of FX transactions and the movements there.

So if we add what we have here in the trade results, then we are on the very similar level to the third quarter. We are working on that. We want to stabilize it so that it will be reflected in the commission result. However, we owe you that comment since we want to be transparent in our presentation. Well, as all of the commission income, is concerned for several quarters now we are stabilizing it. We do not introduce big changes. We are hoping for a increase of the relation here in the individual client. We hope it will be appreciated and be reflected in the interest rates. That's why we talk about plus PLN 200 million per quarter.

Cost, maybe in 2 steps. So the comment on the middle graph. When we talk about the whole total costs year-on-year, then the dynamic is as we informed year before 16% there is a inflation pressure still, and it is reflected somewhere in the activities of all the banks, I believe, in the market. I believe we are somewhere in the middle of the sector. But when we talk about the employee costs year-on-year, that 17%. We, as an employer, try to follow the market and to maintain to still be an attractive employer in this macroeconomic environment. When we talk about administrative expenses well, according to the previous assumptions and announcements, we all know that rents and lease are growing. Marketing costs are growing. This is absolutely unaware decision here when we manage our marketing budget and those administrative expenses include additional provisions for legal settlements.

And each quarter, we update this line when we see that there's a need to update, then we updated in the additional provisions for legal settlements. More you will see in the comments to the balance sheet. When we talk about the next quarter, then it will probably depend on the inflation levels. I believe our base speed of our monthly cost, it's around PLN 150 million. Of course, there are events on the like legal risks or inflation these may impact the situation, we'll communicate on that to you. Going away from this slide, [ CI ] 33% when we take the total that it's 35% for the for quarter 3, which is a very good result, meaning that we are the market leader.

When we talk about the strategy on the financial targets that we've declared to you, as you can see, they are significantly better. However, just to comment on that, taking profitability into account, which looks very good in an annualized way calculated whether this is the effectiveness -- the business cost effectiveness. And when we also take increases in capital into account, but also the work that we've done that Tomek mentioned on the risk. And if we also add to it liquidity indicate on the good level. I believe that we can say that we are somewhere midway of our strategy, and I believe that the bank is really, really well prepared to the increase of equity and to publish economy. Here, we have a slide with our key points after this quarter. I'm not going to discuss this again because that was already covered during the whole presentation.

And now questions, Dominik.

[Dominik Prokop, executive]

Thank you very much. We have quite a number of questions on dividends. In the strategy, the bank assumes lack of dividend payout. So the question is because of this profitability, would you consider a bit less conservative approach to the dividends from the income of 2023.

[Radomir Gibala, executive]

Let me come back to February this year. When we communicated our strategy, we did say that we are determined the management Board as well as the whole team to pay out the dividends by Alior Bank. And as we said, responsibly, we want to build our capability to do that after 2024. And as you can see, this determination, we still aspire to do that. We would stick with that declaration. However, please keep in mind that the bank is not paying out dividends, but has the planned needs to considered the regulators consent as well. So we are sticking to our strategic perspective.

[Dominik Prokop, executive]

Thank you very much Radek. Next question. What kind of contribution to the -- was the [ ECL ] provisions.

[Tomasz Miklas, executive]

Well, that was close to 0 in the third quarter. And that's the result that I presented to you with is the result of the improvement in portfolio and corporate clients and not ECL.

[Dominik Prokop, executive]

Thank you very much, Tomek. How does buy now pay later service is working is the interest in this product growing where are the volumes.

[Unknown Executive]

As I mentioned, for all the customers in September, we've noticed the increase of interest. Well, October is already finished. It's around 20% of new limit of increase. When you talk about new limits, the promotion, promotional campaign is just starting. We are talking about millions and not thousands of millions. We are just starting with the promotional campaign of this product. It is developing as expected. So which means we assumed internal implementation first and then implementation for all the customers who have the resources in the bank and then the third element that's implementation for the customers that still do not have those resources in the bank according to Alior Pay, so everything goes according to the strategy.

[Maciej Brzozowski, executive]

Thank you very much. guidance for the cost of risk midterm has been agreed on [indiscernible] Piece. Is it an ambition? Or is it a real target. Does it also mean that the real clinic of portfolio and NPL are behind us.

[Tomasz Miklas, executive]

As it used to be in the previous years. I hope that for the previous quarters with a customer due to the fact that we are reporting real goals and not ambitions, then clearing of the portfolio. Well, we still want to have NPL and it's not finished yet. However, in the context of the question is that it would have a negative effect on the cost of risk, then this is actually included in the cost of risk that we've reported to you. When we talk about Corporate Clients segment, we see more opportunities than risks in comparison to the previous quarters.

[Dominik Prokop, executive]

Wonderful. Thank you, Tomek. Another question. What is your forecast on the reference interest rate decrease reduction in the coming years.

[Unknown Executive]

Well, ladies and gentlemen, we are in the process of budgeting the next year as well as the next coming years since August this year. These are the requirements of the group that we are functioning with and our office of a macroeconomic analysis told us after the reduction of 75 BPs in September. Now the past looks like we are expecting, of course, assuming that the reduction of inflation, the decrease of inflection will continue. So it will be 5.25% by the end of 2023, then 2024 is closer to 4%. That's how we see it. And then we are preparing our forecast assuming 3.5% or around 3%. That's our base. However, of course, we have to have a number of assumptions here. One of them decrease in inflation but this is what we've assumed.

[Dominik Prokop, executive]

Next question is the hedging strategy that is being implemented by the bank? Will it allow to mitigate for the revenue shortfall.

[Radomir Gibala, executive]

Yes, to put it easily. However, when we take a look at the number of interest rates and level of interest rates it is around PLN 200 million due to the hedging strategy is given back in this strategy. Within the whole year, it's PLN 800 million. But when we take a look at the previous year and then the whole year and when we take a look at the forecasts that I mentioned, we are talking about PLN 300 million, PLN 400 million. That will be next year due to our depreciation of our hedge portfolio. So just to sum up. For sure, yes. However, you have to remember that there's quite amount of the loan portfolio with fixed, right? Because that's quite a big part of this mortgage loan, 80%, 90%, depending on the time window is with the fixed rate. And it is similar with the cash loan so I believe it's an effect of a natural hedging. And with such a forecast of interest rates, we are expecting some revivement of this volume.

[Dominik Prokop, executive]

Thank you very much, Radek. What is the volume of NPL loan was sold in the third quarter? We did not sell that in the third quarter that was due to the improvement of NPL was due to organic work. Now the employee cost dropped by 3% here quarter-to-quarter, even though that we had an increase of over 100 jobs.

[Radomir Gibala, executive]

Well, it's a good question. I mentioned about year-on-year 18%. And quarter-to-quarter, we have decreased a drop in the nominal value. The question whether this is because of the provisions on holiday or that would explain that. However, quarter-to-quarter, it can vary still because we are during the implementation of the strategy.

[Dominik Prokop, executive]

Thank you very much, Radek. And the next question. Administrative costs have gone up by 7% quarter-to-quarter, although in the previous quarters, there provisions for disputes. Is other one-offs in the third quarter? Or this is a new increased level of cost.

[Radomir Gibala, executive]

Maybe I'm going to go back to the monthly cost as we see them, PLN 150 million as I've said and we need to assess the legal risk and suppose disputes inflation generally understood what appears in various ways in different lines. We are talking about PLN 160 million, PLN 180 million taking into account current information. But remember that cost might be quarterly a bit disturbed or seasonally because of BFG every year.

[Dominik Prokop, executive]

Thank you very much Radek. And the next question, what happened with the risk cost in the retail segment in the third quarter compared to second quarter 112 bps versus 84 bps. Can you explain this trend.

[Tomasz Miklas, executive]

Of course, the results of the second quarter in the retail quarter. We have communicated the specific amount. This resulted from a very positive result of NPL portfolio sales. But if you look at the greater horizon with the positive disturbance, the trend is actually decreasing quarter-to-quarter.

[Dominik Prokop, executive]

Thank very much, Tomek. We have exhausted a list of questions. I would like to thank everyone for the participation in today's conference. We would like to thank our CEO, and please feel invited to this event in the...