ING Bank Slaski SA
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Ladies and gentlemen, welcome to our conference summarizing Q4 of the year 2022 and the entire 2022. The conference will be moderated by and managed by Brunon Bartkiewicz, the CEO; and Rafal Benecki, Chief Economist of the bank. The conference will be co-moderated by Iza Rokicka, responsible for Investors Relations. And my name is Piotr Utrata.
Brunon, the floor is yours.
Welcome, ladies and gentlemen. Welcome wholeheartedly. I think that today, we'll try to keep it brief to leave some time for questions because we are aware that majority of your questions found their answers in public and semipublic discussions that were carried out, so we will not focus on all topics, and we'll not deep dive into all issues to me and to ask the most important element is something, which is not reflected in the figures.
The bank is on its way towards the implementation of the strategy, so the same we had and versus what we experienced last year, great fluctuation, high level of unpredictability and war. I wouldn't be myself if I wouldn't stress that I'm extremely proud of our employees of ING Bank Slaski and their reaction to the event of war and their enthusiasm and how determined they were to bring support and aid. The war is still on and that was a token of a great attitude, and I'm highly grateful to all our employees.
When it comes to the events of the implementation of the strategy, the most important element, some key projects from the point of view of replacement of IT infrastructure and cloud computing solutions as well as the application of new tools. All that was very important, which -- and I think that the bank is well prepared for new phases of digital transition and technological change.
All these changes are and will consist in the possibility to use even better and more intuitive tools. In order to use all these tools, we need relevant talents, which is -- which are -- who are well trained in motivation methods and user experience and low-code methods and understanding of all processes. And I think that all these processes are very important and that they were implemented appropriately in the year 2022. So these are less measurable things, but of course, highly visible in our operations and I'm very happy about it.
All that translated into higher attractiveness of our offer and our digital offer and all improvements. And we also got rid of some errors that exist in any kind of organization. We are proud of high stability of our systems, so these are the topics we are very proud of because these are highly important aspects.
When it comes to our market share, it improved. It was very specific year with a lot of disruptive events and turbulence when it comes to the production itself. So sales of individual products and the retail part, especially in loans and in deposits. We -- these were our weak size as on the entire market, so they are reasons for some concern on our part but we can see that relatively we're doing well because the market share has been increasing.
We are still optimistic about 2023 and especially the years to come. We think that we will go smoothly through the phase of further turbulence and instabilities and lack of balance, but relatively, we think we're coping with the situation and we without any major risks for our performance.
Of course, there are a lot of elements of uncertainty which are related to big events and found changes with regard to the regulator and the state authorities reacting to the external situation. So these are elements which are unpredictable. Of course, we are not able to talk about any gossips and rumors in the market. We will talk about bank's flexibility and reactiveness to the events in this regard.
As I've said, I want to leave as much time for Q&A session as possible, I can predict that you will ask about the predictability of net interest income and net commission income because, for sure, you were -- they came as a surprise to you, the overheads and in Q4, especially in the level of provisions raised for different items from macroeconomic situations to other portfolios. So these will be elements of our discussion later today.
I need to tell you that the bank's authorities did not decide on the payout of profit of dividends, so we will not share any information or projections with regard to this payout. You will need to wait for a relevant decision to be taken by the bank's authorities. We didn't decide yet because of all these sources of uncertainty and unpredictability. We are convinced that in Q1 a lot of elements of uncertainty with regard to entire 2023 and further development and growth of the bank will be resolved because we are expecting some answers -- some questions to be answered in Q1. So that's all.
An important element that is for sure of your interest, this is our economic office projections with regard to the macroeconomic situation. So as every year, let me welcome Rafal, who will share his views on macroeconomics.
Good morning. Let me start from the external macroeconomic landscape. Recently, Poland and the global economy had to face 2 shocks, the pandemic and the war. Direct result of the pandemic was disruption and supply chains that translated into lower supply, higher inflation. So we are observing disturbances and turbulence in supply chains.
A lot of them have disappeared up to now, but there are still some delays in freight and in payments of that shows that there are some symptoms of this inflation in global economies, especially lower inflation of goods, lower wholesale inflation in China, which determines the inflation all around the world. So this shock is getting alleviated.
The second one, the war translated into higher prices of commodities, especially gas and other commodities. Today, we can see that gas prices are at a level, which are lower than before the pandemic, September 2021 for coal. So it's all good for the inflation projections all around the world. Europe is still bothered with the shock of the energy market.
Now we expect some interest rate hikes. And in my understanding, the majority of investors think that inflation surprised in the upward direction, it can be reversed. What does it mean for the American economy? The U.S. is doing worse. They can record technical recession. The European economy is doing well because of lower gas prices. We are observing positive projections for Eurozone and lack of predictions of technical recession, which is very good for the Polish economy.
This is something I will tackle now. What's a positive side? The year 2022 showed once again that the Polish business was doing very well in terms of internal demand, and generally, economy was quite strong, especially in the face of the scale of shocks. Apart from these 2 shocks I enumerated, there were also interest rates hikes, which were coordinated and the fastest possible since the Second World War done by all central banks at once.
Despite all that, the Polish economy was doing well. If we were to analyze quarterly GDP changes, we can see that the slowdown is behind us. The Q4 was still quite poor but the slowdown is -- we are ahead of the slowdown when it comes to the annual GDP progression, in the year 2022, the economic growth was 5%, almost 4.9%. This year, it will be only 1%. And this is our forecast. It is higher than the market consensus. This consensus was between 0% and 0.5%. So the recent events were revision of forecast for Eurozone and lower prices of commodities and opening of the Chinese economy with pain and still being bothered by the pandemic problems. But we expect that in the second quarter, the Chinese economy will do better and the European economy and the American one will follow. So we expect 1% growth this year, and there are high chances we will manage to avoid technical recessions, which is the 2 consecutive quarters of lower GDP.
What are the chances and risks? Polish export will stay strong this year for the reasons I enumerated among others because the forecast for our major trade partners are better. This is a feature of the Polish economy that during a slowdown, export is helping a lot and domestic demand will be worse.
We are carrying out comprehensive analysis of income of households taking into account inflation. Polish households consumed the excess of savings from the pandemic. We can see it on the second slide in the upper right corner.
When it comes to disposable income, we want to draw your attention that the effects of interest rate hikes were reflected in this Q4. So higher income for households. It deteriorated the consumption before the end of 2022. In the current year, the consumption will be around 1% or slightly above but still, it will mean poor spending capabilities of the Polish families than it was before.
GDP and investment in this regard, a few comments. Private investment and housing, it will be rather poor investment of small businesses as well. When it comes to investment of exporters in the energy sector, they will do better. We also expect that in 2023, we will have EUR 20 billion from the outstanding EU budget that will support internal demand, better export, poorer internal market that will be the structure of GDP.
When it comes to the job market, the situation will stay positive for a few reasons during last few years from the population -- the active population, 2 million people disappeared. In such conditions, companies will try to protect employment, even despite the slowdown.
Secondly, the Polish economy showed that it needs talents, hiring 800,000 immigrants during last year. That shows the strength of the Polish job market. On the one hand, it's good because the unemployment rate will rise only slightly. And let me remind you that in developed economies without cooling down the situation on the job market, it will be very difficult to take a grip on inflation.
The peak is still ahead of us in February 2023 when it comes to inflation, but then it will go down to 10%. A great problem is that our core inflation is quite stubborn. It will still be quite high. This picture may look better than we thought it would last month. But before the end of the year, the core inflation rate will be about 8% to 10% versus 12% in February.
That means that getting a hold on inflation will be quite difficult. The domestic inflation will be still quite high, so it will be very difficult to control it in the coming years.
What will be the reaction of the financial markets? The financial markets abroad and in Poland, they are valuing high interest rate hikes. Two Fed interest rate hikes are ahead of us. Yesterday, there was one and we can expect yet two of them to come.
Interest rates in Eurozone are flat, and they will be kept flat and the financial markets are playing on the decrease of inflation. Inflation up to now has been surprising to the upper side, and now the trend can be deferred -- reversed. There are some symptoms for deflation we can see by improvement of situation and supply chains, different price indexes, lower inflation -- wholesale inflation of China and also inflation in the U.S. This market -- the most important market looks quite good. So the financial markets are transferring it to Poland are playing on the decreases.
In our opinion, the inflation looks worse in Poland. So for that reason, we expect interest rates and in Eurozone, we expect them to stay flat. If there will be some decrease, we are afraid ending the year 2024, we will see the inflation and -- with a double impact. So that will translate into quantitative easing for -- of the financial policy in the coming years.
Before we move to the Q&A session, let me briefly comment on the events that affected our financial results in Q4 and in the entire 2022. The net income was PLN 896 million. This income was to be expected. In 2022, our total income is at nearly PLN 2 billion. This is a drop by 16% compared to 2021, which was a record year.
Return on equity was at 11.6%. This result is visibly worse than in 2021. Back then, our return on equity was at 14.4%. However, given the events that unfolded in 2022 and the risks that generated one-off costs, we are still quite satisfied with the results we managed to achieve.
Net interest income. Q4 of 2022 is comparable in terms of income with Q4 of 2021 because in Q4, we did not have one-off costs resulting for adjustments made for the suspension of mortgage repayments. So our net interest income went up by 29%. The quarterly result is at PLN 1.809 billion. This is an increase of 1%. Our net commission income was -- went up by 3.5%. It's a small drop from the level of 3.53% from the previous period.
As you can see, the gap between our income and costs is growing. The reason for that is that profitability of our assets has been growing slowly last year. At the same time, we had a large increase of financing costs.
In the last quarter, the cost of financing went up by 25%. This is connected with a systemic increase of interest rates on clients' deposits.
At the beginning of 2022, the interest rate on deposits was rather low. Let me remind you that it was at 5 [ basis ] points on our [ OCO ] accounts, and that bonus accounts, it was at 1.5%. Currently, the interest rate on both types of accounts is much higher. As the [ OCO ] standard account in Q3 and Q4 went up from 1% to 1.5%, while newly opened deposits, there in -- the interest rate went up from 7% to 8%.
Now fee and commission income. The results should be analyzed in the perspective of the entire 2022. We have reported a growth of 14%. Each item that make up our fee and commission income has been -- each category has been growing.
I would like to draw your attention to a few drivers behind that growth. First of all is the fluctuation ratio, which is at 29%. This is connected with the growth in the number of transactions. It was FX transactions that -- also, our payment and credit cards, fee and commission income went up by 27%. This is connected with an increased activity of our clients.
Moreover, we also had an increase of income for financing services. They went up by 15%. The increase was generated mostly by our corporate segment.
Our income dropped by 4% compared to Q3 in Q4. This is explained by the amount of fees and commission that went down but this is due to seasonal variation that we also observed in the previous years. Also, the change in interest rates affected the bank's policy on fees for high balances and other charges that are -- that we charge on our clients.
Now overheads in Q4 and in 2022. In Q4, our expenses, including bank levy were at PLN 858 million. It is a drop of 13% compared to Q3. In particular, our OpEx went down. And here, I need to make 2 comments. Throughout 2022, we struggled with our performance. And therefore, we tried to optimize our costs.
In Q4, we accounted for IT projects. And the IT projects turned out to be less expensive than expected. As a result, we reported a quarterly drop of expenses on IT projects. However, we had an increase of overheads and IT costs in the previous quarters.
Our expenses will grow because this is the price that the bank pays for investing in its development. We're also affected by the growing inflation. Therefore, what was observed in Q4 was a one-off event.
Now personnel costs. They stay at the same level compared to previous quarters. Let me highlight 3 factors that affect our personnel costs. In mid-December, we decided to introduce more remote work in our main office in Katowice and then our branch in Warsaw. As a result, we've been paying out bonuses to our employees.
Last year, we paid PLN 32 million on those bonuses. This year, this amount went up to PLN 35 million.
In the context of bank finances, we decided -- and results, we decided to cut bonuses. We intended to pay out a bonus equivalent to 5% of personnel income. This decision is actually similar to the decision we took in 2021. In 2021, we had record results in terms of volume and absolute figures. In that year, we paid out 10% more in bonus payments than we forecasted.
Also, in Q4 2021, we created a provision in order to optimize internal processes of our bank. This provision amounts to PLN 30 million. So this also affects the operating costs in comparative terms.
Now cost of risk. In Q4, it amounted to PLN 259 million. PLN 63 million are provisions for risk connected with loans denominated in Swiss francs. We have also made provisions for macroeconomic risks.
The provision for loans denominated in Swiss francs. The ratio of our portfolio covered with the provisions is at 56%. This includes provisions that we've made for balance values of these mortgages and the provisions that we created for mortgages that have been repaid.
We believe that we will continue to create provisions for our retail banking segment. In 2023, we intend to make provisioning at PLN 47 million. In corporate banking, we reduced the provisions, the amount of provisions by PLN 30 million. However, please bear in mind that in Q3, we have created large provisions to protect ourselves against macroeconomic risk. So quarterly risk cost margin in Q4 was at 0.66% and for the entire 2022 0.52%.
Our portfolio quality and provisions in Stages 1, 2 and 3. The share of NPAs in the entire loan portfolio is stable. It went up slightly in Q4. Please note that the value of the loan portfolio in Stage 2 has changed. It actually went up. We were talking about it during our previous conference. So there is a growing number of Stage 2 loans in our gross portfolio in the corporate segment.
We have also observed an increase of Stage 2 loans in our retail banking. This is a consequence of decisions taken on our part. We want to modify the factors that affect Stage 2 loans. This will allow us to act preemptively and to make our models more responsive to the general macroeconomic situation. This allows us to better monitor the situation in all segments of our activity.
The introduced modifications affect the value of loans in individual stages. However, they do not generate additional risk costs. Capital adequacy, where TCR was at 15.21%. We have noted an improvement in Tier 1 and the TCR. LCR at the end of the year improved by 20% from 132% to 152%.
I think that's all from me. Thank you for your attention. And let us begin the Q&A session.
Moving towards our Q&A session. We got some of them during our presentations and you're strongly encouraged to ask more questions.
Starting from [ Robert Erlica questions from Bank PL. ] What is the bank's path in implementing a WIRON in existing contracts? Will it -- is going to replace WIBOR? What will be the adjustment rate, which is inexistent yet?
The road map of the national working group are well known to all of you. So within the scope of the works performed, each and every bank is defining its own road map and implementation of road map of -- to implement this new benchmark to projections. It's an important element because if we are to move towards full replacements in line with the road map by 2025, this element of creating the market for the purpose of this new benchmark is very important.
We have defined a road map. It means -- and it defines some important elements for customers. And we announced it is important and relevant for our customers. So by now, we have announced only the general time limit for implementation of this new benchmark for the production of mortgage loans. We expect that it will come on the verge of Q3 and Q4 this year. And naturally, it means that we should have a break to avoid some confusion among our customers.
I've heard that our communication was understood as our attempts to get rid of WIBOR. It's not like that. It's -- our purpose was to get transferred into WIRON. So we should do it step-by-step. And this is how it was done in other countries, implementing new benchmark on the market. So we will implement new products in corporate part as well in line with our road map.
Of course, the beginnings are not the easiest because the adjustment to regulations is quite complex. Nevertheless, we -- and for this purpose, we did not announce the final date -- the final deadline because we need to outline this path, correct adjustment spread or a new benchmark. It's a complex task taking into account the fact that Poland is implementing this new benchmark index in the moment.
During the last few years, we had high fluctuation in terms of interest rates, so it's not the very best moment for such a modification. But what can we do? We need to do it adequately with whole respect for macroeconomic conditions and social sensitivity that was built.
The [ excess ] sensitivity, I would say plus all these elements, which are concerning because WIBOR's reliability has been undermined. And this financial stability committee should rephrase and reiterate its statements.
So these are the aspects that we need to take into account. I think these are not questions with regard to adjustments, but we are not the addressee of this question. We are an active participant, but only co-participant. We try to support the process. But when it comes to -- and we need to focus on our vulnerabilities.
Yes. But to give you a full picture, this credit adjustment spread will be applied in -- for the purpose of transition, so somewhere in 2025. It will be possible to recalculate the rate versus WIBOR, so the impact of this new benchmark on the new production will be minimum. And this is the first comment I have.
The second one is that the entire change, we deeply believe that it is implemented and it will be implemented in line with the EU regulation, so-called BMR, which means in practice that modification and change of replacement of one index with another, both for loans in new production, but also for legacy portfolio that will pass through this transition deadline. It will be made in a fully equivalent and relevant manner.
So with regard to that, we need to assume that loans and credits will be adjusted by this adjustment spread in order to make these products comparable in full.
Thank you very much for your answers. We -- in the meantime, we got another question for precision or extending the question for WIBOR and WIRON from [indiscernible] will bank offer parallelly and simultaneously mortgage loans based on WIBOR and WIRON?
At the same time, there will be no -- there should be no confusion on the loan market. So application of these 2 schemes in a parallel manner would be the worst case scenario. For this reason, we announced that we stopped our production on WIBOR. And after some delay, we will start to work on WIRON, so the application, which was filed by a customer on flexible interest rate, it is adapted to WIBOR and also customers who will take a decision to apply within the new scheme, they will have enough time to reflect on that because that's an important life decision when to take out a loan, whether it should be flat rate or it should be variable rate, and they will have enough time to get to know the principles of this new scheme.
So the nature of WIRON, the purpose of WIRON and so on and so forth. So we do not assume parallel application of the 2 benchmarks because of all this reference [ and basis. ] They are quite difficult to understand for nonprofessionals. And so we should keep them as simple as possible.
So simple banking serves for this purpose to make our customers understand their decisions. Thank you.
Maybe moving towards next questions with regard to the performance review and financial results. Can you provide some guidance with regards to net interest income and what we can expect from loan volumes and split into different segments?
Let me repeat, we will not comment on the future. This is our principle, and we are serious about it. It's in our policy. All relevant information, which can support your decisions have been included in our presentation. I think you have all components, and it was also stressed by Bozena within her presentation with regard to interest rates. With regard to retail products, what is the situation? And what is the outlook?
With volumes high level of uncertainty, but I wanted to provide you with an answer and indicate that we stay optimistic. Of course, mortgage loans, to be honest, as long as we have no information about ECJ ruling, because that shapes the market. And as long as we deal with quite high interest rates, but still, market is adapting to the situation and there is a rising expectation for the interest rates to decrease.
We have quite strict conditions of loan sanctionings, and this will not change. This is not changing, so mortgage loan for the first or the second house, the demand will be quite low. In 2022, the demand was driven by investments. So people were -- wanted to avoid low interest deposits, and that was the reason behind that. So the market expects the real estate market to grow and prices to go up. We do not comment on that, but we are aware of the market expectation and market perception.
Customer behavior -- corporate customer behaviors. Rafal indicated on many elements with that regard. But we -- our statement is that we stay optimistic. When it comes to the value itself, no, we will not -- we have no crystal ball. We will not predict the future. And we have some predictions, but we will keep them a secret.
Let me comment on the past because I think it's something that is shocking. Drop in mortgage loan was massive. We even compared it that this sales in 2022 and deeper and deeper decreases over the entire period led to the situation that monthly sales in the last quarter and in Q4, these were the lowest sales of mortgage loans since 2008. So we can talk about that this market collapsed.
From this perspective, the projections for 2020 and the outlook for 2023 will not change drastically. As Brunon mentioned, ECJ, let's move towards to issues, the ruling of ECJ, with regards to the remuneration for a principal. If the ruling is negative, will ING still raise provisions for CHF mortgage loans or do you expect such remuneration to come? And how much would it cost to ING if this remuneration wouldn't materialize?
So we are in a group of loyal people, so we can share this information. Of course, we are prepared for different scenarios. We don't know what will be the ECJ ruling and what will be the exact wording of it. Of course, we have some vision from a very direct statement to the statement -- possible statement that it will be decided by a competent local/national card but we have different scenarios for sure.
Secondly, if the ruling indicates on some of this turbulence in cash flow. Of course, such provisions will be raised even in the black case scenario. These are not scenarios that could cause any material turbulence in the bank's functioning, which I think you all understand. Nevertheless, such scenarios have been drawn up and they are taken into account.
Of course, when it comes to this radical black case scenario, if it materializes, the level of additional provisions raised in case of our organization would be quite significant, but it wouldn't do any harm to the bank financial standing or its indices. It wouldn't translate into any dramatic decrease of them. So we feel quite safe with this scheme. But of course, it's quite obvious that we are deeply concerned with the element of this wave spreading around showing us that if you scream in public, you can undermine long-term contracts. This wave and this tendency is too long already.
Poland needs Polish banking sector and the Polish strong banking sector translates into lower level of uncertainty, especially such which translate into infections in other and they affect important decisions. We all need a clear-cut rules to operate. So -- but taking into account the expectation and this ruling and announcement by ECJ, we are waiting for it. But we will not comment on the future -- we're not willing to comment on the future but nothing wrong will happen for the bank.
You know all these projections. They are quite well known. And from this perspective, the worst scenario is well known to the market and to ourselves. We have small -- we have share of CHF loans. But with this level, we are not afraid of the financial consequences. Of course, they will be painful for all the parties if the scenario materialized and everything will depend on the wording applied of -- by the ECJ, and we will see what will happen and how it will translate on the provisions raised.
We -- the Ombudsman of ECJ will need to -- will have its -- the announcement. The announcements differ from the final rulings. And this is an additional aspect that should be taken into account. As it's scheduled for the 16th of February, maybe it's not worth considering now, maybe just wait these 2 weeks and let's have a private meeting.
Thank you. Now we have a detailed question regarding our fee and commission income, more specifically about income from FX transactions. FX transactions constitute a growing part of your income. Are the -- is it generated by retail or corporate segment more? And do you forecast any increase in fees and charges income from FX transactions?
Indeed, I have mentioned that in my presentation, FX transactions commissions is an important part of our income in all segments. It is the corporate segment that dominates there, of course, both in terms of the volume of transactions and their value.
I would like to ask a question about operational costs. A representative of PKO BP, would like to know if PLN 35 million of provisioning was recognized in Q4 or maybe they were accrued before?
We've been preparing for making these provisions for a while. These provisions consist of 2 elements, so they were partly recognized before Q4.
Another question of a more philosophical nature from Santander Bank. In the U.K., in the U.S. and in Europe, we are observing a great return of employees to the office. What does ING Bank is planning to do in the future? Why did you take -- why did you decide in December to continue remote working?
Actually, I need to differentiate between 2 things. First of all, our bank is not in favor of a fully remote work for large groups of employees for many reasons. We believe that, first of all, all employees should feel safe in the organization they work for. Here, the precondition for safety is trust in the team that one is a part of. And the trust that the organization will make it possible for the employees to develop and grow.
For this reason, we decided to introduce a hybrid model, which is used by many companies in the world. And the way we operate differs among our branches. As of now, the employees who do not have direct contact with customers are working 2 or 3 days a week in the office and they work the remaining days from home.
We also have teams and departments that are present in the office full time. We also have teams that do remote work fully. So we do not have a one-size-fits-all solution. We are aiming at developing a hybrid model. It's easy to say but it's more difficult to actually implement.
How should we organize this hybrid model? It's not about what days of week employees should spend in the office. It's more about what type of work can be carried out remotely. And what type of work requires physical presence in the office.
Our current decisions apply to this season that is winter this year, namely at the turn of 2022 and 2023. When we were taking the decision, we were assuming that we may have a difficult external circumstances. For instance, we were preparing for power shortages. We wanted to stay flexible. And we believe that we should give our employees the opportunity to either work from home or from the office.
In addition, please bear in mind that we take decisions a lot of time ahead. A lot of time before they are actually implemented. We are obliged to inform our employees about our plans in advance. Actually, well in advance. This allows our employees to adapt their family life, so commuting, taking care of their children to their work.
The decisions we took were based on our forecast regarding the winter of 2022 and 2023. As I look outside the window, I must admit that I cannot see any winter there. But we decided on what we decided in order to be a part of the solution and not a part of the problem.
I have a question about personnel costs. The question is asked by a representative of Santander. At ING, you decided that the remuneration should be increased at least by the inflation rate. Did you manage to do that? And what will be the levels of remuneration at ING in 2023?
Unfortunately or fortunately, our bank cannot afford to offer lower wages, lower remuneration than the market average. We assumed that the remuneration level on the market would be adequate to the CPI, Consumer Price Index. This is what we announced back in the day. The current situation is more challenging. We're struggling with inflation.
In these circumstances, the market varies -- the remunerations on the market vary with regards to CPI. But over the -- CPI is forecasted to fall as Rafal said. Therefore, I expect that the market response will be rather slow and I think that we may see a drop of remuneration compared to the level of CPI. I think this will be the case in 2023. But this is short term.
While in the long term, our remuneration level will be increased adequately to the inflation rate. As I've said, we are putting growing demands on our employees. We want them to develop and gain new skills. For this reason, we will also strive to offer competitive remuneration. Actually, we even have ambitions to offer better pay than the market average.
Our main point of reference has always been throughout the 25 years of our existence, the labor market and not the inflation rate.
Were any provisions released in Q4? And did it affect operational costs? I'm not sure if I understand the question. What do you mean by release of provisioning? Any other -- what do you mean except for the adjustment made for the termination of IT contracts?
Equity and equity management. The question was submitted by PKO BP. Why did the [ RWE ] went down in Q4?
This is connected with RWA indices and the release of provisions. This is typical for banking activity. There is always a certain lag between a new mortgage volumes and new provisions established. This is connected with the valuation of provisioning. So this factor -- basically, this is a ratio that we apply to establish the risk concerning our portfolio.
Do you intend to issue MREL this year?
Well, issuing MREL is a regulatory requirement. This regulatory requirement has been moved. The deadline for implementing, it has been moved from 2022 to the end of 2023. So we are adapting our policy to the existing regulations.
As you know, we have issued MREL instruments at the turn of December and January. What may affect MREL requirements in 2023 is still uncertain. First of all, the deadline may be further put off. Second of all, the value of MREL instruments is connected to RWAs. So it's difficult to assess how many MREL instruments we should issue. This will determine the final requirements.
If the deadlines are not postponed regarding to MREL. So if the deadline is not postponed beyond 2023, then in 2023, we will need to issue instruments worth PLN 20 billion. So if this has not changed, we will need to issue instruments worth of PLN 5 billion.
The last question from Bloomberg. If there are no unexpected one-off events, what is the estimated income in 2023? I see. So you cannot answer this question.
Thank you and see you in 3 months.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]