mBank SA

WSE:MBK

Earnings Call Transcript 2022-Q1

[Joanna Filipkowska, executive]

Good afternoon, ladies and gentlemen, and welcome to our conference, where we will present the results of mBank group in the first quarter of 2022. The results will be presented by Mr. Cezary Stypulkowski, Chief Executive Officer; Mr. Andreas Böger, our Chief Financial Officer; as well as Mr. Marek Lusztyn, Chief Risk Officer; and the macroeconomic overview to be presented by Mr. Marcin Mazurek, Chief Economist. Cezary.

[Cezary Stypulkowski, executive]

Yes. Good afternoon. It's almost a new routine. Whenever we report on our quarterly results, we are focusing on operational results, and we are using a variety of wording, like fabulous, outstanding, better, better than the previous quarter because quarter after quarter, they are simply better, which I think is the outward confirmation of the business model, and our endeavors to lead to deliver on promise and to be in line with our strategy, which we have announced. And I believe that what the first quarter has confirmed is the overall strength of our business model and our customer coverage.

Well, we are realistic that part of our outstanding results is related also to the macroeconomic environment, specifically the interest rate environment, which we'll elaborate in more detail. But whatever we can say, the net interest income, which is partly a result of what's going on with official rates and our, I would say, our very good management of the balance sheet, which is, I think, in comparison to most of our competitors, simply the better.

What is worth mentioning is continued growth of our net fee income. This is not coincidental. This is not a 1 quarter event. This is something that's going on over the last several quarters. And I believe that it absolutely confirms the strengths of our customer relationship and transactional activity of our clients.

That obviously translating into a very attractive cost/income ratio. Well, that's the statutory result, but we will go into more detail and you will see the cost/income, which is sort of more balanced in terms of BFG impact. Costs have risen. That was expected. We will explain that in more detail.

So in this environment, we ended up net profit significantly above the previous year. And I would say, I think it's the highest net profit ever in the bank. We continue to provision against legal risks related to CHF portfolio. You know our stance very well. That has been expressed during our shareholders' meeting. Consequently, we are fighting on the legal front. But at the same time, we are experimenting with our clients' willingness to reconcile with the bank. Under the circumstances, there will be questions. Obviously, we'll respond.

The balance sheet, well, it's growing. I would say not -- I would say, under the circumstances in relatively active way. Note, though, 8% is below our 10% aspiration, which we assume in the longer-term perspective will lead to our customer base, specifically on the retail side, justifies that fact.

On the gross cost of risk, modest. If necessary, we'll be elaborating.

Plus something what stands for mBank, which is mobile, where we believe we are still acquiring that -- more customers. We have more mobile payments. We have a stronger transactionality and more transactions are being done on the mobile device.

I don't want to go too much into details on sort of ESG front. The most important message is that among the Polish peers, I would say, among the Polish corporates, our ranking -- whatever are the rankings at this stage and how more -- how much they are developed. But still, what we are proud of is that Sustainalytics ranks us as the #1 in the industry with relatively low risk. And that has been elaborated when we presented our strategy, but we believe that our starting position is very strong, and the focus is strong enough to continue to compete in this area and to be one of the reference names in the Polish market.

The Great Orchestra of Christmas Charity, this is the first quarter event. That is something that we are very proud of. This is our social responsibility. This is our strong involvement as the employees as well as the institution. We are very proud that basically 20% -- 10% of the overall revenues which Great Orchestra is able to mount during the event is being either contributions from our clients or from the bank.

And what is the, I would say, sort of the new event in the consequence of the conflict in Ukraine is the fact that we've been very active. And within 10 days, we launched the functionality on our app, allowing people really to contribute to the Polish Center for International Aid. And to the best of my knowledge, more than PLN 10 million has been generated by our clients with the [ microtext ].

There is a number of things which are important in terms of how we address the mobile most. This one aspect is constant improvement of our application, having more functionalities. And what is very important for us is to be on the top of the modern solutions, like electronic signatures, like implementation of e-ID, which I think is -- in fact, your new passport in Poland, our new ID. I will be [ the passing benefiting ] next week because I will -- despite the fact that I have all the cards, but I will be having this new ID, which allows much more and specifically, for younger generation, it allows us also to promote account opening -- basic features via contact through the mobile device and e-ID, which I believe will be important factor of our continued acquisition of younger generation clientele, which will benefit us, obviously, in the later stages.

What is important was the launch of the, I would say, new functionalities of PFM. As you may remember from our strategic presentations, I personally believe will be among the new big thing in banking within the next 5 years. This is our investment. We have launched initial, PFM, I would say, enrolling functionalities in 2013, '14. This is the new opening and -- and in the first quarter, we had some functionalities, but that's the process which will be continued over the next years. Please remember PFM being the next big thing in the functionalities, which the bank will be delivering.

And the continued upgrade of our solutions for the corporate. Corporate is, to some extent, [ limiting ] our success. On the retail side, we want to be equally good in terms of delivering the access to the bank via the digital channels. And it has been already confirmed, 70% of our new account opening is stationed remotely.

What was the event of the first quarter? And I just don't want to over steal, so I will pass on to Andreas Böger. This is our securitization transaction, which has been executed in the first quarter. And Andreas, I'll pass it to you.

[Andreas Boeger, executive]

Thank you, Cezary. I mean, definitely a highlight next to the business we're running is that in the effort of having up-to-date active balance sheet and capital management that is also capital markets driven -- and we have been the issuer of bonds for a very long time. We have opened the nonpreferred senior market in the green format last year, primarily eligible securities. But it's not only about traditional issuance, it's also about more going into the asset side and into the risk profile.

And with this we, for a longer time, we looked at securitization. And we were able to finalize this in the first quarter, which was obviously not an easy time with the war in Ukraine going on. But with a very reliable partner here with PGGM, a large Dutch pension fund, we were securitizing a corporate and SME portfolio in magnitude of PLN 9 billion. So the largest-ever securitization in actually CEE markets.

In Poland, it's also the first simple, transparent and standardized STS transaction and various other features, so like a significant risk transfer with the direct issuance from the bank in form of a credit-linked note. So a lot of firsts that were done. And here with really an exclamation mark, it gave us 60 basis points breathing space on the total capital ratio on the common equity Tier 1. And it will remain a part of the component of the box -- of the toolbox we'll be using for active balance sheet and capital management in the future. And this is why we are very happy that we're able to successfully place that at also a very good price in the first quarter.

I hand back.

[Cezary Stypulkowski, executive]

Yes. We continue to gain market shares on the retail side, both on the lending and on the deposit side. We've been disproportionate beneficiary of what has happened during the pandemic and after. And we believe that the process will continue. This is the result of a specific profile of our customer base, which have been targeted from the very beginning, and I have to say reflects to some extent the issues, which we have very much focused on during our strategic presentations.

On the corporate side, I think that we continue to be very successful. Though our focus has changed -- as you see, K1, which historically was the focus of the mBank, has been, to some extent, limited. We decided to be more focused on the middle market in Poland, and we'll be more selective when it comes to the big corporates. This strategy, which has been launched 5 years ago, proved to be successful. But we are keeping the portfolio at reasonable level. And we are, in fact, to be strengthening our cross-selling in this segment. But at the same time, we are in a, I would say, pretty successful, continued process of acquiring other clients, which are midsized and smaller.

On the mobile banking side, I think that the process, as I have mentioned, the only way is up, everything is growing. The share of digital channels in our side is growing. The initiation of transactions by individual channels is growing, with a stronger contribution of the mobile. So from this perspective, I think that, clearly, the bank is in outstanding position.

One thing which is worth mentioning is our very strong position on the BLIK, which is the, I would say, the quintessential confirmation of, I would say, mobile usage. This is mostly due to the e-commerce BLIK success and also in terms the new functionalities, which have been launched at the end of last year, which was -- which were the payments on the point of sale, which was on the Android platform. Here, we are #1 among the Polish banks by far. That means that our customers are using this like casual pay on the iOS devices like no any other bank. You have to remember that iOS only -- does not have coverage more than 10%. Almost all the equipment used in Poland is Android.

And finally, from my side, the key messages, which are straightforward, if you could pass through -- income growth, which is growing. Cost/income ratio, I would say, the dream of -- I would say, of all of the bankers worldwide. Net profit, significantly higher. Return on equity, what should I say? Self-explanatory. Growing balance sheet.

Well, the other issue is, I think which needs to be explained, and I will pass to Andreas, is our drop in the capital ratios, which is easy to be explained but still requires some comments.

[Andreas Boeger, executive]

Good. So maybe briefly, I briefly comment on the capital ratio [indiscernible] check in then later for this part of your presentation also. So capital ratio is decreasing here over time. You see this on -- with 310 basis points over the last 12 months. So actually, we have various drivers.

Let's pick out the 3 biggest ones here. On the one hand, we have -- indeed, still even though we had a securitization, we have more risk-weighted assets. That's one of the minor ones. Then let's not forget the hedge -- last year, in total, the Swiss franc burden we took was 3.7 billion net, which led to a loss of the full year of more than 1 million.

And on the other hand, as you know, we have a government portfolio in hold to collect and for sale. That's hold to collect and for sale. Government portfolio is actually mark-to-market, not against equity, but against OCI. And obviously, on the one hand, the higher interest rates are good for net interest income. But on the other hand, they also, in that portfolio, affect the valuations, and the valuations go downwards. And for example, in the quarter, that roughly also added or deducted another 40 basis points from the capital base.

I briefly go on with the highlights, but I will go more into details. But to summarize what is already said. So very strong income components. And next to NII, I think it's very important to stress the net fee and commission income, which is also on a record level here. Cost base higher, but cost base, I'll talk about this later, the year-over-year comparison, we start from a very small basis. It's better to look at the quarter-over-quarter. It's still up, but that's mostly HR costs and also depreciations or where we would [ like to ] spend the money. Also higher BFG, PLN 200 million nearly in resolution fund and nearly PLN 200 million hit on the cost of FX loans here on the Swiss francs, still leads to PLN 500 million of net profit with a net interest margin of 315 basis points. So very strong increase here. And a return on equity of 15% and respectively, 23.7% on the core business.

With this, we can move to the Swiss franc part on Page 12.

[Marek Lusztyn, executive]

And on Swiss francs, we would like to highlight that in Q1, overall, our portfolio of mortgage loans in Swiss francs, they decreased by 4.6% quarter-on-quarter. So overall, it stands at below 7% of our overall portfolio of loans.

And what we want to highlight is where we started -- the pace of adding the new court proceedings in Q1 was significantly lower than in the beginning of 2021. It's roughly at the level that we have seen in Q4 but beneath -- below the peak of the previous year.

And quarterly cost of legal risk related to foreign currency loans recognized in the income statement of the first quarter this year amounted to PLN 192 million, which brought us to the increase of the overall coverage ratio to the 33.5% from 32.2% at the end of the previous year. So if we take only what we have set aside so far on that part of the -- book of the business, the total cushion set aside for the mortgage bank in Swiss francs reached almost PLN 6 billion, if you look at the provisions and the capital set aside.

And what we want to highlight as well is that in Q1 we concluded the pilot phase of our settlement proposals. The uptake on the customer side was relatively low. And we have to say that, in the opinion of the bank, has impact related to uncertainty about the tax treatment of the designed settlements, pricing, exchange rate of Swiss francs and the growing drastic differentials between the Swiss francs and Polish zloty and economic uncertainty that's related to the war in Ukraine.

If you look at the overall performance of our core versus noncore -- I'll hand back over to Andreas.

[Andreas Boeger, executive]

Good. Briefly, in the overview, I already talked about core bank. Let's summarize: PLN 700 million net profit. Net interest margin, obviously, is higher than in the overall bank at 3.28%. And I already mentioned also the return on equity of 23.7%, which really shows that this was an exceptionally strong quarter. And I will now go into more details and explain to you where it actually came from.

Let's go on Page 15, and let's first look at loans. So loans are positive, both on corporate and retail, roughly 4% quarter-over-quarter, 8% yearly growth. That's also roughly what we wanted to have in the strategy. So like 8% to 9% growth here.

The corporate growth is more pronounced in the first quarter. That's always the case in the first quarter because at year-end also client activity is also more towards paying back credits, low usage -- low utilization of credit lines, and then the business actually comes back in the first quarter. So it's better to look at the year-over-year. So year-over-year in corporate is a bit more than 5%. That's good growth here, especially given the fact that, as Cezary was saying, we focused on profitability last year. And on the larger tickets especially, we were very selective.

And you also see this in the Appendix, Page 44, you can see that, for example, even the K1 exposures year-over-year is the only exposure that is down and the rest is all up. So that shows exactly what has happened.

On retail, it's more than 2% up in the quarter, 10% for the full year. The 10% is also good representation of the long-term potential of retail. In terms of the components, PLN 500 million more carrying values on nonmortgage loans and PLN 1.5 billion more on zloty mortgage loans. So that explains -- so this PLN 2 billion explains the PLN 1.9 billion overall growth here.

And I think it's a bit more exciting to look at new lending, that's the next page, because there you can better see the dynamics behind that. Mortgage loans, let's start with this, a very interesting market because the overall market is in a downward trend on mortgage loans. We also see that but only minutely, so only 3% in that quarter and 1% down year-over-year, still on very high figures. Obviously, this means our market share has improved in mortgage lending here, but we also expect that the new mortgage loan sales will trend downwards. That's a function of interest rates going up, uncertainty due to the war in Ukraine, KNF has also put higher criteria. So there is -- there are various factors that will, in the next quarters, most likely leads to a lower production in the mortgage loans, but that's the next quarters. As you know, long term for mBank, with our demography -- demographic profile of the clients, it's a core product, and long term, this is going to be very positive because now we just know that our client base has inherent trend of just needing housing, and with this also looking after mortgage loans.

Let's look at nonmortgage loans, where we had record sales with nearly PLN 2.8 billion. That's the highest sales figure we ever had. Poland is strong, but also Czech and Slovakia had very strong non-mortgage loan sales with nearly PLN 600 million equivalent.

Maybe to give you our outlook there. Obviously, that's a record quarter. It will not be repeated like this. We'll be more stable, a bit going down maybe, but not as much as the mortgage loans. We still expect, maybe as an outlook on both mortgage loans and non-mortgage loans, that the overall balance sheet volumes we will have during the year, that they will still be growing. So we expect the mid-single-digit growth there and not a double-digit growth. But we'll have to see. There are various uncertainties out there.

Let's not -- corporate, good quarter here. Obviously down from a very strong fourth quarter, but 28% higher than first quarter last year. So this were good sales results in corporate, also at good margins. So that's the way we like to do corporate business.

When it comes to leasing, you see that it's down. That's interesting, what we've seen. And the leasing business is actually in good shape and also having good profitability. Our clients have actually seen a lack of available assets due to just scarcity, still with COVID and now also with the war situation in Ukraine. And due to higher interest rates, what we have seen, and these are numbers of tickets here -- and the number of tickets also behind here guide these volumes -- is that especially for the lower value items, clients have just chosen to pay things in cash. So our leasing is also seeing that the lower ticket [indiscernible] just went down.

Let's look at deposits on the next slide. I mean, the headline says it. We are very strong anchored on transactionality. You see that it's 3% up; 8% up for the full year. Deposits come back in corporate always in the first quarter because year-end is managed downwards. And in retail, we have actually seen a drop, a slight drop in retail deposits. The whole market has seen drops here, but we have gained market share. So the -- our drop here was lower than the drop in the market.

I think the interesting thing is about deposit pricing and deposit pricing going forward. And then we would really like to give some more insights. Obviously, the corporate side is something that is negotiated anyhow bilaterally, but the retail side clearly follows the general pricings. We have mid-April increased prices for retail deposits. So the interest we pay, we pay 1% for savings accounts above PLN 100,000; 75 basis points for savings accounts below PLN 100,000; 50 basis points for term deposits. So we have started to pay here. That's still on a lower level.

In general, what we see in the market for deposits is that -- what will be in the end paid -- and obviously, interest rates have evolved. I mean, at the end of the third quarter -- the first quarter, we only had 350 basis points interbank rate, now we have 525. But market has not found its equilibrium yet there.

Our position, we are strongly transactional. We have a loan-to-deposit ratio around 75%, and we have a liquidity coverage ratio that at the end of the quarter was at about 180, 187. So we are not forced to pay. In the end, we will, to some extent, also go with the market because we obviously want to keep the clients, but we're not desperate that we actually need to pay here on deposits. But the year will actually, once it progresses in time...

[Cezary Stypulkowski, executive]

What is worth mentioning is that I think over the last few years, our cost of funding even was the lowest among the peers.

[Andreas Boeger, executive]

Yes, which is exactly a testament of the high transactionality we have in the accounts.

So let's look at the revenue side. So on total income, I already said it before, it's the highest revenue we ever had in the quarter, the highest net interest income but also the highest fee result seen.

And let's look at the components. So the nearly PLN 1.5 billion net interest income, very strong increase quarter-over-quarter, but also year-over-year, 58% more. I've said we have been very low on paying for deposits, but interest rates were still on the rise. So that's a very good result. We think this result is repeatable also over the next 3 quarters. So for the end of the year, obviously, we'll pay more for deposits. But also in that quarter, we didn't have a full interest rate rises in. So it's a good proxy that this PLN 1.5 billion will be at least repeated to PLN 6 billion NII over the full year. And in general, maybe not at end of the quarter, but as we are right now with the 5.25% central bank rate, it can be expected that further interest rate rises here will have a more neutral effect on NII because obviously, the costs will then also kick in and weigh against the benefits we have here.

To go further on to net fee and commission income, obviously, the first quarter always bears the onetime fee we take for corporate deposits, for corporate amounts. That was PLN 37 million in that quarter. It was also above PLN 30 million in the first quarter last year. We always take this in the first quarter. Net fee and commission income always has some nonlinear effects also that are not fully repeatable in the next quarter. So this is a very strong print with PLN 600 million, but definitely above PLN 500 million should be a good proxy also for the net fee and commission income, which we want to grow further, but obviously, we are already at a very high basis.

Similar thing for trading income. Trading income at PLN 95 million, very high. That's mostly FX driven. I mean, obviously, we're in business here. We have to see that business repeats, but definitely not for the PLN 95 million, PLN 96 million revenue here.

So let's look at costs after we looked at income, and let's start with the cost/income ratio. What we have said, 38.7% cost/income ratio in the quarter. But if you normalize it, i.e., you take the high BFG and divide it by 4, you come to 32% underlying normalized cost/income ratio. That actually is very strong, especially also given the fact that, what, BFG is nearly PLN 250 million. You see it here with the 2 top bars.

On the cost stack, we expect BFG to be around PLN 400 million this year. And last year, it was a bit shy of PLN 230 million. So that's a very strong increase. But even with that very strong increase, as said, the cost/income ratio, normalized, is at 32% here.

Let's look at the further cost drivers, start with material cost. Material cost similar to the last quarters. Some change in the mix. You see it in the results actually. So there is a bit of a higher -- or there is a substantially higher cost for real estate and administration, but some lower costs or other dimensions. And against the -- year-over-year against the PLN 147 million in Q1 (sic) [ Q1 2021 ], I mean, that was a very, very low print. I think it's on all of the dimensions, it's actually an increase, but it's even a small decrease quarter-over-quarter.

The strongest increase you see on staff costs, so personnel costs, went up. That is a function of, on the one hand, still higher FTEs. You see this on the right side. On the other hand, it's a function of salary raises that we have done. We didn't do salary raises like same rate for everybody. It was a more individualized scale. But especially also in the lower salary ranges, we did some significant salary raises, and that is what you see here. And it also includes a higher performance-related pay. That was actually quite low in Q1 last year, and that also explains the differences here on this side.

Amortization is also up. That's what is to be expected because we further have invested. It was lower in the last quarter, so year-over-year up by 4%.

Maybe important, what is the cost outlook because the areas before I have said, we're clearly in an inflationary environment. What is the outlook here? We will have higher revenues. We'll also have higher costs. So costs will definitely increase. I think it's fair to say that costs will definitely increase double digit even in absence of the BFG effects. So if you take BFG out, most of the costs over the full year will increase by double digits.

And with this, I hand over to Marek Lusztyn for the risk parts.

[Marek Lusztyn, executive]

Thanks, Andreas. So on the cost of risk in Q1, we have seen net impairment losses and fair value changes lower than equivalent [indiscernible] PLN 20 million. As you can see on the right hand side, there is a bit of a shift between the segments. It is not due to the deteriorating asset quality, but it's rather in particular to the [ demand in ] the non-core segment. It's adjustment of the model parameters, primarily to a more conservative macroeconomic scenario that we have highlighted. In this situation, the portfolio's absolutely impacted because of the war in Ukraine [indiscernible] on the economic.

Overall, the cost of risk from retail portfolio went up from 70 basis points to [ 102 ] in 1 here -- in Q1. But I would like to underline at this stage, we do not identify any material threats to the asset quality. And we still maintain our midterm target for cost of risk that we have communicated in the strategy. We are creating that basis for us.

As it comes to the 2022, while we don't identify any material threats to the asset quality, we at the same time, see that the current interest rate environment, plus macro plus geopolitical complex -- we cannot exclude that some individual [ problems ] made on the risk in some issues in [indiscernible]. But at the same time, we would like to underline that in the credit worthiness calculation at origination, we have included various regulatory and prudential buffers when calculating the credit worthiness. And at the same time, what needs to be underscored as well, a very high pace of wage growth -- add the growth on, in particular, real estate prices in Poland. This, to a large extent, is seen by us as a quite a strong mitigating factor for the increase of cost of risk.

Going to the next slide, please. On Slide 21 you see overview of the loan portfolio quality. As you may see in the first quarter of this year, the nonperforming loans was strong. [indiscernible] stood at 3.9%, which was [indiscernible] better than the Polish banking sector [ at the edge ]. It was 5.7% at the end of February this year. And this is also [indiscernible] the 5% threshold that is set by the [indiscernible].

As it comes to asset quality -- that of the mortgage portfolio and [ cash out, as you see, ] NPL ratio of both on mortgages market and [ even other arm ] was [ tougher ] than the previous [ offers. ] And also the early indicators -- the KPIs, we [ pretty consistently ] have not seen indications of lower quality of the portfolio. It's [ served ] also, once again, one of the questions we have coming on the Q&A. So as it comes to the interest side, increases as of today, we see basically no impact on the higher rates. So no quality lag on the mortgages or [ on the ask ] lending.

Going forward to the capital and the liquidity position, Andreas has already provided a brief overview of impact from the capital. So at the end of March, the total capital ratio stood at 15.9%. And the Tier 1 capital ratio was 13.47%. That was well above the minimum requirements. On the growth path, 275 basis points above the minimum.

What exists [ into one ] of the questions [ in the slide ] with respect to the decrease of [ own balance ] in [ bank capital? ] It was basically driven by valuation on the bond portfolio that was measured [indiscernible] contrasted with the [indiscernible]. [ Internal ] components included the higher capital reduction [indiscernible].

Looking at liquidity ratios, you'll see that [indiscernible] demonstrating outstanding very strong liquidity position, both as far as LCR and [ net stable funding ratio ] is concerned, way above the [ Basel III ] requirements. Going forward, in the next quarters, we may still see some pressure on capital in higher rates, part of the valuation of the -- on the bond portfolio. We don't expect any [indiscernible] cost. We are in a different situation [ largely. ] [indiscernible]

And as we have demonstrated in Q1, we can also take proactively mitigating actions to manage our capital ratios as evidenced by the [ utilization transaction percentage ] [ .6 percentage points ] [indiscernible]. Also the decision of [indiscernible] in improving the capital ratios moving forward. We may also expect some pressure on capital [indiscernible] changes coming in the next [indiscernible].

[Joanna Filipkowska, executive]

Thank you. And now to [ Marcin Mazurek. ]

[Marcin Mazurek, executive]

Good afternoon, everyone. Welcome to macroeconomic part. So I hate to say that, but 2022 is going to be as complicated in forecasting as 2 previous years were, and Russian invasion in Ukraine complicated things further. It seems that the economy is going to decelerate a lot this year. But fortunately, we are falling from a high level of GDP growth. It seems that we are almost 8% in the first quarter, it's within reach. And with -- we are entering the slowdown with quite sized labor market. Unemployment rate is declining and is below the natural rate of unemployment. It seems that wages are not only supported by the imbalance of demand and supply, but also by gains -- substantial gains in productivity.

As you well know, a lot of refugees came to Poland. It is estimated that at least 1 million left and stayed in Poland. At least 100,000 found a job already. They may balance labor market more if they decided to finally stay in Poland for more. But before it happens, we see that consumers right now are under pressure, that the optimism is sour. We are at the levels we witnessed during the harsh COVID times. And indeed, as I said, economy is slowing down. We expect 4.8% GDP growth rate this year. But well, this number masks a downward slope in GDP growth, [ but ] -- and it also masked the fact that 2023 is going to be the worst year in terms of GDP growth. We are heading towards 0 to 1% GDP growth this year.

I said already about the Russian invasion in Ukraine, complicated things, and it also boosted inflation. Right now, after the April results, we are at 12.3% with respect to inflation. And yet, it's not the top in inflation. We expect the top to be reached during the holiday period, and it will be somewhere between 13% and 14%.

Now of course, the risks here are skewed to the upside. And the Central Bank is continuing the hiking cycle. Right now, the Central Bank rate is at 5.25%, and we expect the rates to reach 7% in the third quarter. It is highly likely that rates will begin to fall in 2023.

When we look at the monetary aggregates, we see, I would say, 2 worlds, 2 different worlds because in terms of corporate loans and deposits, we are enjoying stable deposit growth, and we see accelerating corporate loans. We observed here some kind of catch-up effect. It's going to last this year, but of course those numbers are going to turn a little bit lower in 2023.

As far as households are concerned, we witnessed a drop in deposits in the first quarter. It was mostly driven by withdrawals of cash in March as people rush to ATMs being afraid of war. We think that it was only a level shift, and it will not affect the trend of growing deposit volumes this year. But of course, the annual growth rates will be lower due to this fact.

And as far as household loans are concerned, we are decelerating. We are slowing down vividly, and these trends are going to be continued this year.

Turning to financial markets. We see a burst in bond yields. Almost the whole curve is very close to 7%. It is reflecting higher rates, high inflation and some worsening of credit outlook for the Polish economy. Of course, this worsening credit outlook is also reflected by PLN. Polish currency stays weak, and we don't see much room for spectacular improvement. The one milestone, which is important for exchange rate relations with the EU, and I think that it's important for the zloty and for the European Commission to accept Polish development plan. It would allow for, I would say, some sort of a [ consolation ] this year. But all in all, the prospects are rather bleak. Thank you.

[Joanna Filipkowska, executive]

Thank you, Marcin. Now let's move to the Q&A session. Some -- after some questions have been answered already, but let's start from the beginning.

[Joanna Filipkowska, executive]

So the first question is about the net interest margin. Should we expect growing NIM ahead? How do you see deposit costs developing? Is it possible to provide your current rate on deposits?

[Andreas Boeger, executive]

Maybe I'll start. Current rate on deposits, I think I provided on retail was the 100 basis points for above PLN 100,000 on savings accounts, 75 basis points below, 50 basis points for term deposits. And as I said, that the corporate side is the individualized debate here.

The NIM at 3.15%, well, NIM, obviously, that's a representation -- a quarter is always a representation of 3 months. But I've also said that best estimate is to actually take the PLN 1.5 billion times 4 for the full year. So there is still some upside in NIM. So it will not fall from here, but the upside is not as big, obviously, as it has been in the last quarters that we've -- as we've seen it.

And cost of deposits, we were developing. As I said, the market hasn't found an equilibrium yet what needs to be paid. We are not in a position where we need to pay.

[Cezary Stypulkowski, executive]

And that's exactly our stance. We can expect some brief movements, it can happen, not necessarily just to please the Prime Minister, but to reflect the market development and the market dynamics. I don't think we will be leading the show. But obviously, it will reflect what will be the dynamics and which banks will be moving up in the first round.

Second aspect, which I think is in the horizon, and that's my understanding and my reading of the Prime Minister's comment, is that the government is preparing to sort of join the race for the funds and to come with some retail products which will be more attractive than the current offering by the government. That will be a factor which now definitely can impact the market, which is, as all we know is overliquid -- significantly overliquid. In variety of estimates is almost is PLN 350 billion, PLN 400 billion of cash, which I think makes sense to neutralize and to employ.

As Marcin has said, in the first quarter, we had a significant outflow of cash from the banks. And the question is now how this money will return back to the banking sector and how they will be employed and hardly will be priced. So there is a number of factors, which I think as Andreas rightly pointed out, the easy go, if I may say, in terms of net interest income/interest margin is gone. This is much more sophisticated stage of the development. And any type of estimates which you can expect from us will be definitely much more nuanced than we have articulated in December last year or even in the first quarter.

[Joanna Filipkowska, executive]

Does the mortgage growth in the first quarter [indiscernible]? Is it possible to provide current [indiscernible] zloty-backed mortgages? Any update on loan growth dynamics?

[Marek Lusztyn, executive]

Okay. So to start with the decent floating rate question. Basically, what has happened at the end of Q1, beginning of Q2, there was a significant regulatory change with respect to the underlying thing -- standards Polish regulator imposed on Polish banks. So a large extent, end of Q1, beginning of Q2 was driven by unexpected, I would say, pick up of demand.

The share of the fixed rate mortgages, over time, is growing. We've seen this [indiscernible] [ in the last year ] [indiscernible]. As it comes to the current pricing, I would say, on top of my head, the fixed rate mortgage, which is basically mortgage with a fixed rate for next 5 years, spending on the quality of the client, loan-to-value in a number of different funds as of now starts at the prices, which is south of 9%, 8.7%, 8.8%, which are exceptionally well, which is roughly comparable with the rate, which is applied on the floating rate with the margin, with the current [ field mark of ] 5 [indiscernible], 6.3% or so. And so that also compares with the Polish government fund, especially that stands up the [indiscernible].

And the volume forecast for the sector is included in the economic part of the presentation. And as we have communicated to the -- in the strategies, given our favorable demographic profile, we expect on the [indiscernible] in that [indiscernible]. Only we expect that more clients of mBank keep on buying. They pay money. They pay money. This has been, like Andreas has said, we have the mortgages [ than compares ] to the overall action.

[Joanna Filipkowska, executive]

Thank you. How do you see fee growth dynamics ahead? Will you continue applying fees on corporate accounts?

[Cezary Stypulkowski, executive]

I would say -- there are 2 questions, basically. One is the overall fee growth, which we think over the last several quarters, we have been exercising double digit or even above 20%. I think that you know there is a limit. Under the current circumstance, we don't expect that there will be some kind of adjustment to the fee structure that much. Obviously, there will be interventions depending on the market dynamics and our ability to justify or to, I would say, steer the clientele. But we still believe that our transactionality will pay us off.

So the dynamics will be lower. I have to admit that the 27%, which we have exercised in the first quarter was above our expectations. We've been -- I'm not saying we've been [ sort of ] more flattish type of development. But definitely, that was exceeding our expectations and interestingly now with an exceptional brokerage, all other lines have been growing faster than expected.

I think the volumes will continue, and there is no reason not to believe that the volumes will continue. I strongly believe that we will be experiencing some growth, but I would say we have to understand better the dynamic second and third quarter. Definitely, it looks from today's perspective that it will be clearly double-digit growth, but with [indiscernible] up, that would be premature.

When it comes to the second part of the question, which is corporate charges on the money placed with the bank, yes, in intelligent form, we will be using this product -- I would say, fee to steer the inflows of money because, let's be fair, this is the very important aspects of this is the way the bank guarantee fund is charging the banks and very importantly, it's also a banking tax. And I have to say, these are the tools which we are using to optimize the position of the bank in terms of the excessive charges from the public sector. You want to add?

[Andreas Boeger, executive]

Yes, I mean I can briefly add, that's the year-end fee we take. We don't take ongoing fees for zloty amounts in corporates, but we take it for foreign currencies. And yes, that's for foreign currencies. We'll need to see what the rates do. As far -- as long as they are where they are, we will still continue. And as you were saying, the year-end fees currently not under discussion because that's part of the way of managing the bank.

And on -- maybe briefly on net fee and commission income, so I said we're nearly at PLN 600 million right now. If you look at the chart here that's on the screen, last year, each of the quarters, we were below PLN 500 million. PLN 500 million is a good target to actually have every quarter, and then we'll see where we go there. And that also mathematically leads to what Cezary was saying was up to double digits, but that will be a good target right now to look for.

[Joanna Filipkowska, executive]

Next question. On the new settlement based on the [indiscernible] how should we expect the latest provisions on new projects [indiscernible]?

[Cezary Stypulkowski, executive]

Yes. When it comes to the pilot program, I have to admit we are not satisfied. The response from my clients with the model which we have presented, you -- I want to remind you that the way we have approached our clients was with a pretty dogmatic stance that we don't believe that we violated the laws, and we will be fighting on this front -- be it to fight on the legal front.

But we believe that what has really happened is the -- there are the consequences of the macro economical situation in Poland leading to the significant depreciation of zloty. And we decided that our approach will be to contribute or to share the burden and materialize the risk of the foreign exchange with our clients. The response -- that is very unfortunate that the time when we started to offer the settlements, there were basically 2 major developments.

One was a rapid increase of the interest rate, which definitely was the prospects for the clients switching to zloty exposed them to, I would say, type of a decision-making, which is not [ true. ] I think that the interest rate differential for the zloty and Swiss franc loans must be in the magnitude of 5%, 6% right now. But this is something what, you know, makes a material difference. So that was one factor.

The second was that in the meantime, you had the conflict in Ukraine, which led to the further depreciation of zloty. So I think that it has created an environment of work which was less stable than expected or envisaged by ourselves. That was one of the factors.

Second, we have to be realistic. Our offer was less favorable to our clients than the proposal by -- set by the Chairman of KNF. And on top of that, one factor, which we have to recognize that the jurisprudence, specifically in the third quarter and the beginning of the first quarter, I'm referring to a few courts, favored, I believe, temporarily -- still believe that -- annulation of the contracts, which I think is a big, big mistake by the Polish courts.

You have read recently the statement by the [ stability court ] on this issue, I think, strengthening the position of the banking sector. And we still believe to know there will be a reversal of this attitude, but it has impacted the way our clients responded.

In the meantime, we had this class action case which encompassed 1,700 clients, which we have won. Obviously, it is not the final verdict, but the way the courts justified the -- its verdict, I have to say, very much resonate the position of the bank and the banking sector. And I believe that you know there will be more reflection still on the court side that this annulation of the contracts is not necessarily the way to address.

Obviously, we talk about the courts sort of in an Inshallah type of environment, specifically in Poland under the circumstances where the courts and the whole court and the whole system is in this way. But it has impacted us, our initial program. We still continue to experiment with the clients and to understand better the dynamics. And we approach them, different groups. Interestingly enough, there was a situation where, at the time when we offered initial settlements, we have been separately approached by almost 700 clients willing to discuss with us.

And based on the experience, we believe that we will be able to adjust our process and being able to check with the clientele whether there is space or a reasonable dialogue reflecting interest on both sides. I think that, that's one.

The second part of the question was?

[Andreas Boeger, executive]

So maybe on the guidance for the provisions. As you have seen, what we booked in the first quarter was nearly PLN 193 million. We expect that for the upcoming quarters, amounts in similar magnitude might materialize. And if we look at the reasons why, in general, the provision is to be booked and why it's also changing.

I mean, on the one hand, we have constant inputs on the loss rate. So on this quartile, loss given default, loss given in court -- what happens when we lose and what's happening in this scenario? On the other hand, what we have as a second one is we are actually seeing court cases not only in the methodology, but also really materializing. This is what Cezary was saying. And this materialization is currently differing from the average we expect in the methodology.

So that means that we also book additional amounts here because, as you know, from our very wide disclosure, for example, we assume that in the long run, 50% of the court cases will be lost. If we lose more at a higher severity -- currently, we're actually in the respective quarter [ booked at ]. So these are the 2 things, general update on the loss rate and also factually having cases in court materializing.

In general, there are also other components. I mean, we frequently assess the methodology. That's what we do on a quarterly basis, and we might also change the approach. On the other hand, we still have a still evolving approach to settlements. So we don't have a final settlement program. And clearly, I mean, that's the biggest elephant. We have the unsettled jurisprudence. So that's what in the long run will also change the -- the [ possibility of ] risk. But for the next quarters, a magnitude similar to what is in this quarter is maybe a good proxy.

[Cezary Stypulkowski, executive]

And what is worth mentioning that our current buffering is the magnitude of almost, what, PLN 4.5 billion, plus the buffer which we have on the capital side.

[Andreas Boeger, executive]

PLN 4.2 billion plus the PLN 1.8 billion capital allocation. That's, in total, PLN 6 billion.

[Cezary Stypulkowski, executive]

Yes. That's the money against this portfolio.

[Joanna Filipkowska, executive]

What's your view on government proposed [indiscernible] for the problem? And then repayment for the [ adjacent ] contribution to the [indiscernible] fund. What level of impact or contributions do you expect on the banking sector and for mBank? Do you see some offset from lower BFG contributions?

[Cezary Stypulkowski, executive]

Obviously, this is like for this separate media conference question. Well, there are aspects which, you know, have been -- I love this expression. I'm quoting recently the quote from Donald Rumsfeld saying, the known knowns, the known unknowns and the unknown unknowns. So I think that, you know, the more I hear what the government is delivering, there are more unknown unknowns.

But on the one hand, I have to say I have predicted what has happened. I want to remind some of the -- some people that [ I ] published an article in September last year basically predicting what's on the [ hor ] -- [indiscernible] what's on the horizon, what's on the tape. This is, as always, a big problem for us as an industry because it undermines the paradigms of banking.

Banking is about contracts and sticking to the contracts. And I think what we observed in Poland is undermining this concept. So I have invented many years ago this phrase, [Foreign Language]. And I have to say now, at the end of my professional career, I think that it's materializing. So that's the bad news. Principally, it's a bad news.

On the other hand, we very much respect the fact that there are clients in need. There are some situations, which are, under the circumstances with the inflation rate going significant up and interest rate hiking like never ever, at least over the last 20 years -- yes, some cushion for the client is necessary, and I would say twofold.

One is that there is this support fund, which I think that the banking sector is willing to support and is prepared to contribute. Obviously, this needs to be utilized. Just mounting the funds is not enough. We are very much -- that's the political reality in Poland that we are squeezed between something what I described as a right wing populism and the leftist puritanism. And it's not easy to operate being a banker in this environment.

I would say what the government has proposed still needs to be investigated in more detail by the banking sector. I think the [ instant ] approach, which has been presented both by the banking community and also by ourselves is that if this is a universal approach to each and every client, I think that it's not fully justified.

It needs to be calibered for people who really are impacted. I can imagine with the banking holiday, that the number of clients which will be eased from the payments for -- at least 1 quarter a year, they can place money and earn money on this. So that's something what is not intuitive. And I think that promoting that type of approach does not appeal to me in the -- from the professional perspective.

Okay, there can be some kind of political calculations, which I don't feel very -- I don't feel that I have a such level of expertise in this respect, but I think that it undermines contractual arrangements in Poland. This is not the first development. This is the same has happened on the Swiss franc portfolio. The same happens here.

When it comes to the vacations, I want to remind you, all the public, that the banking sector, during the pandemic, voluntarily entered the vacation with the clients -- has prepared the systems in a very short period of time, offered this. And I have to say, much more clients has exercised this opportunity than from the official sector legislation -- number of cases which have been used by clients based on the legislation, which has been adopted was much lower.

And the customers came back to the repayments, which is a very positive development. Well, there are a variety of estimates -- the one which I have heard, and I think that has been, [ to some extent, very correctly ] endorsed by the banking association was 8 billion per year. Well, they are ranging between, all together for 2 years, 16 billion to 20 billion. With our portfolio, we can estimate even from the macro perspective being the 10% contributor, we will then -- I would say, on the mortgage side slightly more than 10%.

[Andreas Boeger, executive]

[indiscernible] that question will impact everyone.

[Cezary Stypulkowski, executive]

So potentially, it will -- it can impact. Now as you know, there are consultations which will end up forcing the company to be proactive. So with the complexity of the issue and the magnitude of impact, I think that you know it's a pretty short period of time. But I think the banking association will come with some counterproposals to show what we believe as an industry, I would say, under the circumstances makes more sense.

The technicalities around this needs to be worked out. This is what we have heard yesterday from the government seems to be -- and that's positive, that this will be addressed only to borrowers who live in the apartments. So for the truly living needs and not for the investments. That's something that I think is a must from my perspective. That cannot benefit people who made investments in real estate.

So now to premiums, we are very unfortunate because we have this conference just a day after. We have reflected in the afternoon and the evening yesterday. And we are trying to find out why how to address this issue. One have to be fair. We are talking about capital for free. This is -- this resonates to some extent what the Polish government has said to the European Justice Tribunal. That, you know, there is no charge for capital. That is something that we fundamentally disagree. And I have to say if that is being presented as a solution for people in need, I think that you know bankers are very much prepared to be sensitive to this issue.

And I think that you know, the whole industry represents this type of approach. But when it comes to just benefiting people who want to make a better deal, I have to say, as a citizen, as a banker, as a lawyer, I'm fundamentally against.

[Joanna Filipkowska, executive]

Thank you. Also around this subject, do you see some more transition from the [indiscernible] to different [indiscernible]? Or is it likely to trigger a wave of lawsuits by borrowers? Any updates on potential key [indiscernible]?

[Marek Lusztyn, executive]

First of all, I hope that you can hear me better right now than at the beginning of the conference. We understand from the public side that in principle, it is a wish and expectation that the WIBOR transition that follows the benchmark regulation by the EU if possible. We see a number of operational difficulties related to a very speed adoption of the new benchmark rates. But in principle, as far as a sector, we are [indiscernible] and willing to assist in a smooth transition.

If the transition happens according to the BMR [indiscernible], it's pretty clear that the spread adjustment is to be obliged that should basically compensate for any difference between the old benchmark and the new benchmark and the overall view relative on benchmark platform has increased around those principles.

As it comes to the details of the proposal of the transition to be still cheaper benchmark, in the draft legislation that has been open to consultation as of yesterday, there is not much more details provided as it comes to the technicalities. So it is -- given lack of the details at this stage, it's for us difficult to comment on any quantitative feed of this. It's difficult for us to say where that [ premium zloty ] that was used in the last conference of yesterday comes from. And as I said at the beginning, if the transition follows the -- and BMR directed that [indiscernible].

[Cezary Stypulkowski, executive]

If I may add, because the part of the question was about, as I read this, is it likely to trigger a wave of lawsuits by borrowers. Well, that's -- I'm just referring to the article which I published in September. I think that under the circumstances in Poland and with the Pandora box being opened a few years ago on the legal front, and you can question everything. You can question the [indiscernible] question, by we're in everything.

And I believe that what has happened yesterday was that type of approach, that the way it has been presented, one cannot exclude that some people will go to the courts. That will be very interesting what will be the position of the courts because this should be a concern of the official sector, including the Minister of Finance and Central Bank and others because this undermines almost everything what we operate in the financial sector, including the government.

So I hope that it will not be the case. But after the lesson which I've got on the Swiss franc portfolio and the way the government has treated this and the responses of the Polish government to the European Court, I have to say I will not exclude.

[Joanna Filipkowska, executive]

Does your new [indiscernible] positive guidance take into account recent government proposals to support borrowers? Can you provide any sensitivity to [ government ] mortgages rate or extent of customers opting for holidays?

[Andreas Boeger, executive]

Obviously, [indiscernible] answer. Nothing is to be quantified right now on this. And everything we said before is obviously without -- to be clear, is without these government measures that were announced in draft yesterday.

[Joanna Filipkowska, executive]

This amount [indiscernible] [ 35 years? ]

[Cezary Stypulkowski, executive]

Well, we don't have at this stage for our decision making of our governance. But as I understand it, it has not been yet signed by the president, am I right? Has been -- or has been signed? Okay. I would say my personal view on the issues that you know, well, that type of institution will be helpful in the overall system. And this is another element of the, I would say, stability and security net in the industry.

So in terms of understanding of its function, I have to say [indiscernible] have to believe. This gives a lot of participants in the market lunch for free, because this is a situation where I understand the number of participants which can compete with us, namely smaller banks, the [ government ] banks, smaller banks, et cetera, potentially instead of contributing via BFG will have some kind of a soft landing in the case due to the potential participation of the bigger banks in the scheme. That is something that needs to be recognized.

And the second issue is that, obviously, there are still technicalities which are being discussed within the banking sector. And I have to say, have not been fully addressed, plus in our particular case, our major shareholder operating from Germany had some experiences on -- with that type of institutions, which are not that much, I would say, in line with what has been promised by BRRD resolution some years ago, which is a pan-European regulation. So I think that we will be processing the [ access, ] but we cannot declare at this stage that [ it cannot be stopped. ]

[Joanna Filipkowska, executive]

Three questions. The question is about [indiscernible]. [indiscernible] the driver of lower corporate income tax?

[Andreas Boeger, executive]

Yes. In general, corporate income tax in Poland is 19%. Active tax rate in the quarter was [ more 27% ] and is actually was higher in the quarter before. We always have some components that are non tax deductible. And a part of the loan loss provisions are not tax deductible, and [ E&P ] is not tax deductible but also this is [indiscernible] are not tax deductible.

And if -- what we expect for the full year is actually higher profit vis-a-vis last year. And these nontax-deductible items actually not rising as fast as the higher profit. We then need to average this out over the quarters under IAS 34. And this now, I have the figures, gives the effective tax rate, that's 28.2%. So still not [indiscernible] vis-a-vis the 37.1% we showed last year.

In essence, higher expected profits versus nontax deductible items under IAS 34 projected over the 4 quarters. It's a bit complicated, but that's it, in a nutshell.

[Joanna Filipkowska, executive]

How have the spreads for new mortgage loans developed in the first quarter?

[Cezary Stypulkowski, executive]

[indiscernible]

[Andreas Boeger, executive]

[indiscernible] regard. As far as the spreads for the new mortgages in Q1 were concerned, they were basically unchanged compared to the previous quarters. [ We side ] directions [indiscernible] to increase.

[Joanna Filipkowska, executive]

A question on the so called small piece [indiscernible]. Does the bank apply the early repayment clause to the mortgages if they originated after December 17 or the bank will need to adjust its policy to meet consumer protection of its operations?

[Andreas Boeger, executive]

Yes. We apply all the rules properly, and we don't expect additional amounts from this.

[Joanna Filipkowska, executive]

Could you please explain the asset quality impact from rapid rise in interest rates, especially on your unsecured retail bonds?

[Marek Lusztyn, executive]

Sure. I think I have answered that during the presentation already. As you see on the slide currently displayed, it's slide 21, as of now, we see no deterioration in the asset quality, neither on the corporate or on the retail side [indiscernible]. And we see also in the early warning KPIs, not indications of deteriorating assets [indiscernible].

On the particular, what needs to be underscored [indiscernible], together with the rising interest rates, also clients have seen significant increase of the income into the wage pressure that we see in the country for quite a few years. So those 2 effects are quite [indiscernible].

[Joanna Filipkowska, executive]

With such low cost to income ratio, what's -- what are you investing plans to use that excess?

[Cezary Stypulkowski, executive]

Well, we have to recognize that this level of efficiency is, to some extent, artificial. This is the result of the very rapid increase of interest rates. And we have to balance our costs in a very responsible way. That means that we have to -- as it is sometimes being said, what rises very fast can drop particularly fast, as we have experienced. We have operated for some time, right, namely 2020 and 2021 in big part, it affected the negative interest rate environment with the [ banking tax law ].

So I think, that you know, sort of the rapid growth of your expense base will be [ one ] response. That's the reason that I think that we continue to target 39% as a cost/income ratio, but we are realistic that 2022 will be exceptionally low.

But as I said, this is beside the fact of something what has happened rapidly in an extremely liquid market environment with the flood of money which has happened in 2020 and 2021, which ended up in a situation that lots of money have been placed with the banking sector.

And there were questions about the interest margin. I think that I don't believe that it will be sustainable. So we have to manage this in a responsible way, not just overspending like it has happened with the government at the good times, but rather to balance and to foresee also the worst times than we experience right now.

Of course, there is no doubt, banking sector is a beneficiary of this rapid interest rate growth in a situation where the market [ intrinsically is overly. ] And we didn't print the money.

[Joanna Filipkowska, executive]

What is the share of mortgage loans with installments higher than 50% of consumer income, that this seems to be the new criteria to [ speed ] the contribution that [indiscernible]?

[Marek Lusztyn, executive]

That is the proposed new criteria. We have a very strong view that, that is actually a wrong API to apply. Different banks calculate or estimate the customer income in different means and models. They are also calculated at the different policy impact. So basically, they adjust at comparable amount to different institutions and [ bank costs, bank cost time. ]

So we have provided very detailed technical comments on why we believe this is the wrong KPI to apply. And when we meet with the public side, we do hope that, that comments on the banking sector would [indiscernible] reflected in the final legislation on that matter and in that context [indiscernible].

[Joanna Filipkowska, executive]

Last question, about the pace of corporate loans. According to the NBP, there is a corporate credit war in Poland with new sales of credit departments growing by 7% from [ fourth ] quarter. Yet the new production of the [ partner plans ] of mBank fell by 19% in nearest quarter, according to [ SPC ]. What happened? Is that structure of clients or something else? Does the banking [indiscernible] match the overall market share drop for customer lending? [indiscernible] What is your position?

[Andreas Boeger, executive]

Yes. Yes. I think we need to look at Page 16 and then Page 15. I mean, 16 what I said was the year-over-year growth, 28%. So that's quite high. Q4 was just a very strong quarter. And that's new sales. It might also have been new sales of credit line, for example. So because what you see in terms of credit usage on the Page 15, I mean, you see that the carrying amount of loans that we have on the corporate side is exactly 7% higher than the quarter before. So we are actually seeing corporate credit expanding factually on our balance sheet by 7%.

That is also a part of new sales that happened some quarters ago or in [ January of lines usage. ] But we are seeing that expansion. That expansion also has to do with inflation. Because obviously, the inflationary print, for example, in April was more than 12%. That means for a given unit of production, also the monetary cost of this is actually increasing. And that means if our corporates, for example, would like to produce the same number of units, they actually need more funds for this.

And that's what we don't only see in our portfolio but what you'll see overall in the corporate sector. So we can, on the one hand, confirm there is a higher usage and a higher demand for loans. But like 1 quarter in terms of new sales is not the best predictor for what's actually happening. Slide 15 is the one that I think is to be looked at.

[Joanna Filipkowska, executive]

One question. Could you share what proportion from your PLN mortgage holders have got more than 1 mortgage?

[Andreas Boeger, executive]

We have looked into this. And as far as our client base is concerned, significantly over 90% -- 9-0 -- of our clients have just 1 mortgage with us. And as it comes to the number of clients that have more than 2 mortgages with us, it is less than 1% of our mortgages. So it's -- in the context of who's taking this for primarily residential purposes, most likely looking at the number of mortgages that [ it has ] -- also in the context of the demographics of our customers that we repeat so often, definitely vast majority, over 90%, is having just 1 mortgage with us.

[Joanna Filipkowska, executive]

Thank you very much. I think we covered most of the questions. If you have more questions, please contact Investor Relations. Thank you very much for your attention, and have a nice day. Bye-bye.

[Cezary Stypulkowski, executive]

Thank you very much.