mBank SA

WSE:MBK

Earnings Call Transcript 2020-Q1

[Joanna Filipkowska, executive]

Good afternoon, everybody. Welcome to the conference on the performance of mBank Group in the first quarter of 2020. Today, we are represented by our CEO, Mr. Stypulkowski, our CFO, Mr. Andreas Böger; as well as Mr. Marcin Mazurek, our economist. Today, our conference is a bit extraordinary as we are living in extraordinary times, but I hope the technology will not make us any nasty surprises. And now I give the floor to Mr. Stypulkowski.

[Cezary Stypulkowski, executive]

Welcome. In brief, first quarter, seems to be the last quarter of the good old times because on the surface, that means what we are presenting as a result of 2020 first quarter, it seems to be in relatively good shape, I would say. The core income was still growing, fueled by strong business momentum. We have -- we've been targeting -- after the first few months, it was highly possible that the bank would be able to deliver PLN 6 billion of income since both interest income and fees and commissions have been performing very well. So that is one characteristic.

Obviously, things has changed basically second week of March. But still the developments in the time when coronavirus exploded, didn't impact us that much yet, I would say, at least, as I said, on the surface. Cost base, reasonably well managed. Traditionally, at mBank, revenue is quite higher than the cost increase, so it was in line.

Obviously, the most -- and on the business volumes, that means the balance sheet items, our deposits/loans have been growing very much in line with what we have experienced second half of the previous year. So in principle, I would say the quarter was relatively strong, though was very much impacted by the level of provisioning, which we've done as a consequence of the outburst of the disease and the consequences and the effect of the decision-making by the government, which is stagnated completely the economy.

When we look into the performance, the business development, I would say the bank was growing in terms of the market share. And it's pretty impressive. If you compare within one year, we basically grow our market share by 1% on both sides of Corporate and the Retail, which the bank with 6%, 7%, 8% market share is obviously significant improvement.

So we've been on the very -- on the right trajectory. Some new innovations have been implemented. One thing which was -- which I think is worth mentioning is, on one hand, the BLIK mobile payment system, which was improved by the ability really to request the payment from the counterparty on a mobile device via the BLIK solution. And the second, I think, which I would like to mention is Paynow, which is the payment platform specifically devoted to the e-commerce where our market position is very strong. And we know that we have to assist our clients on that front.

In figure terms, as you see on the right -- I don't want to go into the particular numbers, I just want to show that on the right side, you have the quarterly and yearly changes. And I would say on basically every item, which is where we have some impact, I think the performance was very good. You've seen our fees and commissions. Obviously, there is a methodological change which we have to meet, but fees and commissions have been growing second half of the year and performance in the first quarter was also a very strong part of -- the answer is that, as you may remember, we have increased our fees and commissions in the June last year, effectively now starting to charge customers in August, as I recall.

The most important item which sort of shifted the overall, I would say, reasonably good picture, is the level of provisioning which we have done in first quarter of 2020, which totals to PLN 409 million. And the second item, which needs to be explained is the contribution to BFG. We paid less on the restructuring front. As a consequence of our increased deposits, we have increased our contributions to deposit guarantee funds.

Cost side, I would say well managed, as I have mentioned. Taxes, balance sheet is growing. Loans are growing. Banking tax is growing. Profit before tax, I would say very much impacted by this provisioning level; and net profit, obviously, below -- significantly below expectations and below the first quarter of the first -- of previous year and as well a significant lowering compared to the first quarter. So we talked about the months, about the quarter where you had a very active and very promising 2 -- first few months. And I would say, rapid development in March.

As you know, we've been the first bank which has launched, to the market and to the customers, the repayment moratorium which have addressed individual clients and SMEs, which our offering was to allow clients to defer the repayments for 6 months -- up to 6 months of capital charge, but still demanding the interest rate.

The balance sheet items, again and again, you see the green, green, green. So if we talk about the corporate deposits, if we talk Retail, I would say you see the growth rates which are pretty aggressive. On the Retail side, talking about 17% growth comparing to the first quarter of last year, corporate clients, almost 10%. And if we talk about deposits, this is just almost unbelievable. We are more than 20% higher than the previous year.

As I was claiming, customers like us. They like our transactionality, they come and place money with us mostly; significant increases on the current accounts. Well, the equity, as you may know or may remember or -- we didn't pay the dividend again and again. It's not our choice, that was very much enforced by the regulators, not only in Poland. As a consequence, our equity has been -- has grown. Our -- let's move to the -- most of the elements which you see are very strong. The ratios are strong. So not that much to be reported at this moment since we all -- we know that the name of the game and the real challenge of the question is what will happen in the upcoming quarters.

Let's move on. And I think I'm supposed to pass to Andreas. So Andreas -- what will I say? Screen is yours.

[Andreas Boeger, executive]

Yes. Thank you, Cezary. Okay. Thank you. Warm welcome also from my side in this digital format. So let me give you some more background on the numbers. And let's, as always, start with the loans to customers. The loans to customers grew strongly in the first quarter, but nearly half of that strong growth was due to the weak zloty and the foreign exchange effects out of that. So the growth before FX, so excluding FX, is 2.8%, and including the foreign exchange moves is 5.3%. It's roughly the same in both business lines.

Just to give you a background, the zloty depreciated in the first quarter against the euro in the magnitude of 6.9%; against Swiss francs, 9.7%; and against U.S. dollars, 9.2%. So I think it's more important to look at the next slide when it comes to new lending and not to look at just the carrying amount on the balance sheet.

New lending, let's start with mortgage loans on the left. Mortgage loans, still very strong at PLN 2.2 billion. That's 2% more than in the quarter before and 49% more than in the year before. There, we have seen a very strong January, very strong February, still a strong March, but also March was showing a bit of less interest. Something we have seen more pronounced on non-mortgage loans, non-mortgage loans still at nearly PLN 2.4 billion, which is also quite a decent print in general. But we have, from the second half of March onwards, seen just less demand for these kind of products because people, I think, were more concerned with the lockdown and less with taking non-mortgage loans here.

Corporate, very strong print in the fourth quarter. So fourth quarter is not really a good comparison. I think the PLN 7.5 billion is quite strong over the whole cycle. You see the drop against the fourth quarter is across all lines. So I think nothing to say there. Also, a drop in leasing. But if you look at the leasing year-over-year, 0 growth. Obviously, 0 growth is not ideal, but the first quarter in leasing always is a bit weaker due to people just not leasing equipment, normally in the first quarter.

But we've also, in leasing, seen from March on, some, I would say, corona effects. What is the outlook on new lending business? I mean the outlook on new lending business is, in general, that we think that the appetite on the Retail side will be more muted. So we will see less interest likely on mortgage loans and also on non-mortgage loans. The magnitude needs to be seen.

On the one hand, we try to be cautious when it comes to our credit policy. On the other hand, also consumption needs to come back. And obviously, the lockdown needs to be unfrozen. But we're also confident that with the measures that the government is taking around BGK, PFR and also other measures is actually helping our clients here.

Let's move over to deposits then. Strong growth on deposits. Growth on deposits was roughly 10% quarter-over-quarter and 20% year-over-year. I think 2 things are at play here. The one thing that is at play is, obviously, the strong transactionality that mBank has. So you have an underlying trend that is anyhow strongly upward moving, especially in current accounts and anything that is transactional.

But we also have evidenced in the third quarter that our clients have a stronger drive for cash, so to say. So the preference is more for cash and not spending the money, but trying to keep the powder dry. That also explains the loan-to-deposit ratio. The loan-to-deposit ratio is down to 86.0%. So 86% is quite low. It was already low with 90.3%. Our goal is to be like in the low 90s percent normally. But it's -- our clients are cash rich, it means we are also cash rich. So this is the explanation for loan to deposit.

Looking at income. Income, Cezary has already elaborated on it. Strong income, obviously, driven by very strong January, February, but also by still a strong March because this is about the carrying volumes we have. The total income is even stronger on core income. So core income growth was -- you see here in the quarter, you see a total income plus 1.8%. Core income growth was 5.4% and year-over-year, yield was 16.7% vis-à-vis the 13.3%. Talking about core income, there is one change I would like to highlight, which we have done in line with the market practice we observe in Poland.

The net fee and commission income since the first quarter 2020 now includes also the foreign exchange margin we are taking. Obviously, all numbers you are seeing here in the presentation and also in the appendix have been completely restated to actually reflect this. You see this in the appendix on Page 26, for example, there is a red bar in the in the chart. There, you see that the contribution of the FX margin, for example, in the first quarter was PLN 85.7 million. And in the year before -- for example, PLN 64 million.

Still, even without the FX, taking this out, it was a strong quarter on net fee and commission income. Net fee and commission income was this time mainly driven by very strong activity of our clients on the brokerage side, which were actually heavily trading in the market uncertainties. You also see net interest income up again, up again by PLN 55 million. You know that in the fourth quarter, we had the hit from the so-called small z o.o. So from the nonrecognition of fees when it comes to paid back consumer loans, this is fully -- this was fully digested in NII. Obviously, the NII is to some -- lower. It would have been higher in the quarter when it comes to extraordinary effects stemming from the past on the small z o.o.

This is part of net other operating income. We took another provision of a bit more than PLN 4 million for the past on this. So I think we are well covered there. You also see one negative line here, minus PLN 24 million. The minus PLN 24 million is mainly driven to the Visa valuation because, obviously, the Visa stake, we and all other banks also in -- or most other banks, actually half, has also been driven by the negative movements on Visa.

Again, here, maybe a short outlook on income. Net fee income and commission income, obviously, there is a risk of lower transactionality in the coming months, lower transactionality across the board, but also maybe some higher FX hedging, et cetera, of our clients. So let's see, but there might be a downward trend on -- or some pressure on net fee and commission income.

Similar on net interest income, we have seen a rate cut of 100 basis points. The rate cut of 100 basis points we have already informed the market about this. This will amount to PLN 155 million less NII in the year. So with this, I would like to go over to cost. What's very important on cost is, and you know we're very stringently looking at our cost-to-income ratio. Cost/income ratio needs to be normalized also. So taking full BFG into account and then dividing this by 4 quarters. Last year, it was at 45% at the same point in the year. This year, it's at 42.6%. So a strong cost/income ratio here. Costs themselves increased by nearly 7% year-over-year, 4% quarter-over-quarter. If you look at this against income, especially against core income, it still is very much intact. The core income is growing faster than the cost side here.

Cost drivers on both sides, personnel costs due to some higher FTE, also higher social security charges in the first quarter normally. And this is what we evidenced; and also some higher material, mostly driven by some more administration costs and some more IT costs. Part of this also to stem against the, I would say, operational obstacles we had to do with coronavirus. The cost there is always difficult to judge what is really corona related or what is not, but I would say it's a single-digit million amount what we did spend.

Last year on the cost side, I would like to say something about BFG. Cezary has already said it. The BFG resolution fund, the charge is PLN 30 million, 3-0 million less than last year. But the overall deposit guarantee scheme, we will pay also due to higher deposits but also due to a general increase in this is PLN 60 million, 6-0 million more, so that the net contribution -- negative contribution of BFG is minus PLN 30 million, 3-0 million this year.

Let's move over to cost of risk. Cost of risk, very high, nearly PLN 410 million total LLPs and also fair value result here. We always try to take a conservative stance. And I think the stance we took in the first quarter was particularly conservative. The PLN 410 million do not only include the normal conservatism, but also PLN 141 million in amortized cost and PLN 7 million in fair value, so PLN 148 million in what you could say is kind of a corona adjustment.

What we did there is on the Retail side, when it comes to Retail models, we actually stressed the retail models into a negative scenario. It's what you normally do under IFRS 9, but we gave the full weightings with the negative scenario. And what we did on the Corporate side is we conducted an additional review into our client base and also into sectors, and looked at the potential increase for some probability of further LLPs, and this led to these higher amounts here.

Looking at the total cost of risk, total cost of risk at 151 basis points, obviously, quite high. Difficult to see what the end of the year or what the full year brings. We thought we want to be proactive. I think if you look at the outlook for the whole cost of risk, the picture you can paint can, on the one hand, be quite negative. On the other hand, we are very much trusting in the government actions also around BGK and PFR, which we think will really help our clients. And this is why we cannot also guide further what we normally do at this point here on the slide deck.

Loan portfolio quality, NPLs, et cetera, all in line with what you've seen before. I don't want to spend too much time in going to my last slide on capital. Capital and liquidity, obviously, very important resources when it comes to the economic situations we are now facing. The Tier 1 capital ratio, anyhow strong, even stronger after the release of the systemic risk buffer. The overcapitalization on Tier 1, which we now have, amounts to 487 basis points over the minimum. That's very strong. And I think with the liquidity coverage ratio of 221% at the end of Q3, it shows that mBank is a very liquid bank, and we are very safely steering here with our resources. That's it roughly from my side. Maybe a short summary, as I always try to give some takeaways. So strong revenues. But uncertainties on the horizon. Uncertainties around our clients too, we will stand with our clients. BGK, PFR and other programs will help. But nevertheless, we decided in the quarter to take active provisioning against the potential situation.

And with this, I would like to hand over to Marcin for the economist update.

[Marcin Mazurek, executive]

Thank you. Good afternoon, everyone. So 2020 is going to mark a historic year because it will be the first year of officially measured recession. We assessed this recession as minus 4.2% in 2020. It's not because that economy grew some imbalances. It's all about the virus and government measures that's aimed at stopping the spread of the virus. We now assess that around 20%, 30% of consumption have operated during the lockdown times. It is going to be slowly coming back to normality, but the comeback will be very slow and painful since the virus would be rather unwilling as to -- unwilling to leave us for a long time. And we may also bet on the fact that consumption patterns are likely to change. And of course, second round effects are going to kick in. We estimate that layoffs in corporate sectors have already started. It's going to obviously affect the unemployment rate. But at the same time, we think that the government measures that were recently announced are going to stop the rise in unemployment rate somewhere around 10%.

It's important development because using the raw models would give us a 13% unemployment rate. So that's a lot of improvement versus the model. And it seems that the government measures are well aimed. Of course, negative growth means sharply falling inflation. MPC, Monetary Policy Committee, have already reacted to this development. They did interest rate cuts and enacted quantitative easing. We think that MPC is not really going to further reduce rate -- interest rates, but it's rather set to focus on recently discovered quantitative easing. With regard to monetary aggregates, recession has its own rules.

Demand for credit is set to be significantly lower and also on the corporate side, partially crowded out by government lending via PFR. Of course, deposits should fare much better, liquidity would be abundant in the system. As far as interest rates are concerned, we observed the falling government yields. Of course, it was driven by interest rate cuts and also by the announced quantitative easing measures.

And what's important, the initial burst of credit risks that was visible in early March is slowly behind us and the asset swap spreads are returning to more normal levels. The Polish currency was hit along with other emerging market currencies. But to be honest, the scale of depreciation is not horrid. We expect a little bit more zloty weakness before it settles down on a more solid footing in the next several quarters.

Thank you very much. That's all from my side.

[Joanna Filipkowska, executive]

Okay. Now let's turn to the questions, which we received online. The first question is from Tomasz Noetzel from Bloomberg.

Could you please comment on potential expected rate in migration impact on risk-weighted assets and capital. As per CEO comment, good time now are now over. How will you adjust your strategy to adopt to new environment? How can you mitigate revenue damage from lower rates? Is the cost optimization a way forward? What's your view for the industry in the post virus era, assuming 2021 will bring recovery?

[Cezary Stypulkowski, executive]

Well, I have counted 6 questions, so I hope that I will be able to respond in the right sequence. The first is whether there are migrations of the ratings within the IFRS 9. The fair answer will be -- this is premature. I think that the reasoning -- and now I'm from the old school, I was the CEO of the bank at the time when there was ability to set money aside as a general reserve in their good times and release in the bad times.

IFRS in 2004 basically stopped us to be that flexible. And to be perfectly honest, today, we are in a situation where I don't -- that means there is a group of clients where we know that they are on the edge. In first quarter, they have not -- I would say, they've been on our watch list. They didn't deteriorate yet to that extent, but we already pushed them into the different bank. But I would say my personal approach is, as I said, old fashioned, and we decided to put money aside because we know that a number of clients will be in much worse shape. So it's a mixture of understanding of the portfolio and understanding that you know even if the situation of individual clients didn't deteriorate yet to that extent, the money should be put aside. That's one.

The second, no one is able to predict and to measure what will be the impact of all these state-initiated counter actions including the PFR money, which have been -- which have started to be disbursed just yesterday, which will have impact on the clients, which is a semi equity. So that is one factor. The second, there is a pretty robust BGK-sponsored program. So I would say, under the circumstances, to say that individual clients will be clearly deteriorating their position and they should be put into the bucket 2 or bucket 3 already, it's difficult to be judged.

This is also reflected in a variety of announcements by the regulators. And it's not only about the Polish regulators who have been more silent on the issue, but I would say the international regulators, which advised to be cautious. If we will implement or if we will be very strict, and I'm not talking in terms of mBank, but I would say industry, to the setup, regulatory setup, the economy will be just ducked. And all of us know that the role of banking sector under these circumstances is very important.

Without the banks being sort of proactive and more reasonable, that will be difficult. So we are sort of balancing between overall understanding that recession will lead to deterioration of our portfolios. Looking into the individual cases, trying to understand what will be the positive impact of variety of measures adopted by the public sector. This is the way we manage. If someone believes that post the developments in the second half of March, we would be able really to do the full-scale measured refiguration of our quality or the quality of our loan portfolio, that's not the case.

What was the next one?

[Joanna Filipkowska, executive]

How will you adjust your strategy?

[Cezary Stypulkowski, executive]

Well, the strategy, I think that what Marcin Mazurek has said that no recession has its own rules. So 1 thing is that it's pretty obvious that the demand for borrowing will be much less than we have experienced in first quarters -- first few months. So this needs to be addressed. The second issue is that the most -- and this is the -- I think the name of the game is how long it will last, how long we will experience that type of a situation where the economy is closing. And this is the situation that there will be some kind of relaxation, let's say, in June. One have to be a -- the situation will not return back instantly to the developments of first quarter of last year and first few months.

We know that there will be a massive repositioning in the economy, both the supply and demand side of economy will change. So I think that evaluation of the possible passes, which the bank can adopt, will be very much dependent on the -- on our understanding of what's going on in terms of walking out of this hibernations phase of the economy. And I think that, that's the major question. To be perfectly honest, we are studying a variety of -- a variety of scenarios. The most important factor from our perspective is what will be the revenue stream for the bank, where we will be able to continue relationship with our clients and generate revenues?

Answering to this question will be the most important. The second most important will be what will be deterioration of the quality of the portfolio? Third one will be -- and that's part the answer to the -- one of the questions. What cost measures we should adopt?

In banking, it's is pretty obvious. In banking, the name of the game is a number of people. So I would say, assuming that there will be severe deterioration, obviously, we will adopt in terms of the revenues and portfolios will be under a huge pressure. Obviously, some measures need to be adopted. Though one have to be fair, much depends what will be the return to the semi normality, that means how much time it will take for the bank to return back.

Our services are needed. Our services are being delivered during the course of the hibernation of the economy. We operate now as almost intact by the developments. So I would say I'm reasonably optimistic that there will be obviously the new opening and the new reality post return back to -- of the economy to the normal activity. But there will be significant structural changes, which will impact some clients with the result of the portfolios. There are some, I would say, some dose of optimism in our institution.

One of the factors is that we are very well positioned with e-commerce clients, which definitely perform better. There are some areas where we'll have to be prepared for the impact in the consumer lending, which was already, I would say in the first quarter, slightly lower than the -- during the course of the previous year. And my opinion is that post the disease development, are even under huge -- more pressure. It will not recover at least for the next 2 years to the levels which we have experienced.

And it was a very remunerative product for us. Why? Because I think the behavioral patterns and spending patterns of clients will change, that will have impact on the ability to -- or the appetite for this product. On the other hand, we are observing significant inflow of customers' money, and customers are more in a saving mode than spending. So -- and it will last for at least the course of this year and potentially also part of the next year.

Should we adopt very radical cost measures? The answer is no. The Polish banks, and it's not only mBank, operate with a cost/income ratio of 42% in the normal circumstances. So we are -- we don't have that much of effect comparing to our colleagues in the west or rivals, and I have to say that needs to be well-managed with a sensitivity not to destroy the structures and organic strengths of the organizations, and we have to be very intelligent addressing this issue. We are adopting certain measures right now, also in the context of moving the bank into the new head office.

But I have to say the prerequisite for any type of exercise in this respect is better understanding what will be the income inflows during the course of this year and next year.

[Joanna Filipkowska, executive]

Another question from Tomasz Noetzel. How much of your first quarter increase in cost of risk comes from IFRS 9 model update? And how much from assessment of your exposure is more vulnerable to virus?

[Andreas Boeger, executive]

I can give a quick answer to this. We're not giving this in detail, but you can say it's roughly 50-50, out of the PLN 141 million, and roughly half each; so half Corporate, half Retail.

[Joanna Filipkowska, executive]

We have also several questions from Marta Czajkowska-Baldyga from Haitong. What were the assumptions behind the increased cost of risk? Was it the result of a revision of the macroeconomic assumptions or only a review of the financial standing of clients?

[Cezary Stypulkowski, executive]

Both. This is the reality that you address both sides. And I think I tried to explain that part of that is sort of the regular review. And I think Andreas has said, more like 50-50 balanced between 2 approaches. Andreas, do you want to add?

[Andreas Boeger, executive]

Yes. So what we did on Retail is -- well, the macro assumption, we did not work with a completely new macro model. But as I said, within the models, you always have stress scenarios. And we actually looked at the stress scenario and then put the full weight on this. This is how we came up with the Retail provisions. So this is actually, call it, the IFRS 9 model effect. And the other thing is exactly what Cezary has said -- was saying. We looked at some names and then we looked at what potentially might happen in also some sectors. And then we proactively actually took some reserves against it and also put them in stage 3.

[Joanna Filipkowska, executive]

Another question from Marta. Can you provide the credit holidays or payment moratorium request both in terms of number of applications and in percent of mBank's loan portfolio for Retail and the semi split.

[Cezary Stypulkowski, executive]

Andreas?

[Andreas Boeger, executive]

I think we're not giving out these numbers currently.

[Joanna Filipkowska, executive]

What is the demand for lending products in different categories in April?

[Andreas Boeger, executive]

I think we talked about the first quarter, not about April.

[Joanna Filipkowska, executive]

Okay. What is the outlook...

[Cezary Stypulkowski, executive]

But under the under the pressure.

[Joanna Filipkowska, executive]

What is the outlook for operating expenses? Is there room and ambition to cut costs? I think we also...

[Cezary Stypulkowski, executive]

I would say there is no ambition to cut cost, it's to manage the bank in the manner which allows the bank to grow and to generate revenues. We don't have a structural issue. We have -- we are able to manage, I would say, towards -- as I said, towards reasonable spending under the circumstances. That's the mantra for today. But the prerequisite, as I said, is how much revenues we'll be able to continue to generate.

[Joanna Filipkowska, executive]

We have also some questions from Jovan Sikimic. The first one. Your loan growth outlook for the sector is quite bearish for 2020 and '21. Do you assume here any positive effect from BGK or PFR?

[Cezary Stypulkowski, executive]

Mr. Mazurek, you put this 20% downgrade of the growth rates for the lending. If you can answer the question, at least the first part?

[Marcin Mazurek, executive]

It's kind of important element of forecast for lending in terms of its arresting of the growth in unemployment rate. So that obviously helps the lending on the consumer side. In the corporate sector, the PFR activity is going to mostly provide firms with activity. And to be honest, in current times, not many companies think of expanding the activity right now and not many of them thinks about investments. So it's quite natural to think of falling demand for credit.

[Cezary Stypulkowski, executive]

I very much stand with you, I believe that people are focusing on defensive measures. I think that the companies within the -- were in good shape, I think, unless there will be no takeover opportunities, which will emerge only during next year. I don't believe that there will be much of that type of activity this year.

And obviously, there will be some winners, which potentially can approach the banks. But I think that there will be a -- that the lending will be under huge pressure and will be subdued.

And PFR, BGK. As I said before, PFR money are very valuable because this is semi equity for people who are in the worst shape. And many of the businesses which are under the pressure, I would say from the customer's perspective, the product which they deliver or the services they deliver, there will continue to be demand once people return to the normal life. So this is not the situation that they are -- they have structural problems.

As a consequence, that definitely will help a number of clients. There's still a reason that mBank has been so much involved and we so much -- we developed a lot of resources to help PFR to distribute this money, which is underway right now. This will have impact, obviously, on the overall default -- I would say, rating of the clients, which is a positive; and the second, BGK money, definitely now, this is something that has been already tested in the past.

And the elevated guarantee helps. So answering in more generic terms, I believe that these 2 measures definitely, positively, will impact the demand and the ability of the banks to lend money.

[Joanna Filipkowska, executive]

Great. Another questions from Jovan about cost of risk. Can you quantify only the additional COVID-19-related risk provisions in the first quarter? And also, there was pretty much sharp growth of provisioning for stage 3 loans. So is it not COVID related, right?

[Andreas Boeger, executive]

So as I said, the pure COVID related is PLN 141 million amortized cost, PLN 7 million fair value. It's also in the notes of the financial statements, note #3, you can read it. And part of this, what was done is also putting some clients into stage 3, some exposures. So it's a mixed bag. But also includes this. I think the NPL went up by PLN 290 million roughly in the quarter, and part of this is also COVID.

[Joanna Filipkowska, executive]

And the last question for the moment. A question about the so-called small z o.o. What is the impact of small z o.o. on other operating expenses and on other -- on interest income in the first quarter of 2020?

[Andreas Boeger, executive]

Other operating expenses, I mentioned this when we looked at income, part of the minus PLN 15 million. So PLN 4 million and a bit, I think PLN 4.1 million was other operating expenses on this. And when it comes to the part of NII, we have at the beginning or at last -- at the beginning of the year, when we talked about Q4, said it could be, I think, then we said up to PLN 90 million. Let's say, PLN 70 million to PLN 90 million effect from small z o.o. The effect in the first quarter was a bit less than PLN 20 million, which is not shown in NII. So NII would have been higher by a bit less than PLN 20 million.

[Joanna Filipkowska, executive]

So at the moment, we don't have any more questions online, so I think we will finish here. So thank you very much for your attention, and goodbye.