ING Bank Slaski SA

WSE:ING

Earnings Call Transcript 2022-Q2

[Unknown Executive]

Good morning, ladies and gentlemen, welcome to our conference summarizing the first half of the year and the second quarter of the year. Brunon Bartkiewicz, CEO; Bozena Graczyk, Vice President, CFO. I'm holding this meeting -- I'm hosting this meeting together with Iza Rokicka in charge of Investor Relations. Brunon, the floor is yours. Please deliver your presentation.

[Brunon Bartkiewicz, executive]

Good morning, ladies and gentlemen. Welcome. We are about to present the results of the second quarter and the entire first half of 2022. Again, since the results of several banks have been presented already, I think that this macroeconomic message as the end of the market situation. We are already known to you. Interesting times, a lot of disturbances, strong elements reducing our capability of predicting the future. And we know that all of our listeners are very interested in the predictions, but I think that we all should be aware and we should recognize that this prediction element is very weak, predicting in detail what's about to happen, when and at which for -- at what force, that's all very doubtful.

At such times, as they are, because these -- and they are very specific indeed. But these times are specific as regards to dynamics of changes, still very high growth of inflation, which is going to continue for long yet, followed by stronger, higher interest rates with some attempts to control the situation and the outcomes of these elements which are actually disturbing any predictive possibility. And overlapping of all those elements leads us to discussions on who should do what when, rather than what's about to happen. It's not market forces that define the tendencies, it's rather the decisions of entities and bodies that are entitled to take various decisions.

All that translates into the result of banks. And I do realize that you are concerned by the commercial reaction to the signals coming from interest rates. You are also concerned by the levels of regulatory costs, which hit all the banks, adjustment of all the banks and the cost base to the inflation rate and the signals coming from all around and hitting our results. [ SOBK ] company and its establishment, I mean. And another element of concern for you will be the announcement of credit holidays and the consequences of those. Let me point out immediately that the estimation of our participation in funds, FWK, we do not know what our participation is going to be. Taking into account the construction of this fund, the borrower support fund, FWK, we cannot define the levels. However, the levels are not going to be very high, we think. That's the situation.

I think you will be also interested in macro cash, mass cash flow hedging. We will make a comment on that. But I will first focus on the bank as a whole. In these interesting times, which are characterized by the fact that we have an increase in the processes, which have never happened before or so far happened at low levels, still the bank dwells really well. Big figures, conversions from floating to fixed rate, repayments, annexes to mortgage loans, they all amount to big levels.

We've been mentioning that since quarter 4 last year. These tendencies have been growing. Right now it seems we are at the peak of the client activity in that respect. However, we might be surprised. It's holiday season, it's the credit holiday season, and all that influences the activities of our clients. So again, comments on that and our predictive force are very low. So we need to wait for the end of the summer holidays. We need to wait for the end of the euphoria around the credit holidays. It's only after those 2 events that we can formulate our observations.

Let me state that there is an increased interest in credit holidays, visible. That's very visible indeed. In this instability periods, the basic information is as visible in our slides and in our reports. So it's no need to repeat them probably. But the bank follows its strategy. It wants to increase the number of our clients, increase rate transaction ability level. There are peaks and low -- highs and lows, but the level of client digitization is increasing. Cash operations during the earlier quarters make some disturbances and disruptions and take the participation of Ukrainian clients on the market, but we continue with the same tendency. Client caring for the clients, increasing the transaction level, et cetera, cetera.

Market shares that we are presenting on slide 7, they reflect one thing actually. As we believe, we have a strong tendency to use deposits placed by our clients to repay mortgage loans, because the size of those early repayments, partial repayments is really high. There is also an element of uncertainty. Looking differently in different banks, we think that credit holidays will even increase the tendency to early repay or fully repay the loans. The media suggest such cause of action. Credit holidays is just the seventh day of adopting applications. And we think that credit holidays will translate into the early repayments of loans. We think that the first 2 installments of the third quarter, 2022 might be to a large extent dedicated or allocated to reduce mortgage loan exposure.

So we have certain disturbances. We have the element of narrowing down the balance sheets, declining in the individual sector with growths in corporate sectors. But since we predict the declines in economic ratios, the corporations may slow down as well. So the picture is neutral/positive. We have some shocks. And we are exposed to them. These shocks do not derail us from the major trajectory. They do not cause us change any elements of our strategy. So once the situation around and the shocks slow down and calm down, the situation in the longer term, by the end of the year and next year, it should be stabilizing.

However, we repeat that 2023 is not going to be a major change as regards the decline in inflation or interest rate. This will be just the period of calming down and getting used to the new normal. That's it, I would say. No specific actions planned, no changes in our activity. The results we believe they are fair, they are good, and they are in line with our long-term development strategies. So I think in the midterm, there will be no change in the trajectory of our institution's development.

That's all from me. I voice over to Bozena for the financials.

[Bozena Graczyk, executive]

Good morning, ladies and gentlemen, waiting for your questions. I will try to discuss our financial results starting from Slide 12.

In the second quarter, the net profit is PLN 573 billion, PLN 1.4 billion for the 6 months. That's an increase of 36% year-of-year. That's due to the increase in the net interest income. Quarterly, the net profit is smaller by 28% versus the first quarter, which results mainly from booking the cost of the [ IPS ] in the second quarter, PLN 430 million. That's the system of corporate banking protection.

As you probably know, in quarter 2 there was no DGS payment, which is all connected with the fact of creating the commercial banking protection system and increased remuneration costs. Since we introduced pay rises April the 1 it was. General results and 2 comments to them, a comment to the effective tax rate. You can see that this rate increase in this quarter versus the rate for quarter one. You know, that together -- that in line with the IFRS in each quarter we unify the annual -- we annualize the rate. So this quarter we increase the rate and due to that and taking into account the credit holidays which will reduce our revenues annually versus similar estimations of costs, all that translates into a higher tax rate. And in quarter 2 it was 31%.

One more comment on our other income, 2 phenomena. The first resulting from the positive impact of interest on our clearings of derivatives that we use to hedge macro cash flow hedge PLN 93 million this quarter. And on the other hand, we have a negative impact of the foreign exchange result, but actually that's the interest rate differential impact that we -- that's how we hedge our balance sheet position.

Now, if I were to comment on the interest performance, we -- I would like to stop on that for a bit longer. Now it's gone up 5% in the quarter-on-quarter, which is PLN 1.8 billion right now. In the whole first half, it was PLN 3.5 billion, which is 51% up year-on-year. Now, just a word of comment on what happened in net interest income and also to pick up on what Brunon said before. We need to go back to our philosophy of how we manage the bank and especially the interest rate risk in the books. Now, as you know, we've always had the philosophy of stabilizing the interest income through our replication portfolios. So we, as a result had a positive impact on the interest income.

And if interest rates grow, especially fast, then the interest income growth may be a little bit slower than the interest rate hikes themselves would suggest. Now for the purpose of this conference, we have included in this Slide Number 13 information of what the impact on the net interest income would've been without MCFH. As you can see, this quarter, this result is negative, minus PLN 278 million for the first time. So if we exclude the MCFH effect, then our interest income would've grown by 31%, which is 128% year-on-year in a quarterly take. So this, I hope, clarifies what's been happening with our net interest margin. We have been stabilizing this income long run. So please don't look at our interest income from the point of view of these short-term changes that result from those. There is volatility in terms of the interest rates.

As a result of all that, 3.52% is our net interest income, which is a positive change. Now to -- about our reports concerning this so-called the credit holiday and its impact. In our report we said it was PLN 1.7 billion, assuming that client participation will be 70%. Now I can say now, and I can confirm that our interest income will be reduced as a result of the credit holiday, but it won't impact the cost of risk, and it will be translated into our profits tax. So that translates into a 19% differential for our net performance.

Now the PLN 519 million is our fee and commission income. PLN 1.1 billion for the first half of the year. And this is a growth for the first 6 months of 19%. And what I would like to say at this point is that we can see the 3% reduction, especially looking at capital markets. And this is a 39% reduction of our revenues from the brokerage activity and a 25% reduction of the participation unit's sales. Now what's happening on the capital market, is a result of what's been happening in the stock exchange on the one hand. And for the participation shares, this is the continuation of our [ funds ] and the reduction of the value which stems from the changes in the interest rates, of course.

On the other hand, we have a very good result for our commission from cards. And again, there are more transactions, and that translates into better income. Another topic that it's a good idea to comment on is that in early March, starting on the 1st of March, we gave up the fee for a high balance for medium and large companies and for strategic companies as well. So as a result, looking quarterly, fee and commission income was down 5% Q-on-Q.

It's also interesting what's been happening on our end commission on commission on lending. And we have seen a slow reduction -- a small reduction. But quarter 1 is always, as you will remember, a time of the year when we hit quarterly records. So the dynamics, which is 15% year-on-year, shows the effects of our extended lending activity in the corporate sector. Now for expenses. This is a slightly different slide this time. And we are trying to show our general costs, including the banking tax because more and more we have to take these elements into account when looking at the banking sector.

What we can see here is that our expenses, including the bank levy, were EUR 1.4 billion in Q2 and it's EUR 2.4 billion for the first half. And that's a 38% growth year-on-year. Now an important component of the cost growth is the assistance fund, which is the PLN 430 million, while at the same time there are no fees from BGS. And PLN 54 million, as you will remember, was this cost item in Q1. Now these regulatory costs are an increasing share in our overall expenses. And this is the same, potentially, for the whole banking sector as well as in our particular case. When we look at all the regulatory costs, including the cost of the [indiscernible] which is also a regulatory cost. That is now 41% of the total expenses. So this is an important piece of information when looking at how the banking sector is being burdened with these regulatory costs. It's 41% of the total.

Now for personnel costs, they have gone up by 13%, and the head count was stable. In Q1 we had a very sweeping pay rise. And as it is normally the case, it was on the 1st of April. And as you will remember, last year there wasn't such a general sweeping pay rise. Another item under expenses is all the other costs in terms of general and administrative costs. All of this has been going up, and that results from the inflation, which is higher and higher. And we're also continuing our developmental costs. And especially for IT, that means higher costs.

Now for the cost of risk, PLN 183 million was the total for this quarter and 48 basis points was the margin. And that's part of the trend or is in line with the trend for risk. And it's worth pointing out that the macroeconomic factors impact is not that important this quarter. There are 2 things at play. In the corporate sector, there's a negative performance. Well, it's positive in terms of reducing this impact. And this results from some small shifts in the assumptions concerning GDP compared to Q1. The GDP forecasts have improved for 2022. They have been reduced a little bit for 2023. But all in all, when this is netted out against each other, this is a positive impact on us.

Now in the retail segment, the costs have gone up a little bit, and that is because of the forward curve for interest rates that are being used. We continue with a very conservative policy of looking at macroeconomic phenomena and also anything to do with the -- across the cycle cost of risk for different portfolios of our loans. And in the retail sector, just like in Q1, there was a very high correlation between the interest rates, the inflation and the PD indicator. We wrote of PLN 17 million. And last quarter, the total impact of the model change and of the indicators impact on our cost of risk in the retail segment was PLN 18.5 million and PLN 17.5 million this quarter. PLN 18.5 million last quarter, PLN 17.5 million this quarter. And for the corporate sector, we also decided to have some write-offs, especially for the strategic clients, especially given the disturbances in the supply chains and the lack of manpower and so forth. So as a result of that, that was written off.

When we look at the portfolio quality, I have 2 words of comment. On the one hand, in the corporate sector -- segment, we can see that we'll have improved by 8 basis points quarter-on-quarter, which is 3%. Now for the retail, it's 1.5%, and that's very stable. And for the write-offs coverage, we want to look at Stages 1 and 2, and the provisioning ratio is 5.74%. So there's a correlation with the macroeconomic curve. So this correlation is very, very high. And it's important to point out what's been happening in Stage 3 for the provisioning ratio, again being very conservative in our approach, especially for retail loans, unsecured ones. This indicator has gone up significantly. So in retail banking, end of Q2 is at 74.4%.

So I'm not commenting the future cost of risk, but please note 2 phenomena, both of them resulting from macroeconomic trends, inflation, interest rates, et cetera. We can see in here that the growing interest rates, the inflation pressure, which still continues and will continue, that will definitely negatively impact the repayment rate of cash loans and loans for entrepreneurs. That's what we can expect. As for mortgage loans, I think that the big disruption influencing short-term trends are the credit holidays indeed. And we expect that until the end of the credit holidays, that is until the end of 2023, there will be no negative impact on the cost of risks.

Taking into account the fact that the credit holidays are the general in nature, they have nothing to do with the financial standing of the borrower. We'll have -- we cannot reflect the -- its effect in the cost of risk, it needs to be reflected in the interest margin in line with the IFRS. From the perspective of the assumption that during the credit holidays, prediction models cannot include the change in the [ DPD ] ratio, from that perspective we need to state that this portfolio may look better than connected with the long-term macroeconomic trends and the actual situation of the loan portfolio.

The support fund for borrowers, borrower support fund, it is difficult to estimate the impact of our contribution into that. It's in total going to be PLN 1.4 billion for all banks this year. But there are external factors involved, like a share of an individual bank in the nonperforming loan portfolios. Plus there will be some exemptions for individual banks. So our not-performing loans amount to -- and the ratio of nonperforming loans is 0.57%. So our contribution to the Borrower Support Fund will be, we think, amounting to some immaterial levels, shouldn't exceed PLN 40 million.

Now the 22% of adjustment in the capital in the repayment ratio, on the other hand we observed the reduction of this ratio by 1 percentage point this quarter. 2 elements involve, 81 basis point of negative impact on Tier 1, that is an impact on the deferred tax asset. And the impact of risk-weight assets, especially in the corporate segment. So these 2 elements involve.

As regards to our MREL needs. We estimate these needs at the level of around EUR 500 million. Taking into account the account or the impact of credit holidays, we think it might be even higher, but we should not exceed EUR 700 million. So an increase by EUR 200 million as a result of all the phenomena and events that I mentioned.

I think that's the end of my presentation regarding the quarterly and half yearly results. And now time for the Q&A session. Yes.

[Iza Rokicka, executive]

Q&A session now. We have relatively many questions on how we are going to secure and our cash flows. So the basic question to start with, "Please explain why minus PLN 9.3 billion in the item cumulated all incomes in the balance sheet?"

[Unknown Executive]

That's the valuation to the fair value of the entire IFRS portfolio, depending on the forward curve shape. What happened is the impact on our IRS portfolio and its valuation to fair value based on net present value, taking into account the change of the curve between the 31st of December and the 30th June, which directly impacts the valuation. So that's the revaluation of our IRS portfolio, which belong as a part of macro cash flow hedging strategy.

[Iza Rokicka, executive]

Continuing the topic. "The reduction of equity to PLN 7.7 billion. What reductions, what limitations will be faced by the bank since the equity declined?"

[Unknown Executive]

I think we explained that in the past as well, the macro cash flow hedge strategy, although it reduces our reported equity, it has no impact on the regulatory equity. So this negative impact of this revaluation provision, although all this revaluation is negative, but the impact is actually neutral.

[Iza Rokicka, executive]

"Macro cash flow hedge impact on the future quarter as regards the net interest income and interest margin, what can we expect?"

[Unknown Executive]

In line with our communication strategy, we will not provide you with the figures or with any comments here, but you -- but the logic behind the system of flattening these elements is clear and has been precisely delivered to you, but we do not offer any comments.

[Iza Rokicka, executive]

Moving away from macro cash flow hedge. "Can we avoid a net loss in quarter 3? Is it possible to avoid net loss in quarter 3? And what's the impact of credit holidays on the bank's equity, what is it going to be?"

[Unknown Executive]

As we presented in our current report, we expect a net loss in quarter 3. And we also commented that the impact of this PLN 1.7 billion of credit holidays on us, that without any other any other events which might happen in quarter 3, it's 1.2 percentage points on our TCR.

[Iza Rokicka, executive]

The question...

[Unknown Executive]

Let me add, Iza. I can see a lot of interest in the impact of credit holidays of net interest income. But please remember, these are big amounts impacting our lending engagement or loan engagement. If these funds offered to clients, if they are used for loan repayment, which we do not know and which we cannot include in our calculations, and that refers to all the banks, that's not only about us, but it definitely impacts us. That's something which is unpredictable. And we'll be able to make a comment on that in a couple of months only.

[Unknown Executive]

Yes. Let me also add, we have also provided you the information already that the more precise evaluation of the impact of credit holidays on the net interest income will only be possible once we see how many applications are going to be submitted. We are right at the beginning of the process. So probably October will be the time when we'll be able to take into account these elements in our calculations. Please also remember that the number of new applications, the number of new production in mortgage loss versus early repayment, full repayment and credit holidays for mortgage holidays, these 2 elements produce the narrowed or tightened situation in the mortgage loan pool.

[Iza Rokicka, executive]

Coming back to the question about costs, own costs and its dynamics. "Will you be capable of keeping the dynamics below the inflation?"

[Unknown Executive]

Well, I think it's a dream of every single bank indeed. But again, view it from the perspective of costs increasing long term. And please also remember about the execution of strategic aims for regulatory and for developmental goals. So the cost of inflation will translate into increased costs. We've been mentioning it for quarters now, but it's more and more visible right now. The increase in inflation and the increase in costs go hand in hand. So in each and every case, also in our case, we aim at cost optimization. But it's somehow limited, taking into account the external environment plus the unprecedented growth of certain cost items like the cost of energy and heat.

Ladies and gentlemen, we are dealing now with the following element. The inflation rate in Poland is an element of a certain spiral, inflation and cost spiral. So the growth of costs forward, the cost to the next elements of a supply chain and the commercial chain, there is some time lag involved because an increase of the cost in certain services takes time. But please, in quarter 3 and quarter 4, we will have yet another bounce wave of cost increases. There are some supports like protection shields. So the cost increases may be somehow delayed but the inflation and cost spiral exists. Increase in costs makes salaries grow. Inflation increases the costs for producers, for entrepreneurs, costs of goods increase. That influences the level of salaries, et cetera, et cetera.

So we think that this double-digit inflation will be prolonged, and it will really take long. We need to remember that it's not that the inflation will somehow disappear in a moment. Now in our situation, with a spiral of interconnections, the inflation will continue. At the beginning of the inflation system, the growth of costs just followed the inflation levels. Right now we have an opposite situation and opposite phenomenon where the prices grow sometimes higher and faster than inflation. We don't think inflation is going to grow much. We've reached the peak, we think, and now we are at the plateau level, but it will not decline fast. We are at the plateau, which is going to continue due to the transmission of all the inflation signals stemming from the entire economy.

So when you talk about the inflation and its impact on entrepreneurs, we need to remember, inflation is here to stay for long. If we have a specific question, whether the bank is capable of paying out increased salaries versus increased inflation level and cost of life levels, that's -- well, an answer to this question is, we'll do our best, we'll try to do it. Why? Because the element of growing salaries and costs happens in the situation when we have a strongly negative unemployment situation. And the more specialists, the more professional nature of the job, the fewer candidates we have. And that's a very differentiating mechanism for many economies. That's why the cause of inflation and the reaction to inflation in various countries varies.

[Iza Rokicka, executive]

Thank you. We're running out of questions. So if anyone would like to add anything, then feel free to do it online. We're now moving on to the question about the 132% RCR. "And is it comfortable for the bank? Or would you prefer a higher level?"

[Unknown Executive]

We are in line with all the regulatory requirements. So we're happy with the LCR. And we also said that the LCR used to be higher and the -- it's been different in the past time, but it's on a higher level. Yes, I made a mistake that it was lower. Now it's at a satisfactory level. And we assume this will not go back to being lower. Now for mortgages, and our share in the mortgage market, at ING the sales of mortgages is slowing down at a faster pace than the average for the market.

[Iza Rokicka, executive]

"Where does that come from? Why is there this difference?"

[Unknown Executive]

I'm afraid I can't give you a reply. I don't know these figures, but the amount of overpayments or repayment rate is probably higher in ING than other banks. In terms of loan production with low interest rates in the past, we were pretty high. That's how it count up. In terms of the size of the volume of production in recent years, we were in the second place in Poland. Right now we're in place #3. There was a point when we had slowed down compared to other banks, that I would connect the fact that we were introducing very strictly the new standards for credit worthiness calculation that went into force on the 1st of April.

So looking at the production figures, there's a downward trend, but there was a huge peak in March. So based on that peak and given that these new rules were very strictly implemented, the effect might be that there are new -- there are fewer new loans because we implemented these new standards faster than the other banks. But in terms of the production of mortgages, we're doing the way we should be, although there were some differences between the 5 key banks, but these differences between the banks are smaller than they used to be.

In terms of the production levels of volumes for new mortgages, we are in the third place in Poland. And this is not going down now. It hasn't been going down for a few months because we are comparing this to those very high production levels from the past. The new production levels are not what they used to be, and this is not what impacted us between February and April. So it has leveled. So, in terms of the growth of mortgages, this is a result -- it doesn't stem from the new production.

[Iza Rokicka, executive]

"In terms of MRL, what are your needs for the coming time?"

[Unknown Executive]

Well, there's so much turbulence in terms of volume, the balance sheet and macro that I think it's too early to comment on this right now because there are so many different factors that change over time. They are changing quickly.

[Iza Rokicka, executive]

An additional question about the cost of risk on mortgages as a result of the credit holiday. "Can that mean that the provisions will have to be reduced in this area?"

[Unknown Executive]

It's difficult to estimate. There are many factors that impact the models. And it could be theoretically assumed that the credit holiday might result in the reduction of the cost of risk short-term as a result of how the predictive models behave. They also look at the number of days overdue, and that counter will stop. But if we follow IFRS, we shouldn't be looking at those very short-term events. But instead, we should be looking at the performance of the portfolio all the way after the maturity of the loans. So in terms of what you're asking about, we'll have to see how the scale of things behaves and how DPD indicators behave.

So in spite of those short-term distortions that follow the scale of interest in this credit holiday. It's like when you're looking at the health of a patient and you take their blood pressure and pulse 3x a day. And at some point, we say, well, the machine is broken. So for 15 days, we will not be taking the measurements. Will that mean that the patient will be healthier? But if you look at the algebra and the number of problems with the heart rate, we might say we are losing some of the observations.

And since we don't have those observation points, then we assume no deviation from the norm happened. So we might arrive at the conclusion that the patient is more healthy, that we -- a fallacy, we just lost some of the observations. So it will be too early to say that this would lead to resolving these provisions. IFRS requires us to evaluate credit risk all the way to the point of the maturity of those loans at every point in time. So we should not be too much impacted by this short-term distortion.

[Iza Rokicka, executive]

There's one more question about the valuation of the macro cash flow hedge. "If the profitability curve doesn't change, when will the loss go through the P&L?"

[Unknown Executive]

In the period of the weighted average of the maturity that we have on the balance sheet.

[Iza Rokicka, executive]

One more question about the credit holiday. Maybe the answer to this wasn't very clear. "When will you provide your estimates of the percentage of prepayments?" Now let me read this again. "At what stage can you tell us more or less how many customers have used the credit holiday and how that impacts the early repayments?"

[Unknown Executive]

I think, if you want to talk about early repayments, we have to talk about it at the conference after Q3. We should know more after August because there isn't a single day when the repayments are made. It's the holiday season, and if the repayment for August is on the 20th of August, then they can still find the credit holiday application form, and they could have filed it today or tomorrow all the way up to the 20th of April. So April should tell us a lot. But the customers also changed their mind.

There's a high percentage of customers who have already filed this application for all of the 8 months that the law allows them to. And that's a high percentage of customers, after 7 days only. So the conclusions could be drawn that round about September, when they come back from the vacation, from holidays, there might be a slight increase. But -- let me rephrase, we should know how many will use credit holiday better. Right now we just can't tell this. And you're probably expecting the number of the applications. For example, today, the number is much lower than it was on Friday, for example, which is natural.

[Iza Rokicka, executive]

And finally, a very general question to the CEO. "What do you believe to be the biggest problems that the sector and your bank is facing in terms of the coming 3, 4 years?"

[Brunon Bartkiewicz, executive]

Well, this is a difficult question. In this day and age and also in the run-up to the election, it will be very easy for them to say that it's the bank's fault that the standard of living of an average Pole is deteriorating. I don't believe this is true, but this is something that will be tempting for the politicians to say. This sort of a narrative might weaken the connection between banks and the economy. In Poland, banks, relatively speaking, are less important in the economy than they could be, mostly because our economy is less ambitious than it could be. Our economy could be more courageous in terms of investments, developments and increasing its levels than in other countries.

So we are lagging behind in this respect. And right now this gap has increased even further. Now for 8 years now we've been talking about the fact that we are not fully utilizing this developmental opportunity that we have in terms of lending for businesses and companies. So this is my general comment about the social relationship between banks and society. As a result of that, banks have to survive first and foremost. And in order for them to do that, they have to adjust the main economic factors accordingly. Given the amount of the financial burden put on the banks and how unpredictable it is, mind you, to the best of my knowledge we have the highest regulatory cost for the banking sector in the world. So the cost of adapting to those mechanisms might mean that the banks might also increase their own technological and developmental debt.

So these aspects, this burden and a narrowing leeway we have will mean that the bank will be less effective and less attractive. And thirdly, when economic demand for financing explodes, banks might have a problem delivering because of a reduced access to foreign markets and other sources of financing. For example, the access to MREL market is making this quite clear. So these are the general challenges. I suppose that might not be what you're driving at. But this is what I believe is happening in the banking sector. In terms of being able to meet the legal requirements and the customers' requirements, I believe the Polish banking sector is a good sector. We do not abuse the customers' trust. We are highly digitized.

So in terms of the market's mechanisms or being able to compete in the market, the Polish banks should be fine. But the situation is conditioned not just by the market situations. So I had to repeat what I said many years ago. Poland is not a country for every bank, not every bank can cope and survive. And this is not to say that I'm expecting any credit crunch or that banks might not be able to give out loans. That's not where the problem lies. Banks are prepared for that, and they are ready to do it. Just like the whole economy, no one likes sudden tremors. Polish banks are sailing quite smoothly through all these disturbances anyway, but these 3 points I described are the biggest challenges for the future, I think. We will find solutions, but just like always, finding solutions where there shouldn't be a problem in the first place, requires more time. And wasting time is the biggest crime in economy, that the economy and businesses cannot afford to do.

[Iza Rokicka, executive]

And I think that with this optimistic message or optimistic comment, we will close our conference. Thank you very much for being with us. Thank you, and goodbye.