mBank SA

WSE:MBK

Earnings Call Transcript 2018-Q4

[Joanna Filipkowska, executive]

Good afternoon, and welcome to this conference, which we'll introduce you to the Q4 results of the mBank Group. The speakers are CEO, Cezary Stypulkowski; CFO, Andreas Böger; and our economist, Marcin Mazurek.

[Cezary Stypulkowski, executive]

Good afternoon. We are reporting a successful end to last year when we moved back to a more representative growth rate of the bank's performance. Some highlights. PLN 5 billion of revenue. That's a symbolic mark, although part of that was generated by a one-off. But the recurring revenues are PLN 4,839,000,000, which is very good. The key driver was the net interest income, including very dynamic revenue and reduced costs of financing. And this trend has prevailed in the bank and is very likely to continue under the low rate conditions. As a result, the net interest margin has increased for a third consecutive year despite our significantly heavy Swiss franc loan portfolio. We are not very happy with our fees and commissions. We were expecting to hit the mark of PLN 1 billion, another symbol, we came short. But that was due to 2 factors. On the one hand side, as you know, as management was subject to an exchange of letters with the regulator, KNF, as a result of which we had to take a new approach to some of our positions. On the other hand side, the one-off. We sold future insurance cash flows revenue from group insurance products, and we reported a positive one-off gain, while our 2018 fee and commission income was affected. However, our key generators and contributors of fee and commission income were satisfying, and we believe that the trend should continue. Concerning costs, those were under control, reporting a minor increase. But the cost-to-income ratio, which is a key measure of our progress on our trajectory, that ratio was very good, under 45%, net of the one-off. The cost of risk was 78- basis points, very much in line with our guidance. Compared to our best performance, the cost of risk was slightly higher. But our loan book mix is also changing, with growing penetration in the K3 segment, small and mid-sized clients in corporates and the dynamic growth and the bigger share of consumer lending. The net profit, PLN 1,316 million, including PLN 188 million from the one-off. The bank tax was PLN 402 million. So all in all, in terms of our model return on equity, the ratio may not be fully satisfying but still high at 9.5%, net of the bank tax. Comparing apples to apples, comparing assets to our peers across the world, this seems to be quite good. The growth rate of our balance sheet items was very strong with respect to loans and deposits, the structure has improved. Our capital base is quite strong, typical of the regulatory environment in Poland where we are required to maintain what I believe is excessive capital. Another point worth raising is that we are the bank with the highest share of funding raised in the capital markets. We have reached out to the public European market regularly. Last year, we raised CHF 180 million, prepaid CHF 200 million, and we also raised EUR 500 million on improving terms, which also contributes in some way to our NIM. Convenience for clients. As usual, the bank has been making best efforts to stay on the forefront of innovation. As mBank clients and users of iOS devices, you realize that you can easily pay for shopping with Apple Pay. We launched Google Pay in 2017 and Apple Pay in 2018. But Google Pay is much more flexible when it comes to certain payment functionalities. Those of you who are users of Google Pay could pay with hearts, if you wanted to donate to the Great Orchestra of Christmas Charity. It wasn't easy with Apple Pay, not because the bank was not doing its best but because iOS is much less flexible, and Apple is also less flexible to integrate such interventions with their systems. We've launched video on-boarding, which is a new way to authenticate the customer's identity and open a bank account. I believe it is very functional. We will soon try to improve it even more. I've recently opened a new account with N26. And I must tell you that when it comes to customer convenience, experience and security, our process is much better and much more advanced. We are responding to peers, too, with mElements, which has been in business for almost a year. We held a special event to functionalities available from mElements, especially loans available to companies via Allegro and Dotpay. That's mostly addressed to e-commerce operators where we have a strong penetration. The product has been welcomed as a complementary service supporting authorization of transactions. We are working to position the bank with a focus on the raising of our customers' awareness regarding security. We are running social campaigns, and we are providing relevant instruments to our clients. Now the corporate platform offers the same functionalities as we first offered 18 months ago in retail, including authorization of transactions on the app instead of using tokens. Now companies can approve transactions directly on the smartphone, just as our retail customers can do. And the number of active users of that retail functionality has been growing steadily. I'm not going to go through the numbers on this slide, that's less relevant perhaps, let me only mention 2 points. Our double-digit growth rates in many of the balance sheet lines, I have said that mBank is back on track of growth after some hiccups in 2016 and also '17. As you may recall, this is when very strict requirements were imposed, including capital buffers on Swiss franc loan portfolios. So in 2016, we were managing our risk-weighted assets quarter-after-quarter, then the situation improved in 2017 where -- when we already had enough growth -- space for growth. We did not pay out dividends, but this was when banks that were not required to keep additional buffers of 4% hedged easier. But now our bank is back on track of stable growth without having to economize on risk-weighted assets due to very heavy and unexpected capital buffers. That's all from me. I should like to hand over to Mr. Böger, who will discuss Q4, but then we will move straight to your questions. Thank you.

[Andreas Boeger, executive]

Thank you very much, Cezary. So I would like to spend some time on Page #9 to explain, I think, the key features that should be explained from the full year 2018, so to go a bit into the income dynamics and also to explain what happened in cost. So if you look at income. Income up, recurring income by 8.7%, strongly driven by net interest income. So net interest income up by 11.5%. So that's PLN 360 million. But a certain weakness is seen in net fee and commission income. And I think for net fee and commission income, it makes sense. And you see it in our numbers, but I'll give you some summary of what was happening there because the story behind it is that the core businesses are still very much driving the net fee and commission income, and that various effects were just headwinds. So the first headwind, this is a headwind we basically installed by ourselves, is the insurance cash flows. And you will see that in net fee and commission income, in '18 line versus '17, PLN 86 million, you will see less. So total NFC has gone down by PLN 16 million, but insurance is PLN 86 million. You will also see that the fees from brokerage activity and securities issue is minus PLN 31 million. You will see that the distribution of funds, i.e. other products from external parties, is minus PLN 33 million. So that, in total, is a headwind of PLN 150 million. But this headwind of PLN 150 million, we basically made up with our core businesses. Because if you look at the core businesses, what happened in 2018, payment card-related fees are up by more than PLN 50, 5-0, million. Credit related fees and commissions are up by more than PLN 50 million. Fees from bank accounts are up by more than PLN 20 million. Trade finance up by PLN 13 million, but it is still 19%, et cetera. So you'll see the core business really going in there and especially offsetting the one-offs but offsetting also some things we had when it comes to weaker capital markets but also when it comes to current unclear picture, what kind of fees we can take under MiFID 2 and the KNF stance for this. So I think this is the revenue side just to explain this. So in general, with what -- even what the core business is giving into net fee and commission income, I think this is exactly the right direction. When it comes to cost, cost is up by 5.9%. So in zlotys, this is PLN 121 million. And I just want to summarize where the money went -- basically went, and it's hopefully a summary of what you've also heard at the last 3 quarters from us. So on the one hand, this went into higher staff cost. That's PLN 49 million out of the PLN 121 million. This is, on the one hand, higher salaries but also we have talked about expanding our branch network and et cetera, so that means also higher FTEs. I think in branches, we, this year, have employed roughly 70, 7-0, more employees than the year before. It also is more amortization, so PLN 29 million more amortization investment in the future, which basically was CapEx and now is amortizing. And we have PLN 43 million more in material cost. The PLN 43 million, I think, is very easily explained because, out of this, you have PLN 23 million more marketing cost, and we have discussed that marketing cost also for a digital business model is investment in the future because this is how we generate revenues. It's PLN 12 million more IT cost because we want to have a superior IT platform, and this is worth paying for it. And it's roughly PLN 7 million more for administration and real estate, and this has to do with the more physical outlets we have, et cetera. So I think in the -- to summarize, in the cost, in the rising cost, you're seeing exactly what we've said in the full year and also where we really want to put our focus points, where to invest. And with this overview -- and this overview for us is important because you see that recurring revenues is growing faster than cost is growing. And we always have this thing that we still want to keep investing. But ideally, we invest at a lower pace, and we have a lower pace of spending than the revenue growing. And you see this has successfully happened in the year. This is why cost-to-income ratio was going down, and this is a trend we want to work further in the next years. With this picture, I would like to comment a bit more in detail on Q4. I think you've seen the number, a very strong net profit in Q4, so strongest quarter. High core income, core income fueled by net interest income; net fee and commission income a bit weaker. I will explain this. Cost-to-income ratio, very strong at 41.5%; normalized, 43.4%. All of this with the backdrop of strong volumes and good margin development. And also cost of risk that was basically in-line with what happened during the year, a bit lower. NPL ratio down by a significant sale of nonperforming loans, also which we have done. So also from the risk side, I think we are ending '18 on the right note, and we're having the right starting point for 2019. I don't want to go through every slide when it comes to Q4, so let's pick some. I think we go to Slide 17, please, where I can tell you a bit about the dynamics of new lending. In new lending, we have seen rising loan origination across the board. So to start with mortgage loans. Mortgage loans you see here 61% more year-over-year. But let's maybe talk about the full year production of mortgage loans was 35% higher in 2018 than it was in 2017, so PLN 4.6 billion versus PLN 3.4 billion. And we think that this is a good basis on which we have now arrived. And obviously, we want to further grow from there, but we also don't see this going down. Coming to non-mortgage loans, and you know non-mortgage loans also very strong and dynamic here. We have new business of PLN 8.9 billion in 2018 compared to PLN 7.1 billion in '17. The last 3 quarters on very high level with each quarter, above PLN 2 billion. We also expect this to continue, and also we see some slight upside there. If you look at our market share, the market share in non-mortgage loans of mBank is 5.8%. That was December 2018. That compares to 2 years before, December 2016, 5.0%. So we're also growing our market share, but this is happening slowly, steadily. But also I would say if you look at the numbers, a bit forcefully, so this is a good momentum we have in this business. Talking about good momentum, also good momentum in corporate and also in leasing. Corporates, you see in K1, K2 and K3, good momentum. Main momentum was in K1 with 61% more sales mainly in the structured finance area. Brief comment on Page 18 on deposits, because you know our transactional business model and the strong inflow to current accounts, this is still continuing and generally intact. I think what needs a bit of explanation is what we did in the corporate space. In the corporate space, we did a repricing in the fourth quarter when it comes to term deposits. So basically managing out PLN 2.3 billion term deposits, but this was a willful measure we did in order to optimize the balance sheet and the cost structure there. So let's move from these items more to income and cost. Income and cost, obviously, I explained to you how this was looking for the full year. But let's go on Page 19, please, to look at total income and look at income for the quarter. Income for the quarter was PLN 50 million more than in Q3, so 4.2% up. And it was PLN 119 million more than in the fourth quarter in 2017. The drivers, I have said before, net interest income was PLN 21 million more, plus 2.3%. And then we have net fee and commission income with PLN 19.6 million less. This PLN 19.6 million less I would like to explain to you also a bit in more detail because the PLN 19.6 million less basically are characterized by stable revenues on fee and commission income but higher cost. But within these stable revenues, also there is a shift because the shift we have is, on the one hand, we have lower revenues, for example, on the third-party funds we are selling. This was what I said before with MiFID, et cetera. In total, this is PLN 11.8 million less revenues. But the PLN 11.8 million was made up with what I said before was for the full year core business, PLN 5.5 million more in credit fees, PLN 3.6 million more in account fees, PLN 2.5 million more in trade finance fees, et cetera. So you see exactly the core business catching up for this. So the delta we have versus the last quarter is basically higher cost of commissions. So these commission expenses that we have booked is PLN 19 million more. It's seasonal what we've -- similar to what we've also seen in Q4 2017. But obviously, the '17 number is a bit higher because we still had insurance revenues in there. But this is for nonrecurring things you normally have in Q4, but it's also for higher payment for the [ Skhoop ], for example, but I think it's a usual Q4 pattern. Then to complete the picture, I think 2 more comments. Higher trade revenues, revenues from trading, total trading income went up by 46%. Strong FX result, but also this FX result is -- was marked by generally higher volatility and higher client activity and, thus, just better opportunities for us to make money and margins in this market environment. Last, not least, PLN 13.3 million positive effect on gains from financial assets. This, on the one hand, so part of it, a little less than half, is some sell-in in treasury bonds. And the other thing is, and I think you've seen this also maybe with other banks, is a positive effect from the valuation of Visa because the Visa shares we'll be holding will from now on show in this line due to accounting change. So the Visa, I think, now the accounting gurus have finally looked at it. And Visa is seen now as a debt instrument, but the debt instrument needs to be fair valued, so perhaps the underlying thing is equity. It's -- the right place to show it is actually this line. So with this, I would go over to cost. And cost also we explained the full year. I think let's not go too much into this. Cost went down in the fourth quarter, went down by PLN 8.7 million. And let's just look at material costs, so the blue bar here, which went down by PLN 11.2 million. What we did we do in material cost? So what was happening? And also there, the story is, behind the number, you still see investments and you still see our spending, spending money on the things where we want to spend money. But obviously, where you need to be cost-conscious, you have to have some cost consciousness. A bit less IT spend in the quarter, where IT spend is not always linear, so it's PLN 6 million less than in Q3. Less spend on consulting cost, less spend on legal fees, less spend on admin, et cetera. That all equates to PLN 20 million less spending. But still marketing spend, for example, in the fourth quarter was more than PLN 9 million higher than in third quarter. So this is what I mean. We still continue to invest. We try to be cost-conscious on the factors, how we run the bank, but in terms of investing, we really want to be there. I already mentioned the very good cost-to-income ratio for the quarter and also, I think the, very good cost-to-income ratio for the full year even without a one-off, PLN 44.7 million, I think that's quite a good mark. Let's go over to cost of risk, next page. Cost of risk maybe needs a bit of explaining, less the cost of risk but basically the composition. Let's start with retail. So retail, if you add the traditional LLPs plus the fair value results, they're similar to Q3. The fair value result is a bit higher. That is due to the fact that in Q4, we basically looked at the portfolios. And one of the portfolios -- we had a small portfolio, roughly PLN 500 million -- we reclassified from amortized cost of fair value. Because under IFRS 9, it's -- I'm not a big fan of basically having loan portfolios in fair value because I think this is not really what fair value should be about. But there's accounting rules, and we basically said, okay, let's book this over. And part of this was LLPs of this portfolio was basically changed into fair value, and you see this effect there. So I would expect that the fair value line in retail will go down over time, and this PLN 32 million is more of this one-time effect. You have seen it in the 20s in 2018, in Q2 and Q3. And I think it should also diminish because also our fair value portfolio is diminishing in retail. It's not our intention to really book more new business in fair value. In corporate, you have very low traditional LLPs. This is also due to some releases we had. We have a higher position when it comes to fair value. This was mainly induced by one larger name where we basically took a write-down, and this larger name is under fair value methodology. And this is why you see it in there. The total year, we ended with cost of risk of 78- basis points, so in-line with the guidance we were giving. I think looking into 2019, 78 is also a good starting point when it comes to the basis points, where we look at. There's a slight downside risk on this, a little bit more the cost of risk. A bit of the economy, but obviously we were also still working on our mix. So we want to go more into non-mortgage loans. We want to go more in K3s. So it might be a bit higher, let's see. And obviously, we'll have a bit more volume. So I think in terms of zloty amount, the overall amount of risk formations might go up a bit in 2019. Looking at Page 22. Maybe just one comment on nonperforming loans. So our nonperforming loans are now at 4.8%. This is significantly below the sector. The sector is at 6.9%. And you see this on the left-hand side that our impaired loans portfolio went down by 3.8%. This is what I said, we have sold PLN 350 million nonperforming loans in the fourth quarter. And obviously, you see this then reflected in the numbers. Brief comment on capital. Capital, I think, quite uneventful. We are still overcapitalized by 350- basis points when it comes to Tier 1 ratio, above the KNF minimum. So this is a very good starting point of going into the year and growing business and also absorbing potential things that are coming like IFRS 16, potential LGD floor, et cetera. So we're very confident with this. So to briefly summarize Q4 from my side, I think what are the key takeaways. It's the strongest quarter of the year, very strong on NII. NFC, we have explained where things are coming from, why it's down. But the core business is really fueling more NFC, and the core business is really also increasing. And then I think this is the right direction. And with this, I would hand over to Marcin for the economic outlook.

[Marcin Mazurek, executive]

Good afternoon. The economy in 2019 will grow slightly less than it did in 2018. We expect GDP to grow under 4% compared to 5% last year. The slowdown will mainly take place in Q1. How do we know that? Looking at the correlation with the German economy, there's a time lag of 2 quarters behind the German cycle, so we will be affected in Q1. However, the economic conditions have deteriorated as demonstrated by monetary aggregates correlated with the cycle, that is retail sales private consumption. So we will see both private consumption and private investments drop in 2018. Investments, public investments, were often anti-cyclical, offsetting consumption and private investments. Now in 2019, public investments are likely to peak and drop afterwards compared to 2018. Less growth means low inflation pressure. Inflation will remain comfortably below the NBP's target of 2.5%, but the average annual inflation will be under 2%. Under those conditions, the Polish Monetary Policy Council will keep the rates unchanged at 1.5%. Speaking of monetary aggregates, looking at the macroeconomic conditions, it seems that corporate loans will grow less than they did in 2018, and there'll be less growth in corporate deposits as well due to the cyclical problems combined with problems with corporate margins. As a result, the free cash available to corporates will be growing less fast than in 2018. The household sector looks a bit brighter with the slower consumption. Consumer loans will peak and start to fall. But given the rising savings rate of household, the banking sector will get even more deposits on other accounts. As for mortgage loans, we are expecting the moderate growth rate to remain stable. The whole market is still expanding. Homes are available and affordable given the growing disposable income of households and low rates. We see no major risk to demand for mortgage loans on the horizon. Interest rates. The recent downgrade of the outlook of the global economy caused the global rates to shrink. We've seen this trend continue today. The German bonds are at the lowest yields since 2016, and the low rate environment is very likely to continue into 2019, with some potential upward or downward corrections. But there is no reason to believe that the new trend is likely to unfold. The zloty exchange rate. The zloty remains very stable. The volatility of the FX rate is very low. In Q1, we may see some depreciation of the zloty, but we do not think it will be strong. The reasons for any depreciation might be posed by the GDP growth rate. According to the market consensus, GDP growth will slow down gradually to -- well, from 5% to less than 4% on a straight-line basis. But we think this is not very likely. We will see a slump in Q1 -- not a slump, the GDP will drop from 5% to under 4%. That's not dramatic. But it may affect the FX rate. We don't expect this depreciation to be strong, sharp or very long-lasting. Thank you. Thank you. The floor is open.

[Unknown Analyst]

I have a question about the expected growth rate looking forward. In 2018, your growth was double-digit rate. But net of the one-offs, I think you would be somewhere in the high-single figures, net of the buy-backs as well. So is mBank likely to step-up to a double-digit growth? Or are you likely to stay in the upper single-digit figures?

[Cezary Stypulkowski, executive]

Looking at what my colleague, Mr. Mazurek said, if the expected slowdowns are to materialize, we cannot step-up at the very same time. We have a 7%, 8% market share; in lending, 7%. So I don't think we could be very different from the market. So a double-digit growth, that's very ambitious. We'll see how it works out. It depends on the product mix as well. Last year, we reported a high growth in transactions with large customers, which improved the growth rate, and corporate banking growing by a good dozen percent. But I'm like -- I tend to think we are likely to hit high single-digit numbers.

[Unknown Analyst]

Your mortgage loans grew 35%, but NMLs also grew by 29%, PLN 9 million -- PLN 9 billion. Is it likely to keep on growing?

[Cezary Stypulkowski, executive]

Well, we think we'll see some stabilization. It's not a dogma for us, but we tend to believe that growth of consumer loans, short-term loans, NMLs, should be anchored in the transactionality of our existing clients. It's not a dogma for us. But again, the room is shrinking, so we are experimenting with non-client borrowers. But then the risk is higher, so that's something we always shy away from. In this segment of the Polish market is the most saturated. If you compare the share of such loans as a proportion of GDP. That's -- Poland is close to the European average, we have a saturated NML market in Poland. So I think given 2 turbulences concerning the mortgage loans, one relating to the position of mBank protection and the plan, we were planning to -- a change we're planning to implement in 2012, '13, which didn't work for us for regulatory reasons. And then we had to start economizing on risk-weighted rated assets. So I think mortgages really slowed down at mBank in 2012, 2013, up to 2016. Mortgage loans are an important part of our product range for retail customers throughout their lifetime at the bank. We think this is an important anchor of client relations. And the demographics suggest that more loans should be sold to specific clients with a specific profile of -- and the track record of transactions with the bank. So these are just our guidelines, of course. But we have only that much room to sell such loans to clients. And I do not expect dramatic growth for all these reasons.

[Unknown Analyst]

Concerning the dividend, it was surprising to hear you say that the bank will want to pay out a dividend -- it was surprising to hear you say that the bank is working to pay out a dividend for 2018. According to calculations based on KNF data, mBank does not seem to meet the criteria. So do you think that you still have an option to pay out a dividend? PKO will say -- my bank, said it's in dialogue with KNF concerning the dividend for 2018.

[Cezary Stypulkowski, executive]

Well, what can I say? It's been topsy-turvy for 4 or 5 years with respect to the dividend policy. How can you run a bank if you don't know for years how much dividend you can pay? Because it is all up to the regulator acting at its discretion, which is not always clear to us. But we are committed to paying out a dividend. At some point, we received a letter from KNF on the very date we held an AGM. That's not good practice. There's nothing we can do, but we are entitled to have an opinion.

[Unknown Analyst]

What about the 50% you mentioned in the morning? Is it long-term dividend?

[Cezary Stypulkowski, executive]

According to our long-term strategy defined in 2016, we are expecting to pay out 50% of the profit in dividends on a regular basis.

[Unknown Analyst]

With regard to the criteria, K1 and K2, have you changed -- has your position changed? Are you -- do you comply with them?

[Cezary Stypulkowski, executive]

No.

[Unknown Analyst]

Could I follow up and ask about the cost of risk in 2018 in mortgage lending and also in 2017?

[Andreas Boeger, executive]

Well, we're not giving details on this currently. So I can tell you what the cost of risk, obviously, in retail is, and the cost of risk in retail is going up. And that's going up because of the mix, because we have more non-mortgage loans. And the mortgage loan portfolio itself -- because I think the question was mortgage loan portfolio, was it? The mortgage loan portfolio is very healthy. We see the mortgage loan portfolio even going down when it comes to our non-performing loans, et cetera, but we're not giving a split of how much of the LLPs or how much of the risk cost is actually attributable to the mortgage loan portfolio.

[Unknown Analyst]

Well, do you think from the mortgage portfolio drop -- cost of risk in mortgage portfolio dropped to below 10% -- 10 bps in 2018 from, I believe, 17 bps in 2017. Is that the trend that you see in mBank as well?

[Andreas Boeger, executive]

I mean, as I said, generally, we see that it's a healthy market, and we see also nonperforming loans going down there, et cetera. I mean we have very good and very stable situation on the housing market. We see more demand for these kind of loans, et cetera. So we're -- currently, this is a sweet spot. I can't confirm the numbers you were giving, they're competitors, obviously, for us. But it's a comfortable spot to be in when it comes to cost of risk. And this is also why I think we and also others see expanding this business.

[Joanna Filipkowska, executive]

We have a couple of questions that came online. Dariusz Gorski, your thoughts on potential initiatives aimed at addressing the drop in mutual fund distribution fees. Are you considering a purchase or building your own asset manager?

[Cezary Stypulkowski, executive]

Yes. I have to admit that I was starkly opposing mBank to enter that type of institutionalized distribution via the devoted fund. Under the circumstances and regulatory new regime, I have to say I have changed my attitude, and we are not excluding that we'll purchase such unit.

[Joanna Filipkowska, executive]

Could you comment on the growth of FTE reasons behind and outlook?

[Cezary Stypulkowski, executive]

I think details of that has been provided by Andreas. I would say the major driver behind FTE buildup is the expansion of our network.

[Joanna Filipkowska, executive]

Where? Revenues, cost, risk, charge, et cetera? Do you see the net profit delta in 2019 implied by the guidance on aspiration to deliver flat reported results in 2019?

[Cezary Stypulkowski, executive]

Can you repeat?

[Joanna Filipkowska, executive]

Do you see the net profit delta in -- where do you see the net profit delta in 2019 implied by the guidance on aspiration to deliver flat reported results in 2019?

[Cezary Stypulkowski, executive]

I assume that it is a reference to my earlier comment to the media that aspirationally, we would like to deliver in 2015 the flat net profit. But I have added -- I don't know if it has been reported that I considered this to be a stretch. So my understanding is that we strongly believe that the bank has still the potential, I would say according to lines. I think something -- the comments in more detail done by Andreas referring to fees, commissions, I would say overall balance sheet growth, I would say can fertilize in the -- I would say in the zone, which potentially can lead us with a flattish net profit. There is no something very specific. Yes, if you can add.

[Andreas Boeger, executive]

Yes. Because I think the simple formula is revenue is rising faster than cost with a good risk appetite, so i.e. cost will rise a bit but ideally, revenue is faster. And risk will -- risk appetite will remain similar or a bit more but not -- it will not be that the rising revenues will be at the cost of very much higher cost of risk and with this mix, but it's not -- because the question was if the driver is LLPs, I don't think that they will go down. The driver is cost. Cost will also not -- we're not managing the cost down because we're investing in the future of the bank. So it will be revenues not be fully consumed by the other 2. But I think we are on track for this.

[Joanna Filipkowska, executive]

Another question from Marta Jezewska-Wasilewska. In the media meeting, you said that the bank wants to cross NFC mark of PLN 1 billion in 2019. What will be the main drivers of growth? Can you see additional room for growth of commissions and fees on loans in the short term? Or do you think you can catch up with what you've lost in fees and commissions on insurance?

[Cezary Stypulkowski, executive]

We are only PLN 20-plus million short, so let's not exaggerate it. There's not so much space to make up for. And as Andreas said before, in the main lines of the banks activity and business, we've seen growth, and the growth is poised to continue. So PLN 1 billion on the horizon, that's not beyond our reach. I do think that our regular and steady growth will make the PLN 1 billion achievable in 2019, while the net profit is likely to be flattish, but it's a stretch. NFCs, I think, will be strong.

[Joanna Filipkowska, executive]

Another question from [ Ian ]. You have mentioned N26, which you think has worse user experience than the native mBank app. Question is, why is mBank unwilling to scale its business across the region or across Europe. The emergence of FinTechs and new projects launched by former executives from Poland and, in addition, the competitive position of IT, is the bank not losing out -- missing out on an opportunity to define the future of this sector in Europe for many years to come?

[Cezary Stypulkowski, executive]

Well, the question seems to contain an answer, and I agree with it because I think, mBank, with its user experience and its ability to implement innovation, is on the forefront of the retail sector in Europe. But the problem is we are working from Poland with the effective tax rate and the capital requirements applicable in Poland. So based on the platform from Poland, the platform we operate, say, in the Czech Republic and Slovakia, we maintain that presence, although we are subject to a double bank tax. But the Polish regulatory regime is very unfavorable for expansion. We could try to do that from a platform outside of Poland, but we are responsible for Poland. And I think, well, we have no venture capitalist behind us, only shareholders with their expectations. It's a pity perhaps, but operating from Poland as a bank with a license in Poland, how much dividend would we pay? How much capital would we need to maintain? The bank tax is a big burden. The total effective tax rate in Poland for banks is twice as high as the tax rate in the States, much higher than in Europe. All in all, we have low returns, relatively low returns, compared to the potential we have. So to operate from a Polish platform is not easy at all.

[Joanna Filipkowska, executive]

What is your take on the growing competition from FinTech, such as the spectacular launch of Revolut and its acquisition of customers twice above the sales targets? Of banks in Poland, mBank, with its small number of branches, is the closest they can get to the FinTech model.

[Cezary Stypulkowski, executive]

The time will come and the truth will be shown. I am not paralyzed by the emergence of FinTechs. I think what we offer, as a licensed bank, speaks for itself. I have the Revolut app on my device as well. And I don't see a major difference that would incentivize me to swap. I think we have to launch new functionalities such as shared payments, for instance, but that's on the horizon. And the solutions in Western Europe are very competitive. Many banks cannot deliver them with the product range that we offer and have offered to our clients for years. So when FinTechs face regulatory hurdles that are faced by banks, when they reach a critical mass that will put them on the radar of the regulator, then the truth will come out. Until then, FinTechs are -- tend to be promoted in the U.K. The door is open to FinTechs, the regulators are less demanding for them. But this will come to an end when they reach a critical mass. But I get asked this question, and I don't think mBank has to worry. NBP has recently pointed out the risks of the sector posed by consumer finance portfolios, especially the fastest-growing, high-value loans with longer tenders.

[Joanna Filipkowska, executive]

Do you share that concern?

[Cezary Stypulkowski, executive]

Yes, we do. It may not be very professional. But looking at one potential acquisition target, this was exactly why we decided not to.

[Joanna Filipkowska, executive]

And one more question from [ Bjorg ] to Mr. Mazurek. What is the outlook of market rates in Poland versus Swiss rates?

[Marcin Mazurek, executive]

Market interest rates. Well, we think the rates in Poland are likely to remain stable for several years. But looking at the developments in the Eurozone, considering that the Swiss National Bank is a slave to risk aversion, and when market conditions start to deteriorate, the Swiss franc appreciates, which requires tightening of the policy. So the Swiss franc is very likely to stay away from raising the rates for a while. We think the first small hike could take place in 2021. So for the time being, the outlook of the rates in Poland in the Swiss franc, that outlook is quite stable.

[Cezary Stypulkowski, executive]

Well, if you have no further questions, please join us in one-on-one meeting -- talks.