Alior Bank SA

WSE:ALR

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, ladies and gentlemen. I would like to welcome you to the financial performance conference of Alior Bank S.A. And we have the following persons here representing the bank: Iwona Duda, Deputy CEO; and two gentlemen, Maciej Brzozowski, Chief Risk Officer; and Dariusz Szwed, responsible -- CEO responsible for Business. And now I pass the floor to the acting CEO, Iwona Duda.

[Iwona Duda, executive]

A warm welcome, ladies and gentlemen, at our consecutive financial performance conference. Today, we are going to talk about the fourth quarter performance and for the whole 2021.

So 2021 and the fourth quarter was another very good quarter, whereas in the fourth -- in the third quarter, we closed with the level of PLN 80 million. In the fourth quarter, we closed at the level of PLN 120 million. And each quarter of the last year, we closed with a positive results. And no doubt that the second quarter that was a breakthrough, and then we rebound under not favorable business environment with low interest rates faced by the whole banking sector and also the pandemic constraints and also, consequently, the behavior of our customers, both business and retail.

When it comes to the ratios. In the fourth quarter of 2020, the ROE was at the level of 7.4%, which is a good level. Then C/I ratio was at the level of 7.7% -- sorry, 47% (sic) [ 41.7% ] against 43% in the fourth quarter 2019. So please note this decline, which is shown in this slide, it is under the specific COVID environment, which shows that this is very good performance because in 2019, it was when we operated in normal business environment.

And when it comes to the cost of financing, it is smaller, it is 0.26%. And previously, it was at the level of 1.12% in fourth quarter 2019. Of course, we looked at the revenue side and the cost side. We sought various methods when it comes to the revenue side.

No doubt that we recorded excellent sales of the mortgage loans. In the fourth quarter, we sold mortgage loans worth almost PLN 900 million. So hopefully, we will have also very good sales of mortgage loans in the months to come.

Then lease sales was also very good. In the fourth quarter 2020, it was worth PLN 684 million, up by 11% on the year-to-year. And there was a collapse of the lease sales because of the COVID outbreak. But then the market rebounds, and now it's going up. Then the higher purchase loans, it exceeded -- it reached almost PLN 1.5 billion, to be more precise, PLN 1.46 billion.

So the -- when it comes to the assets under management of our investments fund company, the record -- it was record sales. Net sales in the fourth quarter 2020 reached the value PLN 225 million. And the total value of assets under management was up by 44% to reach the value of PLN 1.14 billion.

And we keep emphasizing very safe capital position of the bank. The Tier 1 was at the level of 13.55%, which means 505 basis points above the regulatory minimum, which means by more than PLN 2.4 billion. And the TCR at the level of 15.85%, more by 535 basis points, which translates into PLN 2.58 billion.

And the cost of risk in the fourth quarter of the last year also declined from the level of PLN 289 million in the third quarter 2020 to PLN 233 million in the fourth quarter 2020, which means that the COR index on the quarter-to-quarter basis declined from 1.86% to 1.48%.

And please note that in the Alior Bank, we are not having problems with the mortgage loans denominated in Swiss francs because the share of such loans in our mortgage loan portfolio is marginal. So in fact, the value of such mortgage loans in Swiss francs is insignificant.

Next slide, please. On the first graph, you can see that despite the material deterioration of the business environment, we have generated stable performance, so all the figures are up. And please note that at the beginning of 2019 -- in the fourth quarter of 2019, the net profit was at the level of PLN 12.5 million. And after 1 year later in the fourth quarter of 2020, the net profit was at the level of PLN 120 million.

And where are we at the moment? Our assets is PLN 78.6 billion, which means that the assets -- total assets are up by 2.5% on the year-to-year basis. Deposits are worth PLN 66.9 billion, which means up by 2.9% on the year-to-year. And then the retail customers, now we have more than 4 million retail customers, up by 0.8% on a year-to-year basis. And we are very happy because now the retail customers, they are really limiting their activities in the pandemic environment. Now business customers segment, we have 239 (sic) [ 239,000 ] business customers, up by 6.6% on a year-to-year basis. Now the online customers, up by 35% on a year-to-year basis.

Now the total number of online customers is 616,000. And we are very happy because, as you can see, this is the best evidence that we are doing very well in the digital channels and the customers are very happy with our digital solutions. So no doubt that we are going to further increase the number of online customers. And we are also migrating non-online customers to the online channel.

Next point I wanted to make, I would like to come back to the ratios, which are important from the prudential point of view and conservative point of view. Tier 1 and TCR, let me tell you what is the trend, that it is an upward trend, which indicates a very good position of the bank. And also the LCR, which is the liquidity ratio, also is at a very good level.

But we have further plans. We want to further increase our operational efficiency, and we are currently already implementing the cost savings initiatives. We identified some of them that are in the pipeline, and we want to implement them in various areas such as wage costs, IT costs. Then we also review all our real estate with the lease contracts, also company car fleet and also the cost of subsidiaries.

And when it comes to our expectations towards Alior Bank Group, we want to seek -- we want to find cost initiatives in the subsidiaries similar to the parent company. But also, we want to also seek synergies. And furthermore, we have ambitions to reduce the operating cost by at least PLN 100 million on an annual basis.

And another element we would like to draw your attention to, we would like to -- we want to focus now on the ECO products and on ECO channels. Of course, we are already present in this segment, but we would like to establish our strong presence in the ECO channel and in ECO products areas. So as a matter of fact, we have in every area, we have offered in consumer finance for the retail and business customers. Also in the lease area, we want to finance, for example, photovoltaic panels. And then the total volume in value terms at the end of 2020 was -- the value was at the level of PLN 1.4 billion. But more ambitious than that, we want to make our offer more attractive. We want to be -- we want to build actively the green view, offering ECO products for our customers. But of course, we must be green also inside the bank.

And of course, when it comes to environment, we want to cooperate with the National Fund of Environmental Protection and Water Management under such programs like Clean Air, Electromobility. And we want also to finance the Renewable Energy Sources products. And hopefully, in this manner, we will improve -- we'll contribute to the improvement of climate.

And then awards. These awards received in the past, we are very -- we are still happy with them. But you already know them. But no doubt that we are having these awards constantly and, of course, in our presentation to make you realize that both the customers and also the market analysts, they appreciate our activities. And this -- that is the reason why we received so many awards to date.

Then when it comes to our operational strength, I pass the floor to my colleague, so Dariusz Szwed, the CEO for Business.

[Dariusz Szwed, executive]

And now let me start my presentation. We are very proud of what we achieved. No doubt that it is due to the hard work of our workers working in our branch offices. So we are really grateful to our employees. We appreciate their efforts.

And let me start with the mortgage loans and their sales. We focus on them. This is #1 on our priority agenda. More than 2,000 new customers, so this is the product that we -- in which we have our anchor product, stabilizes our portfolio. It gives us breadth. We can generate long-term margin.

So we are going to develop the mortgage lending segment, which is supported by the mortgage lending centers. And as you can see, the growth was plus 78% on a year-to-year basis.

When it comes to the cash loan, which is a core product especially in the pre-COVID times, so in the fourth quarter, the sales stabilized at the level of PLN 1 billion more or less. Now this result was driven by 2 factors. First of all is the approach of our risk department to lending. No doubt that this is a very good approach, a reasonable approach. And we know what were the historical challenges. And also in the times of pandemic, the customers are not willing to take cash loans.

However, this is not true for higher purchase loans because in consumer finance segment, we recorded another record quarter. So this is the highest-ever sales that we posted in the fourth quarter in the consumer finance area. And this growth trend is continued now in the first quarter of this year. And please note that we -- on the year, on an annual basis, we have gained -- we acquired 1.4 million new consumer finance customers, that we also offered not only accounts but also cars, but also insurance products.

And no doubt that information for analysts when it comes to mortgage loans, now we have more than 5%. And during the summer post peak, it was even -- share of the market exceeded 7%. So we -- but then in the fourth quarter, there was a decline because other banks understood that mortgage lending is a safe product. And they took some proactive measures. Nevertheless, even ending the -- closing the year at the level of more than 5% is also a very handsome level.

Then of course, pandemic, the coronavirus, COVID-19, it forced the bank to change the approach to the market. We modernized the bank. We have implemented the new online solutions. So today, the customer can reach our bank using broadband solutions, and we have more users than ever of mobile apps. Also the number of the customers with constantly growing inflows on their accounts is on the decrease. And the customers like our digital solutions more and more.

So let me just signal out the core of our capabilities. So the most recent mobile apps allow our users to pay for public transport first or to pay for parking fees when they leave cars somewhere in the city.

And then when it comes to NPS, it's up by 1%. You could say the 1% is not much. But when you look it in the value terms, it's more impressive. So the relationship NPS, after a decline in the third quarter, in the fourth quarter, we came back to the previous level. The customers became convinced that we are safe -- that we offer safe environment, that we offer disinfectants, we offer masks, so they don't have to be afraid. They still can come to our offices, to our brick-and-mortar offices.

Now when it comes to the fourth quarter, the sales was PLN 1.3 billion. The fourth quarter was more stable, strength over a higher number of the lending products. And I mentioned at the previous conferences that our ambition is to exceed the sales level of PLN 1 billion.

And the -- of course, to -- I would like to explain the stabilization of the micro-lending business. The micro customers -- the micro businesses are the most vulnerable to any crisis, to any pandemic events, so any changes taking place in the market are immediately reflected in the micro business segment. So we are making sure that this trend is still up. So please remember that this is still an upward trend. In terms of the business customers, this is a similar trend. We are very happy with this trend.

And the BankConnect, this is the combination, the merger of the accounting systems and banking accounts, so if you decide to combine your bank with -- your accounting system with the Alior Bank, this is a really strong tie -- symbiosis, and we appreciate that very much. And we want to offer more and more products to the customers. And the number of the customers who use -- the payroll accounts with Alior Bank is on the increase, and we are happy with this level.

Let me go back to the micro customers and then tell you. The first slide shows the number of those client -- customers and closed this number. These people trust us, and they want to stay with us. They do not take loans, first of all, because they do not need so much cash as they used to before the pandemic. But it also shows that the time when they start to believe that the pandemic is over, and they will start -- the numbers will grow, and we're going to feed them with investments and operating loans. And that micro portfolio will get stabilized.

But please note that these customers are increasingly strongly linked with us. They pay the insurance premiums from our -- over our channels. The 3/4 of our customers use debit cards, where it's quite hard work done by our account managers who have reached this. And this slide also shows our ability to generate the fee and commissions income. The higher number of transactions per customer, higher fees and commissions. And we can see that also in the quarter-to-quarter trends.

We have always been and we are active in the support and assistance programs which helped people to survive the COVID era. Almost PLN 2.7 billion people received via the bank from the PFR fund. Then the subsidies reached PLN 360 million. So we are active here, too. We were among the first banks prepared to go ahead with the 2.0 Shield. We have developed an interface to support our customers. The guarantees, where we are still leaders in the de minimis program, so we serve our customers who are happy to benefit from that.

What we offer to the business customers online. Just briefly, we are in touch with the analysts, and we are happy to help our customers in this difficult time. We have a lot of promotion campaigns. The gas stations, people get discounts on petrol on these stations. We can acquire new customers, especially those who use those petrol stations. So we keep looking around for new -- and finding new areas, and we want to keep our shareholders happy.

Now we put a strong emphasis on keeping our customers to be able to do anything they can at our self-service system. So we keep developing that platform. And we will keep developing it. We will add new and new components to it so that the customers will be self-served.

And there is an application for the larger customers, too. 43% of all post-sale instructions were done over that platform. So not just the sales as such but also anything that comes after, it can be done in this way very quickly.

Now just a few numbers. Just 2 issues for you to remember, 37% of micro accounts opened last year over online system. And they have qualified signature, so we can offer to our micro customers a credit process up to PLN 200,000 without showing up at the bank just by using the qualified signature. So this signature -- qualified signature is enough for them to have the transaction done without physically showing up at the bank. Whoever is afraid of that, they can do it from home or from their office.

Now closing, I want to stress that 2 of our key companies, Alior TFI and Leasing, the fourth quarter belongs to them. They built the foundations for the strong balance sheet this year. Alior Leasing, the sales grew over PLN 700 million, that is historically high -- a record-high value. We are developing the services. We want to go ahead with the vendor services. Alior has a bit more to do in this field, so we will certainly go for it quite actively.

We have a wide distribution network, and there is quite a number of outlets. If they work out those branches, we have more than 200,000 micro customers. Each of them drive a car, so just multiply that times this number, how big amounts can that reach.

Alior TFI is another company which I've mentioned a quarter ago on our conference. We wanted to exceed PLN 200 million of assets. So we have done that. Now in January, we reached PLN 1.3 billion. And we have coordinated these sales distribution channels. We want to take advantage of this market situation. I think we can do it as good or even better than others. So we're happy with these figures with the growing number of customers. It's over 10,000 such customers. And the growth is 280% as a result of our hard work and the growing confidence people have in this bank.

The surveys show that Alior Bank is recovering quickly after its unhappy time when we had -- our credit portfolio was on the heavy risk situations. So now we've stabilized the situation. Maciej will continue on that soon. So we want to take advantage of all the opportunities which show up.

And now on risk, Maciej Brzozowski, go ahead, please.

[Maciej Brzozowski, executive]

As the slide shows, the year 2020 was quite a huge challenge to risk sector and to the banking, of course. We have focused -- this year, we focused on 4 key things, but we continue very -- our very strict and careful approach to risk. The first thing we focused on was an active support to the bank customers by giving them credit holidays. And then the management of the credit models during the unprecedented COVID epidemic. And then we also focused on dynamic management of the credit policies, including the risk involved here, the risk which accompanies our customers these days. And we are consistently, jointly with the sales people and others, to maintain the high-quality of products sold. And also the quality in relation to the risk, we want to sell safer, better and to take lower risks.

The next slide is about the credit holidays. The group -- the whole group distributed 91,000 to the individual clients, 16,700 in leasing. These are quite high numbers, almost PLN 9 billion for the whole bank. And the segment, if you distribute that per segment, it's almost PLN 5 billion to individual customers.

What you can see here at the bottom is the share of payments which have been done completely. It's 93% for the whole bank. So this is quite an early measure of risk. It's 30 days and not any longer, so this is an early warning, in fact.

There are statutory holidays, which are different than these here. Because in that case, somebody must -- the customers say that he lost his job. And here, it's PLN 30 million -- only PLN 30 million are late with repayments for longer than 30 days, so it's quite a good proportion.

It also shows us how the risk is changing. At the beginning of the COVID pandemic, we have expected that people will love to stay in the credit holiday as long as possible. But what they do actually is that they prefer to put -- so many people were actually saved by the credit holidays, and others quickly come back to the normal prepayments as soon as they can.

And this slide shows our vision or our imagination about the industries. Low, medium and high-risk industries, we divided them into such categories. The high risk was the shopping galleries, restaurants, tourism, transport. We did not include -- specify skiing resorts. But anyway, look how the turnovers under accounts changed. When the COVID started -- broke out, it dropped 6%, the turnovers. Now it grew 6% up. Then by the end of the year, it's 36%. So it looks like that industry is doing quite well. Now the medium risk was first minus 4%. Now it's 22%. What about the high risk again, high-risk segment? 32% of declines in April, and now it's 10% today. And that's a global rate. So it seems that from the risk point of view, the world has managed to survive and to show quite a good performance in this difficult time.

Now the quality of the credit portfolio, it did not deteriorate significantly during the COVID time. This is the delay in 30 days and more, delay in prepayments. When you compare the end of 2019, the rate was 1.68%. At the end of 2020, it was 1.42%. In the meantime, you had the COVID outbreak, which should drag that value down strongly, but it didn't because we were quick enough to address this problem and keep the quality at an unchanged level.

Here, in last April, the quality of the credits -- or the delay is longer than 30 days. We were afraid that it might continue or be extended over the whole year, but it didn't. At the end of the year, we can only see 0.8%. So it's quite a nice, nice satisfactory performance. And the credit quality has not been deteriorated. As Dariusz said, the mortgage loans have grown. There's no quality deterioration at all, right? So we did not pay with our credit qualities at all.

Now the structure of the risk costs and the quality of the credit portfolio. This structure, as you can see, does not -- the left bar shows the total. The structure has changed a little bit. There is a bit more retail customers in relation to what we had before, some 3% growth, and a small decline on the business customer side.

The individual customers, well, as Mr. Szwed mentioned and Madam CEO said and I mentioned that before, too. So just look at this segment, where we speak about the loans on property because from the risk point of view, this portfolio is very good.

Now business customers are your leasing growth. We have seen here quite a good part of our business. They offer simpler products to our customers. But let's go to the most interesting part, the bottom part of the slide, is the impairment -- impaired loans. You cannot see here any material growth, but 14.48% more or less for the whole bank.

The provision -- coverage with provisions is here at the bottom. It's a great increase in the fourth quarter of 2019 at 55.18% now. So this number shows how the bank -- how careful the bank was about the risk and how it managed to make buffers and cushions to protect itself against any adverse events.

Then the next thing is the cost of risk. After the great growth that we saw in 2020, at the end of the third quarter now, these levels have become much lower. And in the fourth quarter, the total risk cost was 1.48%. Remembering that we are in the COVID pandemic environment, so we cannot be very sure about what will happen. But I'm happy now that we will manage to keep these values unchanged in the further quarters to come.

Now we have changes in our lending policies, which are producing increasingly better results. The write-downs on the expected losses are declining. I have partly discussed that before. But if you have a look at the -- this bottom-right corner of the slide, the individual customers, how their risk costs have changed, 11% down quarter-to-quarter, so which is a very good trend for us.

In the business segment, the cost of risk has declined too by 30% quarter-to-quarter and 53% year-on-year. So I hope these figures were -- are good prognostics for the nearest future and the rest of this year.

Let's go on, please. Now to explain to you the -- our approach to the question of risk, there was a question whether we're going to make more write-downs because of the COVID, I said no because the bank was -- did very well in his conservative policy before. And now this on the right-hand side of the slide, you will see our approach to the risk model perhaps. We addressed all the factors which described the risk. So we estimated the problems people might have with the repayment, that is the default potential, then how they were -- how much more needs -- financial needs they would have in connection with the COVID. We've planned that -- we assumed that the recovery of the nonviable portfolios would occur. And we also thought that there might be a change in the recovery of the top -- the biggest customers. So we addressed all these potential problems, and we made a few macroeconomic scenarios. And now we have reviewed all that, and the macroeconomic parameters and rates confirm that we were right to be so conservative.

And now we estimate that 3 scenarios should be taken into consideration: the optimistic, medium and pessimistic. In simple words, it would be connected with the real GDP in 2021, and the base scenario would be 60% of coming through; pessimistic, 25%; optimistic, much -- 15%. So we are careful in this, too.

Despite the decline in the overdue portfolios, we have seen the growth in the valuation parameters. So we have increased these numbers down to 70%, then second basket is 13%, which is much more than in 2020. And the coverage with the write-downs and the expected costs grew in 2022 (sic) [ 2020 ]. And that, let me repeat again, the coverage with all the write-downs grew by 11.8%. So I believe that this is quite a safe cushion, buffer in case things go worse, that although we are reaching now quite good performance in numbers and we expect that people will come back from the credit holidays, we will continue to be as conservative as we've been so far because we must be safe -- on the safe side if something really bad happens because who knows. Hopefully, we will not need to face such things. So I wish myself and everybody to see the COVID pandemic over at last.

And a brief summary of the credit quality. In the bank, of course, we'll try to sell more and more of these. The slide show that the quality has not deteriorated in comparison with the previous years our cash loan, which is most sensitive to risk. So these delays did not grow. We keep the same quality level and the same with the business customers. Of course, there are some higher costs caused by the COVID. There was a smaller change in the first quarter, but it wasn't material.

So I think that seems to be time to discuss the financial performance in all the areas. So in the fourth -- we start with the fourth quarter total income. As you can see in the slide, the result on the interest was PLN 666.7 million. So it's a little decline, but it's nothing strange. In fact, in this environment of the low interest rates, we try to look for some new income sources. So we've increased the -- our results on fees and commissions. We reached PLN 177.7 million (sic) [ PLN 177.0 million ]; then other business, PLN 67.7 million. The total cost at the level minus PLN 731.3 million, down by 2%. And now gross here is PLN 180.1 million. And the net result, as we said, in the fourth quarter, we closed with the net profit of PLN 120.3 million. And that is -- also can be seen in other rates: the credit to deposit, 84.0% (sic) [ 84.06% ]; cost to income, 41.74%; net interest margin, 3.63%. So that's how it is in the fourth quarter.

And in the same quarter, we had one -- some one-off events. First of all, we made the write-down after taking over the Meritum Bank, minus PLN 40 million; and we consolidated RUCH chain, PLN 12 million; and we wrote down minus PLN 23 million; and we dissolved the provisions for the bonuses, which is plus PLN 4.15 million (sic) [ PLN 14.5 million ]. We have also done an extra write-down on this small TSUE (sic) [ CJEU ], PLN 35 million; and an extra profit, PLN 48 million, by selling securities. And the interest rate, the result includes the additional provisions related to the early repayments of loans.

As regards the annual performance, the numbers are here. The total is more than PLN 3 billion; then total cost, minus PLN 3.71 billion (sic) [ PLN 3.75 billion ] gross; and net, PLN 311.2 million. And this net result, although it's still a loss, it's much better than our forecast. We have done better than our own forecast. So we are happy to have achieved that because all that seems to be the stable trends.

The third quarter was very good. The fourth quarter was even better. And the early results we have seen so far until today seem to be quite good too, so that makes us quite happy, in fact.

Now the components, the -- I must repeat that the COVID effects and the low interest rates were factors that played a strong role on earlier performance and on the whole banking sector expect. So PLN 328 million is the effect of the changed interest rates. So Alior definitely experienced these lower interest rates. So whenever these rates will grow, we will try to -- we will have a good starting point to restore it.

Please note that in the fourth quarter, we have shown 0.26% to analysts, who will understand that if you try to calculate that, you will reach 0.23%. But we showed 0.26% because of that difference between the third and fourth quarter. Nevertheless, to be very open and transparent, we want to present 0.26%, but really, it was 0.23%.

The interest margin, we expect it to grow, and it's very good. And shareholders are -- should be optimistic, too. The credit to deposits, well, we are now on the over-liquid market, so this rate must be lower than in the previous quarter. But it tells us that our lending is offering new opportunities to us. And in the question-and-answer session, I will explain our plans to you.

And now interest income. The composition of that you can see in the slide. This gray line shows the fourth quarter is lower than the third quarter. That is because of the one-off change in the settlement. That was because of the TSUE verdict.

The next slide is about the fees and commissions year-on-year. On the left side is -- the greatest problem was the decline in the exchange in FX transactions. In the first quarter, when the interest rates went down rapidly and there was a lot of uncertainty, so we had kind of a gap which we found difficult to fill later -- in later quarters. But anyway, our ability to generate fees and commissions is growing, is stronger. So the activity of our brokers also add to these higher fees and commissions. And these bars show the growing or stable trends.

So what we have done in the right time proved to be a good move. It's good we've done that because now we take some benefits of that as we get more transactions. We do not have any negative experience of customers who would leave us because of something. Conversely, we give them more products, and we get more customers.

And the cost of operation, not much can be added to what Madam CEO said, but the 47% is the rate cost to income, which is quite higher than in 2019. But now how it was in the individual quarters, in the first quarter, it was 50.7%. In the last one, it was 41.7%. Of course, you can discuss why it was so. But remembering these PLN 100 million of the planned costs, this information should be remembered here. We try to keep the cost as low as possible.

Thank you.

[Iwona Duda, executive]

Now please ask your questions if you wish so.

[Unknown Analyst]

Question 1, [indiscernible]. The results of the bank were again charged by -- burdened by the little TSUE. Will that happen again in this year? And have you made adequate provisions for that?

[Iwona Duda, executive]

Well, as regard to small TSUE, we know that the market had to face that for the first time after September 2019. So our bank made the biggest provisions by the end of 2019 for that purpose. In February 2020, we added some more, PLN 99 million of provisions we added to it because we wanted to be very conservative and careful. Now we decided to add PLN 35 million more provisions. But as you can see, this is -- these provisions are each time a bit smaller. We are watching the situation very carefully. There is not much historical experience. That's why we, to be on the safe side, we are making these provisions. But we do not expect any high activity of our customers in this field.

[Unknown Analyst]

And the next question is, what kind of provisions against COVID will Alior close the 2020?

[Iwona Duda, executive]

Well, 2020, PLN 418 million, easy, the same as in the second quarter.

[Unknown Analyst]

Okay. The next question, the guidance of the risk costs, 2.2. Will it stay for this year? Or is this not yet a stable macro environment?

[Maciej Brzozowski, executive]

Well, of course, we will keep that. We will try to reach the level of this rate as low as possible. I mentioned that before that we've made a buffer of provisions and reserves to be safe. And there's -- no one can now say that things will happen this way or that way later in the year. If you -- there's -- if -- last March, nobody would be able to predict the actual situation that we see now. So yes, we expect that to continue.

[Unknown Analyst]

Has the bank sold any NPL portfolio in the fourth quarter?

[Maciej Brzozowski, executive]

The bank, of course, tries to reduce the NPLs, right? And the resource that we have, and we try to reduce it, so we have sold the portfolio of NPLs of about PLN 390 million.

[Unknown Analyst]

And another question. [indiscernible] What was actually the financial assets write-down PLN 23 million. What was it?

[Iwona Duda, executive]

That was because we reviewed our nonfinancial assets, and that's why we have -- what we have identified there. So to be -- to sort it out completely, we have decided to go ahead with this number. There were some selected non-key applications.

[Unknown Analyst]

And next question, please. Is the bank thinking of buying the call options earlier?

[Maciej Brzozowski, executive]

No, I don't understand.

[Unknown Analyst]

The bonds and call options.

[Maciej Brzozowski, executive]

No, no, we're not planning anything like that.

[Unknown Analyst]

Could you please comment on the outlook for the fee and charges, the result in 2021?

[Maciej Brzozowski, executive]

So we are proactive. We are working jointly with the business customers. And when it comes to the fee income, the trend that started in the third and the fourth quarter, we hope that this trend will be continued and that we will be supported by the strategy that we want to update. And at the turn of the first quarter, we are going to announce the updated strategy -- business strategy. And then the bank will be even more profitable. And we are going to acquire customers, not only retail customers but business customers.

And also, we want to be more active in the ECO segment and in ECO products. We want to participate in the power transformation, talking -- starting with the photovoltaic farms. I mean starting with [ Mr. Schmitz ], the average coal, and then ending up with the large power generators having photovoltaic farms. So we want to be very active. And we are hoping that the potential of subsidies -- the pool of subsidies that will come to Poland will require the participation of the banking sector.

And then, of course, the new number of customers, it should also translate into an increase of the fee income. And also the repricing that we made, we are hoping that the old portfolio will be gradually replaced with the new portfolio, with the new price levels. So hopefully, this repricing will also bring some tangible results.

[Unknown Analyst]

Next question, in the fourth quarter 2020, the cost of risk was at a low level, 1.48% versus 2.2% updated level and given the standardized the risk level at 2.2%, so do you think that the potential profit will be 0 at the end of the year?

[Maciej Brzozowski, executive]

This is not such a straightforward analysis, but please note that in the fourth quarter of the last year, the profit was mainly hit by the one-off events such as the case of the Meritum company. However, if you add this cost of risk at the level of 2.2%, I believe that there is still potential for profit growth.

[Unknown Executive]

We are waiting for more questions, please be patient. Just wait a sec.

[Unknown Analyst]

Okay. Next question, could you please quantify the negative impact on the Tier 1 capital in 2001?

[Maciej Brzozowski, executive]

Under the temporary regulations, mitigating the impact of IFRS 9, we estimate the impact at the level of 0.4%. And then in the next consecutive 2 years, the consecutive tranches will be accounted for.

[Unknown Executive]

Okay. We are waiting for more questions. Of course, some of the questions are about the stock price -- are your stock prices -- are your share prices. And of course, we refrain from any comments.

[Unknown Analyst]

Taking into account the market turmoil in 2020, are you considering the update of the strategy?

[Iwona Duda, executive]

So the current binding strategy is for the year 2022. No doubt that this current strategy must be updated, and this will be done by the end of the first quarter this year. But I can already tell you that the major directions for growth are still valid, which is the leader of new technologies. Then also taking care for the customer, so our services must be convenient. Then the customer should be able to take advantage of not only banking products but also other products. And we want to take advantage of being a member of PZU Group. We want to offer cross-selling also insurance products through our banking network. And also, I would just want to signal out that we want to extend our product offer also in the environment-friendly area, the green area, we call it green deal.

So there are no more questions. Thank you very much for this press conference. We also would like to thank you. Bye.

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