mBank SA

WSE:MBK

Earnings Call Transcript 2020-Q3

[Operator]

[Interpreted] Good morning, and welcome to this conference presenting the results of Q3 2020 of mBank Group.

Today, as usual, we have CEO, Cezary Stypulkowski; CFO, Andreas Böger; and Marcin Mazurek, our Chief Economist.

Over to Cezary Stypulkowski.

[Cezary Stypulkowski, executive]

[Interpreted] Good afternoon. Q3 seems to be a time of stability after spring. It seemed so until recently. In terms of the results, as expected, our revenue was solid. Although NII was lower than before under the mark of PLN 1 billion per quarter, our net fee and commission income is quite good and growing steadily. Under the circumstances, the bank maintains a strong bond cost regime. Our cost income ratio, which is an important indicator for the bank, has remained stable despite all the weaknesses, which we have seen in the top lines.

Our net profit was around PLN 100 million, perhaps nothing to boast about, but that is partly due to our policy of setting up provisions against the legal risk of historical portfolios of Swiss franc loans. We will speak about the volumes later, but the volumes have remained flat, growing slightly year-on-year, in particular, in our retail business.

When it comes to corporate banking, we are expecting the impact of the pandemic across the board on the market plus the helicopter money offered by the government. Our Swiss franc portfolio is dropping 7% down year-on-year. The production of mortgages bounced back to the relatively high level we reported in Q1. We are well on trajectory.

Our NML consumer loans are doing less well, but that's true of the industry at large. I think it will be rather difficult to go back to the pre-pandemic levels because consumers are concerned and less willing to use consumer loans at this point in time.

The key ratios are looking still good, specifically our capital position, our LCR, which is very high. We have high liquidity. We are setting up provisions. Our guidance this year was 150 basis points. We are now at around 100. We'll see what happens in Q4, but I'm sure we will hit the target of 150 at the most.

Other key developments. Our bank participates in support schemes for customers, including the money offered by PFR as well as the credit moratoria. At this time, credit moratoria are expiring in mid-October. And to our surprise, clients are paying back the debt more than we even expected. You have details of the portfolio subject to the moratoria on this slide broken down by type of loan and by tenors. But according to our weekly reports, the latest came on Monday, all the data suggests that customers are, again, regularly paying the loans after using the credit moratoria on the payment of interest. The number of applications to extend the moratoria is quite low. We have about 100 clients still using the statutory moratoria.

What we are quite proud of and what confirms the profile of our bank is that, when it comes to the distribution of PFR money, we channeled about PLN 6 billion of grants. But if you look at the number of applications processed by mBank, those represented around 20% of the total, which means that our customers, specifically SMEs, quite diverse and digital. All that shows that the bank is a convenient choice for our clients, and that our clients are using the schemes offered. Of course, we don't know what's going to happen next from quarter-to-quarter. Hence, the name of the game is strong customer relationships now offering solutions acceptable to customers. We are growing at a good rate.

As you can see on this slide, this is the increase in our market shares, especially in retail banking, where we have a structural advantage, but also in corporate banking. As you can see, looking at the numbers, our balance sheet figures, our customer penetration ratios are improving. On a more technical note, we now allow noncustomers to access customer finance under the PSD2 umbrella. We are expecting this to be a new channel of customer acquisition. We believe when customers get to know our offer, they will stay with us, and our experience shows that it's true.

As for innovation, we have been working with Super Ksiegowa, a company that's changed its name for 2 or 3 years now. We have integrated that this -- and the service offer to SMEs and also micro firms, which are quite digital. It is our significant advantage. We've also added more products in factoring at mFaktoring for small companies, in particular. So step-by-step, we have gained a very strong position among the newer SMEs. To conclude my introduction before I hand over to Andreas, who will follow-up with more granularity, we've been quite unhappy to see that our NII has dropped below PLN 1 billion. Fees and commissions grew 12%, almost 13%, year-on-year and perhaps less quarter-on-quarter with additional volumes, though we are under pressure. And the bank took a very reasonable position last year, even before the COVID pandemic in anticipation, rather of the expected tensions elsewhere. The increase in fee and commission income did not offset the attrition of NII, of course, but I do believe that the proportions are quite similar to what more advanced banks are reporting.

We have been reporting this page in green quarter-after-quarter. Now there are some red flags on this slide, especially when it comes to our return ratios, who've been hit. But if you look at the cost of risk, it is now at around 100 points. And a new line we've been reporting since last year, provisions for legal risk related to our FX loan portfolio. And this quarter, we wrote down nearly PLN 187 million. So we are on a trajectory of relatively high provisions, which does not imply actual payments. We are not paying large amounts. But if you have more specific questions on this topic, we'll take them later.

So our profit -- net profit this quarter was PLN 100 million plus, which is well below our aspirations, but driven by the conditions we are working under.

On the balance sheet, as I have said, in retail, we've seen an uptick in corporate banking. We've seen a slight dip year-on-year and quarter-on-quarter. In deposits, we grew more than 20%, which is largely due to the fact that there's a lot of money out there, both public money and private customers deposits. Our market share increased significantly year-on-year. In deposits, we now report a 1.5 percentage point increase. Clients understand that we are convenient in transactionality and -- besides customers are reallocating their savings. It's good to know that customers bring the money to us. Although when it comes to our prices on deposits, we are not very competitive. But I can also say nobody is competitive these days.

We pay the bank tax, of course. It's not reported on the slide, but I understand, Andreas will discuss that. Yes, taxes and the group balance sheet guidance. That's a significant charge, a public levy. And when it comes to the provisions for legal risk, we are out on track to the waters. And when you look at court judgments, there's little clarity out there, partly due to the fact that these developments are very public, so to speak. There's a lot of uncertainty about the amount of public levies and -- a little from Andreas, over to you.

[Andreas Boeger, executive]

[Audio Gap] of which we are reporting, so -- a switchover of translation, it seems, because I'm hearing myself. So sorry for that.

So let's go on Page 10. Where you see the development of our loans to customers. The loans in the quarter were increasing by roughly 1%, given an overall year-over-year PLN 5.3 billion -- sorry, PLN 5.13 billion increase, which is roughly 5%. What happened in the quarter is that the demand for corporate credit was, on the one hand, lower because our clients are, in general, flooded with cash. Being flooded with cash means that we then have a lower credit line utilization. But on the other hand, our corporate clients were also more reluctant to invest. And also, corporate clients, that's the good thing of it, keep repaying the loans. That's what we will then see on new lending because new lending wasn't that bad, but they keep also obviously repaying, which is a good sign about their credit worthiness.

Different picture on the retail side. Retail loans were still growing. The growth on retail is roughly 3%. That 3% is mainly coming from mortgage loans, which were adding PLN 1.3 billion in the quarter, but also non-mortgage loans are back and they were adding PLN 500 million.

It makes more sense to look at the next slide, with the new lending business because that's the dynamic you would want to look and better understand. Of course, the good message is that the new lending business for retail actually rebounded in the quarter.

Let's first start with mortgage loans. Mortgage loans were anyhow not that heavily hit after the lockdown or after the first big lockdown in April and the month afterwards. But we still had a steady decline. And I was also explaining this last time that mortgage loans have like a 2- to nearly 3-month time delay in terms of the demand reacting to certain situations. Mortgage loans are back with the sales -- with sales of PLN 2.1 billion. Also within that quarter, because we've also discussed that these quarters now in COVID times, are not uniformly as one block. You also have to look at the month in between. So for example, the sales of mortgage loans in September was stronger than July. So they're on upward slope, and that's in total more than PLN 400 million more than in the second quarter.

Non-mortgage loans, which were the hardest hit. They were very hard hit in starting from -- beginning of mid-March when the lockdown happened. But then particularly weak in May -- but from the April, but then starting to rebuild over May, June, July, August and September. So we have added more than PLN 600 million in new sales compared to the second quarter. We are at PLN 1.8 billion. But as Cezary said, the return to pre-COVID levels in non-mortgage loan sales will take a significant amount of time. So it's good that we're back at a reasonable level. But seeing, for example, the PLN 2.7 billion we nearly had in the fourth quarter 2019, that will still take a long time.

Corporate loans, I've already said, the new sales actually looks good. What we have in corporate loans that leads to the lower carrying values is the low utilization of credit lines and actually clients to repaying their corporate loans. Good news also on leasing. Leasing with a strong rebound plus 72% more contracts, and that's also backed by underlying volumes. Let's look at deposits. Deposits, one of the most dynamic fields this year. The good thing is that the acceleration of deposit inflow has actually stopped in the third quarter. It's always going to be deposit rich. It's good to be liquid. But having an intake of PLN 25 billion in the first -- in the year, so in the last 12 months, it's actually too much to actually make the money work in the end because our loan-to-deposit ratio still remains at roughly 78%. So it was important to manage the inflow of deposits down. It's a bit more than 1% in the quarter. Corporate deposits went down. Retail deposits went up. What is important here is if you look at retail, we have it here on the slide. The growth was in current and savings accounts and term deposits went even down by more than PLN 2 billion. And also within corporate, which anyhow was lower deposits, the term deposits diminished by PLN 4.2 billion, which is 39% less. So we have 39% less term deposits in the third quarter -- end of the third quarter than what we had at the end of the second quarter.

Let's look at income. Income, obviously, as Cezary has said, heavily affected by the 140 basis point interest rate cut. We, in total, had over the full year starting from March, if you look at the income dynamics. Let's look at core income for net interest income and net fee and commission income. The core income went down 2.7% in the quarter, and it went down by 4.5% year-over-year. Strongest negative impact on net interest income with nearly 10% less over the full year and 5% less in the quarter.

I think for this, it makes sense to jump briefly into the appendix. So if I could ask that you see Page 27, please, Joanna. Because this is the -- I think the best way to explain what happens and what we are actually doing against what's happening. So on the left side, you see the net interest income structure obviously heavily affected, minus 10% in the quarter, minus 19% year-over-year. That's mostly driven by the interest rate cuts. What we can do here in order to counter this is to work on the margins, and we're working on the new sales margins on retail and corporate business. But the majority of the management actions actually comes on the interest expense side. These bars are much smaller. This is why the magnitude of the percentage savings are not that big in zloty terms.

But if you look at what we've done vis-à-vis the last quarter is the interest expense went down by 42%. We heavily limited the outflow of cash that we pay on deposits. It's only PLN 44 million in the quarter, and I can now already tell you that the fourth quarter will also be lower than the PLN 44 million. And also the money we pay on the issue of debt securities, we have repaid the euro EMTN in amount of EUR 460 million end of September. So that figure will also go down, and we will further work on the measures we can actually do in order to steer our interest expense. So let's go back to the main page on income, please. The positive side of income is net fee and commission income, where we have done substantial steps already last year in order to increase the overall basis and the potential for this. This year, obviously, the positive effect, and we've spoken about this in the last quarters, is the brokerage result. That's a this year effect, but other things were also part of what we have already done last year. And we're also currently further working on increasing the basis that we'll go into stronger net fee and commission income in the coming quarters and in the coming years.

As always, I mean, when we guide on this, the trajectory is at least stable to higher. It's not very easy if you look at every single quarter because these single quarters are nonlinear to some extent when it comes to, on the one hand, the cost that is charged, but also on the other hand to the income we are generating due to certain seasonality.

Trading result also up strongly. That's mostly the foreign exchange result. And you see a small one-off of 24 -- PLN 21.4 million on the gains on financial assets. That's actually the valuation of Visa.

Let's go over to cost. Next page. Costs in the quarter are slightly down by roughly 1%. Let's look at the overall cost picture. And then without BFG, it should take the longer horizon. So year-over-year, costs are up by 1%. And quarter-over-quarter, they're down by 1%. That still leads to a cost income ratio that is at 40.2% for the whole quarter. Without BFG normalized for the full 9 months, that's 42.5%. So still a very strong cost income ratio even given the backdrop of weaker income.

Maybe to go into three of the lines on costs, you see here lower personnel costs. That lower personnel costs is currently not a function of less staff, but mostly a function of lower performance-related pay we have. We will see a strong increase here in material costs. That's a mixed bag of things. Some of them strongly business related, like, for example, higher marketing expenses. Some of them are also related to what you will also see in the fourth quarter, the move that mBank will have to a new headquarter. So some of this is administration and real estate. Part of it is also what we show on the consulting costs, which, on the one hand, higher legal fees for Swiss francs. And on the other hand, larger pay for external professional services, which also, to some extent, still includes and -- but now also for this year covers the efforts that were done around the sale of the bank that were predominant in the first half, but now we have settled also the bills there. On amortization, I have said in the last quarter that the PLN 116 million was quite high. The PLN 108 million is a bit more normalized, but we have said that we will steadily go up also from there. So in a nutshell, cost under control. The guidance we gave for cost for this year are not to increase on a quarterly basis. We still stick to this, so I don't expect that the fourth quarter will be higher. It will be rather on the same level or maybe slightly lower than the third quarter.

Let's go to cost of risk. Cezary already said a bit about cost of risk, 98 basis points in the quarter, 126 basis points on a year-to-date basis. Cost of risk is lower than in the quarter before. It's still elevated on retail. On retail, this PLN 147 million also includes, to some extent, let's say, a forward-looking provisioning of PLN 42 million where we've looked at some of the clients and on behavioral aspects with some assumptions. If they come back from moratoria, et cetera, and we moved part of the portfolio into stage 2, which led to a PLN 42.4 million higher loan loss provisions for the retailer side. Otherwise, retail would have also been lower.

Roughly to say, all the, let's say, special COVID measures, which are, to some extent, the staging but which are also like adjusting some macro scenarios, et cetera, for the full year now sum up to roughly PLN 250 million.

Loan portfolio quality, basically unchanged. NPL ratio at 4.8% and 4.5% according to the EBA definition.

Last but not least, capital. I think what is very important, and that's also part of what I would say, the summary of that quarter is, what is very important is the crisis so far has obviously hit the bank when it comes to revenues. The efficiency is still very good, but we don't know what is ahead of us. So if you don't know what is ahead of you, the best thing is to go in with a very strong capital base, to go in with a very strong liquidity base and to also go in with a proper provisioning on loan loss provisions and also on Swiss francs. And this is what we have done, not only in the third quarter, but also in the first 9 months. And with this, we see ourselves well positioned for whatever is to come. And with this, I would hand over to our Chief Economist. So Marcin, please continue.

[Marcin Mazurek, executive]

[Interpreted] Good afternoon. It looks like, once again, the virus is in the lead in the economy. Things were looking good in Q3. Economic recovery was quite spectacular. GDP bounced back to, well, below 0, but still better than in Q2. Now it looks like things have gone wrong as the pandemic hit again, and we have new lockdowns. Consumers are reacting not just to new restrictions, but they are also self -- they are using measures of self control. So they are deciding to cut certain types of spending and staying home more thus spending less. And this will probably continue. Most likely, we'll see additional restrictions caused by the pandemic before the year's end.

What is the good news? The good news is that the labor market did not react much. Given the strong dip in economic activity, the unemployment rate grew little to 6.1% and has remained flat for 4 months. It doesn't look like it's going to grow much by the year's end. Our target is 7%. But again, that's the worst-case scenario. The government schemes launched thus far have protected the labor markets rather well, which is key to consumers. When the lockdown is lifted, consumers will be ready to consume once again and to make up for the lost time.

What about GDP in detail? Q3, our estimate is minus 1.8% year-on-year. We were expecting a better Q4. But again, quite unexpectedly, the new restrictions have hit. And so we are now expecting minus 4%, depending on the evolution of the pandemic, obviously. Clearly, nothing seems to be working for now. All the local lockdowns have not produced the expected results. Next year, we'll see additional risks given that economic activity is under lockdown, once again, in Q4.

Inflation. We still believe that inflation is not -- is out of the question and margin is breaking up now. The same goes for core inflation, although core inflation is falling from a high level, 4.3% last month.

Flipping the slide now. As for monetary aggregates, nothing new that we wouldn't see in the last 2 quarters. We have a lot of deposits in the system, unlikely that this will change lending. Both to households and corporates will probably drop further in the financial markets. When it comes to fixed income, the markets are calm, and there is additional pressure on yields. Given the global economy, the Polish economy, the rates will definitely remain very low for a while.

Question is what about credit risk? Let me reassure you, I'm not expecting additional credit risk in the Polish economy, even if government -- the government offers new schemes to additional sectors. The National Bank of Poland is active on the bond markets, as our other central banks, which will keep credit risk under control.

The zloty, I think we were overly optimistic. We would think 4.6 was the cap. The cap has been crossed, and I don't think the trend is likely to mount next year. The zloty weakened because of additional uncertainty and economic slowdown. In the mid-term, however, we believe zloty should appreciate from the current levels because the economy is very well balanced. We have a big surplus in the current account. There will be more money in the euro to be exchanged on the market. And when the pandemic is contained and growth rebounds, we'll see more demand for the zloty. To summarize, if zloty was to weaken, it's probably the time. Next year, we think the FX rate will bounce back to 4.3, 4.4 against the euro. Thank you.

[Joanna Filipkowska, executive]

[Interpreted] Thank you very much. And now it's time for questions.

[Joanna Filipkowska, executive]

We've received a lot of questions online. I'll try to group them, starting with questions about the NII.

[Audio Gap]

[Andreas Boeger, executive]

Okay. So NII and -- so in general, the net interest income for the third quarter, as I would say, a good chance of being the bottom, together with maybe the fourth quarter. And we will work ourselves out of there. The net interest margin itself might follow a quarter later, et cetera. We also have to distinguish between NII and NIM, but this is the bottom or we are very near the bottom.

[Joanna Filipkowska, executive]

Okay. So on Swiss franc. What drove higher provisioning on your FX mortgage exposure in the third quarter? Earlier, you have mentioned a view of your FX mortgage exposure on an interim basis. Does the higher provisioning in the third quarter means any changes to your provisioning methodology?

[Andreas Boeger, executive]

Yes. I can take this also. So what we do on Swiss francs is we have said we will periodically look at what we're doing and how much we're doing here, because the one thing is what inputs plug in and the other thing is also the methodology under which we work. We should not forget that what we have here is we have some dozens of final court cases and -- on which -- on those, you want to somehow extrapolate to quite a high population of loans giving only some observation points, which not all are also really reasonable. So that means the methodology itself should always be back tested. We have not changed the methodology, but that doesn't mean that we will not do this when we review it in Q4 because this is what we said we will do at least twice a year.

We have -- then we revisited some inputs. There are some inputs, which we clearly would do every quarter like, for example, foreign exchange moves, et cetera. But given some of the moves we have seen over summer and also given some of the uncertainty when it comes to inflowing cases, but also the dynamics of court cases that were very few still but in second instance against us, we decided this quarter to adjust two things. The one thing is, we, to some extent, upwards adjusted our probability of losing in court. And we, on the other hand, adjusted the number of people we expect to in the future, come and source. So the future population of lawsuits. These were the two changes.

[Cezary Stypulkowski, executive]

[Interpreted] If I may follow-up, I'd like to refer to what you asked in your question, your methodology, you said. What we are using is kind of guiding principles. At this point in time, it's very difficult to take the status quo and put it in a box of clear criteria. As Andreas said, we keep monitoring the developments following the same criteria. Although the criteria are being revised as well. So for a long while, I don't think we won't have a solid basis to take a more systemic approach in anticipation of some kind of resolution of the Supreme Court.

Based on opinions issued -- or to be issued by the National Bank of Poland, the Polish financial provisional authority, KNF, the competition protection authority will peak, et cetera. But the resolution will go beyond Swiss franc. It will define a legal principle, so they have to consider all things to be considered when it comes to the banking law. So that resolution will be quite relevant, and there will be many stakeholders participating in the process. For instance, some courts consider that credit agreements are unfair, and thus need to be invalidated, just because banks put provisions concerning FX rates. We use FX rates, but so does the National Bank of Poland. It's a common practice. Why is it just in the case of Swiss franc loans that this mechanism is being contested? I don't know. So there are many issues to consider, many, many factors.

Next question about costs.

[Joanna Filipkowska, executive]

[Audio Gap]

ratio of low 40s. We see our competitors reducing staff. What's your capacity to achieve cost base in 2021 when loan rates are weighting on NII?

[Andreas Boeger, executive]

Yes. So in general, the cost income ratio is the guiding principle. So that's very important to look at, and it's a good question. We want to keep the cost-to-income ratio obviously in the 40s, ideally in the low 40s and improve it constantly. For that, we have to look at the income side, but also at the cost side. What we are planning is to have costs increase at a very low and very mild rate, and that is already a strong cut to the plans that we had in the past. So you will to see costs not on an overall basis decreasing, but only mildly potentially increasing. The reason for that also is we're not managing a particular quarter and we're not managing even 1 particular year. We need to secure the basis for the future income of mBank to actually in the long run have a proper cost income ratio. We, as a bank, have always been focused on this. We are a tight ship when it comes to managing that. It will continue, but don't expect huge cuts, huge layoffs, et cetera. Expect a very disciplined mBank, more disciplined than in the past, but not an mBank that will actually work against its future by doing some short-term measures that will not pay off in the mid to longer run.

[Joanna Filipkowska, executive]

You mentioned earlier that 200 bps cost of risk could not be excluded. Have new lockdown restrictions made this scenario more probable?

[Cezary Stypulkowski, executive]

[Interpreted] Well, yes, I might have -- may have said that in Q1, not exclude -- I do not exclude that. But our guidance after Q2 was 150 basis points. And this is something we would like to keep up, and this is where we expect to stay. I don't think Q4 will see any particular evolution of that number. Of course, it's only the first days of the first -- the second phase of the pandemic. So quite likely, we may have to revise those assumptions. But for now this is my point of reference.

[Joanna Filipkowska, executive]

Are you speaking 2021?

[Cezary Stypulkowski, executive]

[Interpreted] Looking at what's going on, I cannot exclude it. I cannot rule that out. Although now after listening to Mr. Mazurek. From his perspective, it seems the mitigating measures and the flexibility in adaptation means that there should be no mass wave of bankruptcies, insolvencies. I may be more conservative in my assumptions. I think the mitigating measures do play a role, but they are also distorting the picture right now. We don't know how the underlying economy is operating. I think Marcin will agree.

It's also true of the headcount. Companies are trying not to lay people off, but they will come. If things will go as they are going now and the situation continues into Q1 2021, then the problems will be more massive. And 2021 may be different from what we expected.

[Joanna Filipkowska, executive]

[Interpreted] Going back to Swiss francs. Are you considering to offer settlements to Swiss franc borrowers?

[Cezary Stypulkowski, executive]

[Interpreted] I know that's millennium, is running this kind of initiative. It's a very difficult time, however, considering all the uncertainty also caused by some measures taken by public institutions. Most such settlements include NDA obligations, customers have to commit themselves not to raise other claims. From what I hear, this could also be contested. We'll see. I think we will be more of a follower following the suite of our peers.

Just several years ago, we considered a conversion mechanism. We considered putting away some money and offering auctions to clients, offering them certain options. But for other reasons that I explained, by then, we decided against this project. In general, my legal instinct, the instant of a lawyer tells me that so long as we don't have solid grounds, which could be provided by the resolution of 7 judges of the Supreme Court, we won't be able to really develop any kind of approach because anything we do could then be contested.

[Joanna Filipkowska, executive]

[Interpreted] Are you planning additional repricing of fees and commissions? If so, retail or corporate?

[Cezary Stypulkowski, executive]

[Interpreted] Well, we have been repricing for a while. We said services will have to come at a price. We said that 2 or 3 years ago, and we are quite consistent in that regard. We are running this review of this exercise on a regular basis. I'm not making an announcement right now, but we are regularly looking at the activity of our customers and the fees and commissions out in the market. So this is not out of the question, but we don't think there's much room for that.

[Joanna Filipkowska, executive]

[Interpreted] One of your big peers has announced FTE reductions today. Are you planning mass lay-offs? Are you considering a significant reduction of your branch net book?

[Cezary Stypulkowski, executive]

[Interpreted] No. As it is with the assumptions we have, that is a recovery in 2021, given our cost income ratio and given our branch network, which is comparably smaller than other banks, we are well positioned. We may want to reallocate human resources within the bank rather than impose mass reductions. But if the economy turns out to be under strong pressure and banks are still charged heavy public levies, we may have to consider such movements.

[Joanna Filipkowska, executive]

[Interpreted] Another question is customer activity.

[Cezary Stypulkowski, executive]

[Interpreted] One of our peers, that's Santander, they are in a different position. They have a very big branch network in small towns. We don't. So probably -- they are probably concerned with customers leaving branches for online banking. We don't have that issue. Our branches simply complement our core online and mobile activity, mobile first. So our network is quite flexible, easy to transform. We are in transition anyway. We are closing down a few branches, but we are not expecting mass changes, no.

[Joanna Filipkowska, executive]

[Interpreted] Are you expecting additional dividend restrictions imposed by the regulator?

[Cezary Stypulkowski, executive]

[Interpreted] Let's be realistic. I don't think banks will pay out dividends for 2020. HSBC's going to, they say because they had bad results. But under conditions in Poland, especially banks that have Swiss franc portfolios, I think the regulator will try to prevent them from paying out dividends. EBA has made some appeals, calls saying that this is not a good time to pay out dividends. It's time to retain capital impact. I agree.

[Joanna Filipkowska, executive]

[Interpreted] Mr. Stypulkowski, you mentioned weak demand for consumer loans. What about supply in mBank? Have you relaxed your lending policy in Q3? And what is your approach in Q4 for retail and corporate lending alike?

[Cezary Stypulkowski, executive]

[Interpreted] Yes, we did relax the policy in Q3. We have tightened the policy when the pandemic broke out first, but I think the top issue is demand. I'm more concerned with what is -- what we said before, what Marcin said, clients are unwilling to spend money due to uncertainty despite the strong labor market. The future is uncertain, so I don't think our lending policy is a major issue. But we are opening up our infrastructure to what we used to avoid that is lending to transactional customers, that was our mantra. But now with the new -- a concept of using account information services, when we get insight into the transactionality of customers, holding accounts with other banks, we'll see how it develops. But that's one of the pieces of the puzzle. It doesn't mean that we will be accepting all risks, but it does play a role when it comes to better access to the customer base of transactional clients. That's relevant for us, but it's in the bud, and we'll see how it develops.

[Joanna Filipkowska, executive]

[Interpreted] Could you comment on what NBP government -- Governor Adam Glapionski said about the risk of loss of the banking industry in 2021?

[Cezary Stypulkowski, executive]

[Interpreted] What could I say? The governor of the Central bank knows more than I do. So I have spoken on many occasions and said that the current setup, the regulatory setup of levies charged on the banking industry in Poland does not fit well with the economic reality, and I hope this will change. What the NBP governor is now saying, and he has a more holistic view with access to more information, only confirms my approach.

[Joanna Filipkowska, executive]

[Interpreted] You have a new service, mAuto. Have you been selling cars via mAuto? Are your clients businesses or individuals?

[Cezary Stypulkowski, executive]

[Interpreted] Honestly, I don't know enough. I've looked at it, but please be patient. We launched that service about a month. Ago, let's wait and see until early next year. We'll come back to you and tell you more. Well, my experience tells me it may not be very attractive to individuals.

[Joanna Filipkowska, executive]

One final question. Do you see continuing better trends in PLN mortgages?

[Cezary Stypulkowski, executive]

[Interpreted] The mortgage market will probably be better protected, more immunized. These are decisions people make in the long term. People expect to live the lives in their own apartment. So the question of this market declining possibly also for PLN mortgages, that shouldn't happen. The market should stay strong. And I think banks will be soon. The banks that are more likely to win that market are those that have strong processes to support the customers. That will be the competitive advantage in the market.

[Joanna Filipkowska, executive]

[Interpreted] Are you planning to sell NPL portfolios in the next 2, 3 quarters?

[Cezary Stypulkowski, executive]

[Interpreted] I cannot tell you. We have a new Head of Risk. Once he has found his base, he will decide. That's right.

[Joanna Filipkowska, executive]

Do you expect the regulator to materially modify its approach in the current environment?

[Andreas Boeger, executive]

So maybe I'll take that. I've read in the press that there is rumors it might go down. So what do we expect from BFG charges? We expect that to be on elevated levels. If they might really go down, I think that they really can at this point, not confirm. We think it would not be very reasonable to actually further increase them because the burden we have when it comes to BFG, banking tax and the overall, let's say, public levies in total on the banking system is, I think, the highest in Europe, and you have to look globally where it goes. So I think the best expectation is to roughly think it will continue the way it is, but there might be a slight hope that it might even go down.

[Joanna Filipkowska, executive]

[Interpreted] We had a question about the resolution of a panel of 7 judges of the Supreme Court. Will it be a legal principle? When will it be released? And if it's good for Swiss franc borrowers? Will it help them to get positive resolution in courts?

[Cezary Stypulkowski, executive]

[Interpreted] It's really hard to say right now. As I said before, this will be a very important basis looking forward. It's not just a matter of Swiss franc loans and borrowers. Once that becomes a legal principle, it will apply to many other areas as well assuming that given that banks use FX rate tables in agreements relating to FX conversion.

[Joanna Filipkowska, executive]

[Interpreted] With regards to mortgage loans?

[Cezary Stypulkowski, executive]

[Interpreted] Well, that opinion that's shared, that opens the door to something much broader. There is the basic mechanism of setting out of determining the market price of money, not just in Poland but across the board. I have been monitoring many court cases, and I realize that lawyers prefer to claim that those provisions are unfair because it's easier to do so. But contesting the fairness of agreements because banks used FX rate tables is not reasonable, in my opinion. So we are now talking about the fundamental principles of banking.

And then the question is, you have been assuming that an agreement may be declared null and void on that fail basis, what the banks are actually -- or what the courts are actually doing in some of their judgments, something we've been watching with the concern and setting up additional provisions. Even then, however, the question is about the principal available to customers over a period of time. The cost of capital and then the claims that could be raised by banks on that ground. So there are many factors to consider, indeed, and I think the process will take time. I'm not expecting any resolution in the next 6 months.

[Joanna Filipkowska, executive]

[Interpreted] Okay. These are all the questions we got. Thank you for being with us today. And see you, all of you, very, very soon. Stay safe. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]