ING Bank Slaski SA

WSE:ING

Earnings Call Transcript 2023-Q2

[Piotr Utrata, executive]

Good morning. Welcome to our meeting when -- during which we are going to sum up our financial and business results for the second quarter, but also for the first semester to have a bigger picture. Brunon Bartkiewicz, the CEO of ING, Bozena Graczyk, Deputy President, responsible for Finance, CFO; Rafal Benecki, Chief Economist; and Iza Rokicka, who is responsible for investment relationships. Thank you. Brunon, over to you.

[Brunon Bartkiewicz, executive]

Good morning, Piotr Utrata, who opened today's meeting. Ladies and gentlemen, the second quarter, the first semester have been quite rich in terms of events that impacted both the economy and the results of our bank. And I'd say also that which might sound controversial, that from our perspective or from my perspective, the situation is getting stable, I would say. We have a bit more certain components in a period of uncertainty. So we have a positive outlook on the future.

The current developments seem to make the most dramatic scenarios unlikely. In some cases, we're quite certain that they are not going to materialize. And despite what we see outside the windows, the situation is more and more clear. So therefore, our outlook is more or less optimistic.

Rafal will give us a comment on the macroeconomic picture in a minute. We do not always share the same views, me and Rafal, but he's an expert or we do listen to him. And he will show us his thoughts and the thoughts of his team regarding this area.

And what has happened over this semester in this past quarter? This is yet another quarter when we are happy to be able to put in place our basic core strategy, which is to satisfy the needs of our customers, those that regardless of the fact that the economic activity seems to be slightly slowed down in the second quarter and will be slowing down even further in the third quarter, we have more and more customers. They perform more and more operations.

There are some areas which are less active, mortgages and consumer loans. Activity in getting loans by economic operators is naturally lower in the second quarter of this year than it was in the first quarter and in the fourth quarter of last year. And that is the outcome of a certain phase of the economic cycle that we're in. But it seems that -- the calming down and the period of awaiting is something that we are going through at the moment, but we are already seeing some of the signs of a recovery.

They will become material in two, some three or four quarters. We're not sure if everything quite yet, but a lot also depends on the form of the social contract that we will be concluding. And that is also largely dependent on the signs that we will be given by the Monetary Policy Council on the 7th of September. It is all interlinked, but there is an overlying theme of stability.

We do have a lot of challenges ahead. A lot is happening, Swiss francs, WIBOR, WIRON, [indiscernible] the future on the mortgage market in Poland. So one could say that there are a number of significant changes in play against the backdrop of the economic cycle, inflation, labor market situation, investment level public investment and the influx of European funds, et cetera, et cetera. But to be frank, we do what we are doing. Market share is stable. There is a drop in retail deposits. That's the perspective of one quarter actually. From the point of view of four quarters, it's a question of a different attitude to our operation in this market.

And we're also looking at the loan to depo, which is weakening because of the decreased loan activity. But to our -- in our view, this is already behind us. We also have the advantage of being able to see the July results already.

We are also going to take into account the consequences of the hedging model and the rate increase of those that generates a specific situation in the P&L accounts. We've seen the comments of -- so you have -- you will have analyzed that already.

I do not want to discuss figures, I leave that to those more competent than I. Bozena will take us through the results. But Rafal will take priority today. So you are familiar with the figures. Slide 8 and 9 shows the results that are equally important that perhaps less expressed in figures because figures are not all. So we make reference here to a lot of the important components.

On Page 9, I think it's worth looking at that too because other than commercial components that we have spoken about in the chief challenges -- regulatory challenges that we have mentioned, we also have dealt with for a few quarters now, quite intensely with -- well, trying to fight against the fraud and criminality on the market. And we've been quite successful here in this area as a sector, but also operators in the public sectors that cooperate to the same end.

So we're holding quite intense talks, but we're also working hard and making a lot of effort and talks are in progress with the Financial Supervision Authority with consumer production office. And I think that we've got quite a lot of effects already where the sectors and our customers are becoming more and more secure.

And another aspect as well is that we're looking at the WIRON challenge you can see from our previous messages that this has been quite a complex process since December. We are communicating our position on producing mortgages based on WIRON. We are also adding the message that as of the tenth of August, we are going to start launch new production gradually for corporate customers of new products based on WIRON.

This is important. The WIRON market is something that needs to be created. We are taking action in the spirit of the provisions of the road map of the National Working Group. It is not set in stone. Obviously, it is subject to analysis and evaluations, and we are very active as members of this working group. Until recently, Bozena has represented the banks in the steering committee, there is one floating seat. So thank you for the colossal effort that you put into the WIRON work. But it is ever so important for this product to be significant. We've been active since the very first transactions on the derivatives market. and through mortgages. And we are adding also right now in the third quarter, corporate customer offer. And it is in this spirit that we're hoping this market will move forward and develop.

I believe that it doesn't make much sense for me to repeat what we wrote in our statements and in our presentation. I'm hoping to get questions from you. I'm also hoping to get questions addressed to me, not just to Bozena but it is with that hope that I will now give the floor to Rafal to talk about our Chief analysis of our excellent team of macroeconomics and then Bozena traditionally, as always, will present the financial results. Thank you.

[Rafal Benecki, executive]

Many thanks. Welcome very brief macroeconomic update. The short-term forecast for GDP are not very optimistic. We can see the reasons why a recovery could become material halfway through this year, but it's not happening. It's about 1% or a bit less than that, the forecast for the moment. The industry -- the world industry cycle is changing before our eyes. So we can see the reflection in the American and Asian industry, excluding China, but it looks a lot worse in Europe. And that too means that our industry will not recover too quickly.

But here in Poland, what we see is an improvement of disposable income. We can see that in realistic terms, this income will quickly improve significantly in terms of salaries in enterprises, but also taking into account social benefits income of self-employed people. So that gives us ground to expect a recovery in consumption. There is a slight pickup of demand for investment plans in enterprises. There will be a lot of public investment happening this year.

So hence, we are assuming that the slowdown actually peaked in the second quarter, and it will then recover in the third. It is happening very slowly and it's reticent, but the nearest months will show how quickly the economy will be picking up. Weak import is helping, export not so much, data from Germany, still quite weak, about 1% GDP growth this year, which is not very good for Poland.

Next year, the projected increase is 2.5% and that is also not very impressive. Still, we are seeing some hopes for change of trend and the recovery in the second half of the year.

Midterm perspectives. Poland has quite important opportunities ahead. We're trying to talk about it in our publications. One of them is near shoring. So transferring production closer to our borders, the data displays that it's slowly starting. Right now, it's order transfer and the German statistics about import indicate that Germans are buying a lot more from our region and less from, for example, China and Russia.

Further on, the next near-shoring step would be to locate actual FDIs here. And Poland is viewed as a very good location for that, but we need to make an effort to make that happen as a country and as an economy, we need to really try hard. This is definitely an opportunity for us to be the next engine for the economic growth for the next 10 or 20 years, but it will not just happen by itself.

Another midterm factor is that Poland is more and more viewed as a program a hub with the third or fourth global country in terms of resources for programmers. So we have a lot more FDIs mainly in the service sector, in the region and in Poland specifically. That's a very important factor. Reconstruction of Ukraine is also a certain opportunity that we can talk about, but it's still distant and uncertain. I think we can sum it up by saying that Poland sees a lot of investment needs at the moment and opportunities for economic growth, but a lot depends on the nearest decisions of enterprises, our partners and the decisions that Brunon mentioned as well. Now inflation for -- which is important from the point of view of interest rates. Short-term inflation perspectives are viewed as optimistic. Inflation is dropping fast in Poland. In developing countries and developed countries, it is surprising and this trend is likely to continue. The first central banks have now started lowering interest rates, such as Chile, Brazil and Hungary. The Czech Republic, perhaps will do so in the second half of the year.

We're assuming that the Polish Central Bank will join the trend. We're expecting the first decrease 50-75 points this year in total. What's behind it is the drop in current inflation for guidance by the Central Bank. Well, it will start if we have one digit inflation. We can see that it's possible for it to drop slightly below 10%. The publication will be launched in late August. So that would mean that the first decrease would happen in September.

In total, we have seen two, three decreases down to 75 points. The financial market is pricing further decreases on the curves for developed countries as well. It will be a difficult to deliver such decreases as expected, but we can see that possibly happening in Poland. Long-term inflation perspectives are not so -- optimistic long-term inflation is getting stable at 5%, and that will be the probably ultimate inflation rate from the point of view of a 2- or 3-year perspective.

Now regarding the fiscal policy, that's also an important component from the point of view of economic recovery, but also inflation forecasts. This is one of the important reasons why disposable income is improving. One is lower inflation, but another is significantly more transfers. That impacts consumption expenses, but it could also reinforce inflation. Polish debt market that has been bypassed by foreign investors recently, is currently enjoying some influx. We see no problems with financing loan needs. The main buyers are, of course, national banks and some foreign investors, but they are cautious in general.

Now regarding the long-term borrowing needs. Poland has quite an important challenge ahead for financing military expenses and energy transformation expenses, the reconstruction of enterprise investments that have suffered for a few years. That's an important component that will also be an opportunity for the banking sector, but it may also mean that the foreign debt will grow in Poland, also public debt might. We are estimating that the foreign debt of the public finance sector could grow from 25% to 40% over a decade. So there will be quite a lot of loan needs, public and private alike, and that's a very important factor from the point of view of the banking sector and the Polish economy. Thank you very much. And please feel free to see the graphs in the further slides.

Okay. I think it's time to show you the short-term macroeconomic trends and how they impact the structure of our balance and P&L account. In the second quarter, you can see that very clearly. Indeed, as far as the net profit in the second quarter, it's PLN 1.099 billion. Throughout the first semester, it just over PLN 2 billion. And that, of course, is impacted by the interest rate increase, but also lower regulatory costs, especially compared to the amount of those costs in the first semester of 2023 and the lower risk costs and the reference base. We can see that last year, let me just recall, especially regulatory costs were charged with PLN 430 million of [ Sopka ] cost. The accumulated ROI -- ROE macro cash flow from hedge is 13.5%. And this amount includes accumulated effect from the credit moratorium from the third quarter of last year.

Now regarding the interest rate results, we're still analyzing this item, adjusted for the credit moratorium, but it's increased by 7% year-by-year. It's 3.7 -- PLN 3.9 billion and in the second quarter, this exceeded slightly PLN 2 billion. And I think there are two things that need to be emphasized here, first of all, the accumulated interest rate margin in the second quarter, which was 3.53%, and that is on a comparable level and has been for the last two quarters. And the quarterly interest rate margin grew by 30 basis points and -- to reach 3.69% that was due to the increased interest rate revenue, but also increased profitability of our investment portfolio. So from treasury bonds and of course, the interest rates of our credit portfolio, we noted as well in the second quarter, a decrease of financing costs, but let me just remark that there was this impact of ending one promotion activity and launching another promotional offer for new funds, new cash.

As of the 19th of July, we have a new offer in place, bonus -- stock bonus 7.9% interest. And as Brunon said earlier, our deposit ratio at the end of second quarter was 77%. That is below our target level and optimal level. And of course, that has been under the influence on a large dynamic on side of deposit volume, but also decreased loan demand vis-a-vis an increase of deposits of 5%. That means that the ratio is not growing.

Now when it comes to commissions and commission income, PLN 1.056 billion and it's at a very similar level year-on-year. and now quarterly performance of commission results PLN 534 million, which is an increase of 2% quarter-on-quarter. And what you can see here on the slide is increasing customer activity, and we can see it in particular in the results on cards and we have an increased number of transactions and values. And what we see on FX results, 8% growth quarter-on-quarter and 5% growth year-on-year.

We are also happy to see improved results of bancassurance, 3% growth quarter-on-quarter. In particular, we do appreciate the increase in sales of leasing products and -- with regard to insurance. And something that is quite visible in our bank and also across the sector is a lower income related to maintaining accounts of customers. It's related to the fact that we reduced or withdrew fees for high balance on the account.

Operating costs, the costs and the bank levy amounted to PLN 2.2 billion and nominal value, that's in nominal terms, it's 11% drop year-on-year, but it's mainly related to the dynamics of regulatory costs. So let me remind you one more time that regulatory costs dropped by 49% year-on-year. In Q2 2022, we had PLN 430 million costs related to the creation of [ Sopka ], and we had a contribution towards deposit currently PLN 54 million last year, which was not incurred this year and also contribution to restructuring funds, which was included in Q1 costs was lower in 2023 vis-a-vis 2022.

Now equity -- on cost dynamics year-on-year, they increased by 15%. And it's worth pointing out that cost dynamics is larger than revenue dynamics. And you need to bear that in mind, costs increased by 15%, revenues by 9% year-on-year. As we said before, on the 1st of April, we increased the prices. So costs of -- we increased the salaries, so in this quarter, salary costs increased by 10%. General Dynamics of salaries is 14% year-on-year and 15% compared to the first half year in 2022.

And one more thing that is clearly visible is that, in general, costs of bank activity are under inflation pressure. We can see this on the example of IT cost, which increased by 18% and real estate maintenance by also more than 20%. Cost of risk. In this quarter, we did not increase provisioning for legal risk related to CHF mortgage loans. As a role, we now took into account ECJ decision and this increased our cost in Q1. And at the end of June, the coverage ratio is 89%. Now when it comes to further details, they are presented in this presentation.

Cost of risk. In general, we have very limited impact, PLN 12 million. That's a negative impact on the changed macroeconomic situation. So that's PLN 11 million in the retail segment. And it's just a matter of change of shifting short-term changes between quarters and changes in short-term interest rates.

It's worth pointing out that if you compare half year this year and last year, you have PLN 49 million, increasing to PLN 85 million. So this difference is a result of a positive impact macroeconomic situation. Last year, we had a negative contribution of PLN 59 million over 6 months. And now we have a positive contribution of macroeconomic factors amounting to PLN 46 million.

And also, the current macroeconomic cycle allows us to define several elements and factors that will decrease the quality of loan portfolio, especially in corporate banking. This is nothing of concern, but this is a natural outcome of situation -- macroeconomic situation, and this was already mentioned today by Brunon.

Quality of loan portfolio. It increased this quarter by 16 bp to 262. And the risk measures in corporate segment, especially with regard to SMEs, had the biggest impact on this segment. And at the end of June, solvency rate as presented on the slide and risk-weighted assets and impact on this result as well as decreased deferred tax, which improved the result -- improved the risk ratio.

So that's in terms of sum up of financial results, and you are free to ask questions. So please ask your questions now. We will start with questions here in the room, giving our online guests time to think about their questions.

[Unknown Analyst]

[indiscernible] from USB. I wanted to ask about the WIRON for more than a month, you've been offering mortgage loans based on WIRON. And this is absolutely in line with the load map. But what do the customers? Are mortgage loans popular among customers? How many such mortgage loans have you provided yet? And you're going step by step, first mortgage loans, now corporate loans. What are the next groups of products that you will cover by WIRON rate?

And the second question is partly related to reference rates. Have you tried -- has anyone tried to challenge WIRON. And if -- WIBOR, of course, not WIRON, WIBOR. And if so, how many people try to challenge that.

[Bozena Graczyk, executive]

Production of WIRON-based loans, well, we've just started. So in the case of mortgage loans, we always have a certain delay in time. But we signed, I think, some 90 loans -- loan agreements in July, yes, exactly 90 based on variable WIRON interest rate and 90 loan agreements with fixed interest rate, which after repricing will be based on WIRON. So these are the amounts.

And I think you are able to see this as well and other banks will be quoting that too. There is this tendency whereby the production, variable production vis-a-vis fixed production and also considering the fact that we have huge expectations of falling interest rates in the case of WIBOR, it's already materialized. So let me draw attention to the fact that we are going -- we are in a phase where fixed to variable is like 70% to 30%. It will change after the interest rates change but that's more or less what it looks like.

And what I'm trying to say is that we are now in the same situation as the banks, which did not stop producing variable and fixed loans based on WIBOR. So customers, it is my opinion that customers see WIRON positively. Definitely, there is going to be a lot of discussions about it with time because WIBOR versus WIRON is set to have certain benefits. One has certain benefits over the other, which is actually a mistake. So I'm sure there are going to be a lot of discussions around that.

And now referring to your second question, yes, there were some attempts at challenging the rates. And there are -- the volume of income is so big that it's just too tempting. I'm thinking here about law offices rather than customers who are a little bit misled. So despite all the declarations of public authorities that there are no grounds to challenge WIBOR, people still attempt to do that. And there are two streams: one, challenging WIBOR, two, challenging information policy of banks. As of now, we have some 33 applications submitted in court considering the activity of law offices, I think this scale is quite limited, and it doesn't really have any bigger impact on us.

These attempts are -- well, I don't want to comment on the personally. You can look at the most recent opinions. And by the competition authority and the regulator who are commenting on the WIBOR and challenging WIBOR.

You also asked about the products. Well, we will go step by step. We've implemented the first elements, but there will be more gradually, we will launch them. This is a whole group of products. I'm not going to name them all, but they are mainly addressed at smaller customers. So we have more standard products here, more homogeneous, more uniform, more mass market product.

And gradually, over the next weeks and months, until October, we will be extending the offer of standard products and new products are in the pipeline, both at ING and other banks, as you well know, because we are doing it alongside other banks as well. So we are moving forward along this pathway. And so something that used to be topic of concern, part of the road map is now becoming a reality. And I'm sure in the next weeks and months, you will hear more about it because we are now implementing.

Meanwhile, let me read the question from the Internet. Does the bank intend to participate in the safe credit offer, 2%.

We have no -- we haven't finished the analysis yet. We were busy preparing WIRON mortgage loans, and it absorbed a lot of our attention.

Sticking to mortgage loans. Let me ask one more online question. How do you evaluate the proposition of the regulator on refinancing of mortgage loans to fixed interest rate -- towards fixed interest rate.

We are starting negotiations under the auspices of the regulator and the association of the Polish banks and the banks will hold discussions as well. It's not as easy as it might -- so it's an open topic. Nothing has been decided yet.

Let me continue online questions. And concerning consumer loans, how come consumer credits -- consumer loans have increased in their volumes. Some banks have been limiting their position on this market due to legal uncertainties. How does the bank evaluate the risk because such a loan is the basic loan of the bank?

It is not really a question about consumer loans. -- consumer loans. So this is demand-driven. We saw such activity among loan companies. And I'm glad that we can see this increased demand on consumer loans, and it's a result of a very simple thing. Our consumers have already gotten used to the price levels and as you know, the coverage of prices by -- increased prices by increased salaries is quite -- quite high in Poland. So they are shocked related to inflation and interest rates, especially in the current situation. Well, customers and e-commerce have been interpreting it quite clearly and simply customers start realizing their plans and intentions. So we've seen a lot of improvement.

Let me draw your attention to the fact and that the -- well, some people have gotten into problems, taking loans from other entities. And luckily, it doesn't have impact on loan -- on consumer loans in banks, banks which verify creditworthiness more thoroughly. So people are satisfying their needs, and that's why there is more demand towards consumer loans.

Now mortgage loans, what was the question, evaluation of legal and regulatory risk in this term -- in those terms.

Well, now let me be honest here. Change has to happen. It's good to implement changes when production is limited because we are able to stabilize things. We are hoping that things will stabilize on the market. And if we keep holding dialogue with the regulators, we will be able to create an atmosphere when there will be a less risk of regulatory changes or low risk. So we are involved in the dialogue, both with regards to refinancing towards fixed rate and sources of coverage of production and loan portfolios.

So we are involved in the dialogue, which causes a lot of optimism. Not all problems have been solved, but I'm thinking we will be solving them in a reasonable way. serving our customers. Tensions related to creating of new products occur all over Europe. And so consumer loan is a thing that causes certain tensions, and we need to restructure the market in those terms. But if you're asking about loan holidays, well, our base scenario is or means we are listening to the decision makers. So our base scenario assumes that credit moratorium should be reasonable.

So we take into account revenue indicators, income indicators into account, income ratio. So this is what we take into account in our plans. And so we took it into account in our evaluation of the reality.

Moving on to financial questions. Question #1, concerning interest rate risk and its impact on interest rates. This is historical information, but let me refer to our disclosures in the annual report for 2022. These were obligatory disclosure and back then, we quoted that the sensitivity towards shifting of 100 bp amounting to PLN 450 million. And you always need to take into account the value of balance sheet and sensitivity of changes in that balance sheet as well as decisions taken by the bank and the sector.

So the reference point would be PLN 450 million on an annual level in 2022.

[Unknown Analyst]

The LCR indicator volatility. So the peak in the first quarter and now the drop, what is the assumed level of this indicator? That is the question.

[Bozena Graczyk, executive]

This is an indicator that's likely to be subject to temporary volatility that results from the way the being incoming and outcoming balance sheet items differ. So from that point of view, this is quite normal behavior looking at the structure of the balance sheet and the changes on the assets and liabilities items. These indicators on a high level, definitely and absolutely above the buffers that would be of any concern to us.

As you can see in the recent period, even if there was a quarter where this indicator would drop, it then would increase further on. So hence, I think we will be looking at trends in the subsequent periods.

[Unknown Executive]

MREL question. What is the estimated MREL impact saying that some of its requirements will have to be fulfilled by elements different than what was expected upper one tier, what other instruments will be used?

[Brunon Bartkiewicz, executive]

This was a question that was asked at the previous conference. We are in the SP strategy. We always comply with all the regulatory norms as of the 30th of June we've got the MREL norm that we have complied to a specific amount. As you can recall, we received a loan from the group in the amount of EUR 260 million in the second half of this year. We will be supplementing our MREL requirements -- with such a combination of instrument that we consider the most adequate and needed from the point of view of the structure of our balance sheet and our equity and the proportion and the classification of our strategy, MREL strategy for [ SB ] gives us quite a lot of freedom to choose various instruments that we will, of course, conclude as part of our group transactions.

Before we disclosed that the MREL requirement that we see until the end of the year accounts for about PLN 6 billion more or less that is the level that will have to appear until the end of this year in our balance structure.

[Unknown Executive]

Okay. There's a more general question there and strategic. Does E&G consider taking over other banks? If so, is it interested in VeloBank that is looking for an investor. This is a question from Business Insider?

[Brunon Bartkiewicz, executive]

A bank never says never. And that is a very general mark. If we were interested in Velo, we wouldn't be telling you anyhow. So I will refrain from making any comments. The process is in progress. But let me just remark that the procedure indicates that this bank has had -- the bank has had a few opportunities to join the sales process, but it refrained. But I will have to stop at that because that's the kind of message that cannot be communicated in this form at a press conference. So I will be making no reference to this.

[Unknown Executive]

A question in the room. In the audience...

[Marta Jezewska-Wasilewska, analyst]

Hello, Marta Jezewska-Wasilewska and my question is about the status of the dividend. You are giving me an intense case. The status of the dividend, please. Is the bank waiting for another comment from the supervision authority or are there any toxin progress to this end.

[Bozena Graczyk, executive]

Thank you. You know just as well as we do that there are no -- there is no consent to pay dividend as of now. So the situation is more or less the same as the quarter ago. And if it were to change, we would definitely be informing you, but you know what happened previously. So this is not the time.

So the court of justice verdict has not yet been incorporated into the Polish sectors transparency.

[Iza Rokicka, executive]

Results. A question about the cost of risk in the second quarter of 2023. Now these costs were they under the influence of any individual write-offs for individual issues in corporations or was that more of a portfolio provision?

[Bozena Graczyk, executive]

It's a combination of both. Like I said earlier, we see a few forward-looking components that trigger increased portfolio provisions. We've had a few individual cases as well that, like I mentioned before, are part of the economic cycle, and that's absolutely those are situations that are under control and well managed by us. But according to accountancy principles and the prudence principle, we have increased the provision for such cases.

Ladies and gentlemen, I think there's no secret there that since we have quite a prolonged period of reduced economic activity, while at the same time, increased production costs and not everyone can transfer that to the final consumer, and there's also the component as Rafal mentioned, the orders we can see quite a significant drop in sales because there are no buyers. And there are no doubt that vis-a-vis many entities, few dozens, perhaps, we will see such things happening. So breach of covenants, decreased profitability. But definitely, the bank has to approach these issues together with clients. So default on the repayment is something that we don't see yet, but the deterioration of the situation of tens or hundreds of thousands of credit takers. It's something that is going to occur, and there is no doubt here.

The economic cycle, especially given the high inflation that we've seen, that's not typical due to the war-inflicted distortions. Well, that has to translate such turbulence has to have an impact. It is not possible to be completely unscathed with this kind of turbulence. You can't be dry walking in such rain. We -- what we add that the corporate sector is going through this turbulence relatively mildly.

Looking at the historical risks, so we might have expected quite a lot more trouble, right? So we're working through this river almost dry footed. We cannot really use the words such as recession or crisis. We're walking through it, but is it raining over our heads, Yes, it is. Well, it's -- there is a drizzle.

Okay. The use of the loan takers support fund. Has it increased or decreased vis-a-vis the first quarter? We are seeing gradually fewer applications here. And it's the income per family criterion that's responsible for that partially. And the proportion of the monthly payment to the income. In general terms, we could say that it's -- the number of applications is dropping quarter-by-quarter in short-term perspective. So it looks as though the trend is positive.

That's also naturally expected given what is happening to interest rates increase income, et cetera, et cetera.

As typically said, this was quite active last year, the first quarter, perhaps and then the second, well, it has slowed down really a lot. So I don't really recall exactly how much money there is in the fund, but there is quite a lot of space because there were no applications to supply to the fund. Those are -- s data easily obtainable from the market. I don't recall exactly, but there is a significant surplus there. So no further expectation to contribute to the fund.

No great interest unless there is some media coverage that the criteria could be used for credit moratorium. But we not -- we don't know much more than what the media are reporting.

[Iza Rokicka, executive]

Okay. One more question perhaps, your optimism initially at the beginning of the conference. So there's a question as to whether or not ING really sees a light at the end of the tunnel. And slow increase of demand for investment loans rather than operational loans in corporations, especially in the private sector?

[Brunon Bartkiewicz, executive]

Let me say the following, to use a phrase light at the end of the tunnel, which I use myself is perhaps not very much justified because we're not in a tunnel. That would mean we are under a certain surface under the water under the sea. No, that is not the case. There is a slight weakening of the growth pace, slowdown in activity. We are facing the spread of the investment wave, especially that we're looking at private enterprises, large enterprises that are state-owned have a lot of work to do, for example, in the area of transformation -- energy transformation.

But this wave is not very far reaching. On the other hand, when we look at the inquiries of customers, we are observing that there is quite a lot of interest as a matter of fact, but it doesn't exactly translate into credit applications. But there is interest, where from? As you know, in the periods of weakening, you can see the whole economy weakening, but the leaders of the process are doing quite well. And those entities are already thinking about investment processes.

Next thing is that investment process that was stalled for quite a significant period of time mean that, well, enterprises cannot really operate for a very long time before they start to expand, modernize, and refresh their investment portfolio. So there is interest for sure. What we need is an impulse.

[Iza Rokicka, executive]

Now interest rates, does it hinder the process.

[Brunon Bartkiewicz, executive]

I think less so, if at all, I'm expecting that, together with the economic revival, the sub continuous rather than subterranean wave of interest among the leaders that have activity and success even against this backdrop, that, that will just come through quite simply.

So yes, this is where the optimism is from, and that's a natural process. And of course, I will not want to list investment loans that are happening in the background because that might not impress you much. But please remember that the economy includes also some measures where the effects are only seen after a significant delay period of time. But it's happening. There is no doubt that it will be happening. Rafal, do you want to add anything?

[Rafal Benecki, executive]

I just wanted to add that when we look at the National Bank's economic cycle test study, there is a certain budge because hey, new investments are being planned. And there is a percentage of enterprises that are seeing new investments growing, and that is a slight increase in the share of such enterprises. So you could say that the biggest pessimism is over. And I think this can be triggered significantly by export. This cycle in the global industry is slowly changing outside Europe. We're hoping this trend will reach Europe too. And we're looking forward to seeing the influx of EU funds that would be quite an important component as well.

So in general terms, what we assume is that this pickup in global industry will appear and that the scenarios will not be quite so pessimistic as indicated in the recent indices for the attitude of enterprises in Poland and the world.

This was quite divergent from realistic data actually. Let's see that the second half of the year might be better than the forecasts were, which would then translate into more willingness to invest and to get debt. We believe that we are against this historical civilization opportunity to move the economy to a different and better level of competitiveness. And that belief is not just based on our naivete, but a solid conviction that there are very sound foundations. So if adequate encouragement is provided and the feeling of security that the money invested will bring return. We believe that this river can run. And I believe that entrepreneurs believe that too.

[Iza Rokicka, executive]

We have one more question from online. Business Insider has a follow-up towards the question about WIBOR-based mortgage loans and court cases? And how fast is it going? How does the bank assess the risk related to the fact that these mortgage loans are being challenged?

[Brunon Bartkiewicz, executive]

Well, let me repeat what I said three months ago. There is a certain limit -- there is a limit to aberration and grief and I can't imagine seeing such injustice, and dramatic events in those terms. This is a form of abuse. These are attempts but I am referring to the opinion of the public sector, which has a duty to supervise those ratios and those rates. In spite of unequivocal statements, the wave has been growing. People are trying I'm far from saying that it's impossible. It may materialize, and we would have to well pay for it a lot as a society as the economy, if it materialized.

So I am convinced that we will be dealing with material issues and not immaterial issues in the future. I don't believe any reasonable person thinks that someone who takes out a variable interest loan was not aware that the interest can change. And the interest change suddenly and significantly vis-a-vis predictions. That's another story. But the fact that it is variable. Well, as the name suggests, after 30 years of functioning of variable rate loans, variable rate loans. Well, I can't really accept the argument that people were not aware of that. So you could -- based on that, you can challenge actually everything if you went along those lines.

Do we have any other questions? Well, if no, thank you so much for participating in the conference and see you in the quarter.

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