Bank Millennium SA

WSE:MIL

Earnings Call Transcript 2023-Q1

[Dariusz Górski, executive]

Good afternoon, and warm welcome to everyone. Welcome to Bank Millennium First Q '23 Results Call. With us we have Mr. Joao Bras Jorge, our CEO; and Mr. Fernando Bicho, our CFO. The structure of the call will be as per usual, we'll start with approximately 25 maybe 30 minutes presentation, and then we will be available for questions. Thank you very much. Over to you, Fernando.

[Fernando Bicho, executive]

Thank you. Good afternoon. Thank you very much for, again, attending our quarterly results presentation. We start with a snapshot of the main key profit and loss items and balance sheet items on Pages 5 and 6 of the presentation where it is visible. The strong improvement in the recurrent results of the bank, supported by a significant increase of net interest income year-on-year and also the resilience of this net interest income that without the impact of the credit holidays still grew 1% quarter-on-quarter. On the other side, costs are growing, but still below inflation. And also, we had in the first quarter that was marked by 2 important events. One was the conclusion of the insurance transaction about which we reported several weeks ago, that translated into a significant capital gain. And on the other side, also significant provisions for FX markets, legal risk, including one extraordinary adjustment.

All in all, this allows us to reach a net profit in the first quarter of PLN 252 million, and this marks already the second consecutive quarter of positive results. Excluding extraordinary items, we also see the resilience and the capacity to originate organic results by the bank with the net profit, excluding extraordinary items, reaching PLN 672 million in the first quarter at a similar level of the previous quarter. As a consequence of these movements, we had continuation of significant improvement in the cost-to-income ratio.

The cost of risk stays within the range guidance that we had provided previously. And on an adjusted basis, of course, return on equity was already double digit, even above 20% on an adjusted basis. On the business line front, we would highlight the significant and sustainable increase of acquisition of customers and where we are approaching the 3 million mark for active retail customers, which is being followed even at higher speeds by the increase of the digital and mobile customers.

Deposits continue to grow, especially driven by deposits from individuals, while total loans decreased mainly due to the significant decrease of the FX mortgage loan portfolio, also because of the deduction of the provisions that are being created. And so without this impact, the loan portfolio would have been flat. Finally, to highlight is also the resilience of the capital base of the bank. There was a minor decrease of the capital ratios in the first quarter, but they stood still comfortably above the minimum regulatory requirements. The Page 7 is just again a highlight of what I have just mentioned. So I will go directly to page #8, where we can see the evolution of the quarterly results of the bank in recent periods where it is visible, this gradual increase of the net profit without extraordinary items, which stabilized at PLN 672 million when compared with the fourth quarter of '22, which is 37% above 1 year ago.

Moving to Page 9. The revenue improvement continues to be driven by net interest income, which grew 31% year-on-year and 1% quarter-on-quarter. As it is visible on the top right graph, we still had an increase in the average remuneration of loans in the first quarter of the year, but also still an increase, although at a slower pace of the average cost of the deposits. And this happened already in a context where although the reference rate from NBP stayed at the same level, we saw already some decrease in the level of the main reference rates, mainly the level of the [ LIBORs ] is already lower than what it was in previous 2 quarters. The combination of these factors translated into net interest margin of 4.58% only slightly down by 5 basis points versus the fourth quarter of 2022.

Regarding net fee and commission income. Here, the picture is stable to the level of fees and commissions were at the same level of the previous quarter, although 9% lower than 1 year ago, mainly due to lower fees that were temporarily enforced during the pandemic times and are no longer being charged regarding part of the accounts. But we see some positive developments in several other lines of fee and commission income, namely payment cards. And also, we see a rebound already in the investment loan balances that -- in the investment front, balances that sooner or later will translate also into some increase of fee and commissioning. Moving now to the cost side. The total costs are growing clearly below inflation, 7% growth year-on-year.

Of course, the first quarter is inflated by the initial preliminary booking of the contribution to the resolution fund that we created at a level similar to last year, although as we disclosed yesterday afternoon, based on the communication received yesterday, actually, the number -- the figure is lower. And so this correction, which in fact is a reduction of cost will be reflected already in the second quarter. So anyway, looking at the concrete drivers, we continue to have more pressure in terms of staff costs, which we believe is something that is common to the market, and this translated into a growth of personnel costs by 12% year-on-year, while other admin costs grew 10%. At the same time, we have continued the fine-tuning of the of branch network as we have been doing in recent periods.

Moving to asset quality on Page 11. We kept a strong quality of the loan portfolio. NPL ratio at 4.7%, slightly up versus the previous quarter, but also we cannot forget that actually, the loan outstanding balance was lower versus previous periods. Looking at the cost of risk, it stood at 63 basis points over total loans exclusively driven by retail loans. But still -- and this is exactly within the range guidance that we have mentioned during the previous conference. Additionally, also, we should highlight that in this quarter, the cost of risk was not supported by sales of NPLs.

Regarding liquidity and capital on Page 12. Liquidity remains very, very solid with loan-to-deposit ratio at 75%, LCR at 228%. And regarding capital ratios, as I mentioned in the introduction, we have a resilient capital position, a minor drop during this quarter. But still comfortably above the minimum regulatory requirements, more than 80 basis points above the minimum regulatory Tier 1 requirement and clearly more than 1 percentage point above in terms of the total capital ratios. And of course, just for clarity, these capital ratios do not include the net profit generated in the first quarter of the year. If such net profit would be considered as part of the own funds of the bank, the capital ratios would improve by approximately 50 basis points.

Moving to the FX mortgage portfolio on Pages 13 and 14. So first of all, we had the continuation of the effort that has been done already for a long time of significantly decreasing the FX mortgage portfolio. And as it is shown here, in the quarter, we had a reduction in Swiss franc terms of 4% of the gross portfolio. So without deduction of the legal risk provisions and year-on-year of 16%. As a consequence, the percentage of FX mortgage as of -- the total loan -- of the total gross loan book continues to decrease, and it's already around 7%.

At the same time, we continue to increase the provisions against legal risk. As we disclosed already 3 weeks ago in a specific current report, we created PLN 821 million with P&L impact for the Bank Millennium originated FX mortgage portfolio including 1 extraordinary adjustment of PLN 337 million in anticipation of some deterioration of some parameters connected with the FX mortgage legal risk. The combination of the creation of these provisions and the decrease of the loan book brought the ratio of total provisions against legal risk versus the gross FX mortgage book to close to 56%. during the quarter.

We continued the efforts to reach an equal settlements with our clients, this quarter total number was 806 so lower than previous quarters as by the way we were somehow expecting because of the significant number of settlements that were done during the previous 3 years and as a total in the last 3 years and 1 quarter we have done close to 18,600 amicable settlements with the customers. The lower number of settlements in this specific quarter of course also brought lower costs of such settlements through the P&L.

moving now to the second part of the presentation regarding the business development. The main highlights are on Page 16. So solid growth of retail deposits by 9% and overall deposits by 4%, a strong quarter in terms of cash on sales that grew 10% quarter-on-quarter, also significant growth in the number of payment cards by 214,000 year-on-year.

And then this permanent growth in the number of active retail customers and active digital customers where we are approaching the PLN 3 million threshold. More details can be seen on Page 17. So the loan portfolio on a net basis after the deduction of all the provisions decreased by 4% year-on-year. And this is, to a large extent, due to the additional provisions for the legal risk that have been created because if we would exclude the FX mortgage portfolio, the loan portfolio on a net basis would have remained flat. Customer deposits, as I mentioned, growing solidly by 9% year-on-year in terms of the retail deposits. The structure of the loan portfolio continues to change with the dilution of the FX mortgage portfolio.

And in investment funds, some positive signs already in the quarter with the growth of the assets under management, but still with a decrease of the outstanding by 13% year-on-year. More details on the retail performance on Page 18. I already mentioned the strong quarter of cash loan sales, which when compared with 1 year ago, grew by 35%, while mortgage production remained at a lower level as it is, let's say, common to the market with total disbursements at PLN 925 million at similar level of the previous quarter. When we look at the evolution of the retail portfolio on a gross basis, it is visible that the consumer loans still grew by 1% and PLN mortgage by 2%, while the FX mortgage had a significant decrease.

The solid business performance of Retail is also illustrated on Page 19, a growth of 36,000 active customers in retail in the first quarter at 183,000 more versus 1 year ago, then also an increase in the growth of micro business clients versus the -- in the last 12 months and followed by a significant increase of the number of current accounts by 200,000 and the number of debit and credit cards by more than 200,000. The digital journey continues to gain traction. On Page 20, we once again illustrate very strong numbers in terms of usage of digital channels with 2.6 million active digital users to 0.32 million active mobile users with a significant share of online sales, 80% share in the sales of cash loans in the first quarter 2023, 96% in the sense of term deposits and also 43% share in current accounts acquisition.

And Page 21, also additional figures, which we would particularly highlight the significant number and growth in BLIK users and BLIK transactions. We continue to support this growth with a permanent effort to assure convenience and security every day to our digital users. Illustration of this effort is shown on Page 22, also with the pilot phase of the Buy Now Pay Later payments, new services with payment cards and on Page 23 with a number of other features that provide convenience to customers that are running their own business.

And on Page 24, the continuation of the development of our Goodie Smart Shopping platform in which we have an increase of 50% year-on-year of the number of active cashback users. Moving to Page 25. The corporate business activity has been conditioned by also the strict management of the capital consumption especially -- so it means strict management of risk-weighted assets. And this, as a consequence, limited the growth of the corporate loan portfolio. So when we compare with the previous quarter, on a gross basis, loans to companies only grew 1%, while when compared with 1 year ago, they fell 2%. And this includes, of course, not only loans to companies, but also leasing and factoring.

On the other side, we had year-on-year some contraction of the deposits due to high base of 1 year ago. But with a rebound of 5% quarter-on-quarter with a good mix between current accounts and term deposits. We also continue to focus on gradual improvement in transactional activity, which is illustrated by the growth of 6% in FX transactions. And regarding also the lending activity, the focus on utilization of BGK guarantees to the highest level ever in our case of at PLN 3.9 billion, including our leasing company that is the only one in the market for now with active sales of BGK guarantees.

On Page 26, regarding leasing and factoring, we had a decrease of sales -- leasing sales by 9% year-on-year, although the portfolio as it was shown before on a gross basis year-on-year, still grew by 2%. And in factoring a marginal drop in factoring turnover by 2% year-on-year and in FX transactions growth by 6% year-on-year. The effort to provide innovation and convenience for our corporate banking customers is also illustrated on Page 27, where we have been keeping the expansion of the offer for corporate clients, including loans for photovoltaic installation and technological loan and also bigger availability of CDMs throughout the country. So in summary, these are the results of the Bank Millennium Group in the first quarter of 2023, and now we are available for your questions. Thank you.

[Dariusz Górski, executive]

We're getting better each quarter. It's 21 minutes. Thank you very much for your questions that have arrived. Meanwhile, let's start from those that specifically relates to our results. There's a handful of questions relating to NII. Let me read these out. Is it reasonable to expect NII to go down from Q1 levels as deposit rates increase? So are you planning to increase your bond portfolio further? This is the first question. There are similar questions about the outlook for NII in the NIM in the following months. Yes, I think these are main questions. There's also a level of deposit EBITDA in the first quarter, what level of deposits pricing do you expect in 2023, how do you see the competition evolving in the segment? And the other question is about pretty much the same. So it's out of a NIM deposit pricing, competition and deposit Beta sensitivity of it.

[Joao Jorge, executive]

So I will start and then maybe Fernando can complement. At the moment, of course, the deposit business is profitable, and this means that we would keep increasing the volumes on term deposits and savings accounts and all the total deposits volumes as much as possible. The production of mortgage in Poland due to the very unstable and unpredictable legal structure that we have at the moment, not only in Swiss francs, but also the way that the change from [ LIBOR TO SARON ] is going to happen and future legal risks that we can have in this product may -- that all the banks are selling mortgage in a very prudent way. And today, we are having a production that is 50% of the previous year. And it's very difficult to forecast any development in this area. So it means that we will keep growing in deposits. And of course, we will allocate these deposits between bonds, securities, National Bank of Poland bills and all of these kinds of instruments.

There was the worst part in terms of pricing of term deposits. I would say it was the last year, the end of last year, when there was the normal, I would say, [indiscernible] deposits off the end of the year and already these some expectations of the decrease of the interest rates embedded in the yield curve. Now we are already in a situation of some slowdown. We see that today, the top offers are already below the levels of the end of last year. And we are forecasting a count down. We saw some little dressing and some competition in the beginning of April with, of course, some banks trying to increase their volumes for the quarter presentations, but we believe that now we are in a more stable environment.

And we are not forecasting a bigger competition on this market. But of course, also the rise of improving the net interest income based on the increase of the interest rates is over. And today and going forward, the net interest income will improve mainly based by volumes and proper pricing of these instruments. It's also important to understand that there was a change of the mix. When we were in the environment of interest rates 0, there was huge increase of the current accounts and the customers were not placing their liquidity in any instrument, savings accounts or term deposits. And as we say, the movement of the increase of the interest rates. That was the change of the mix. So it was not just the cost of the deposits, but also very important, the change of the mix. We believe that the mix now is stabilized. Mix is very close to what used to be before the rate cuts of COVID times. And so we -- as I said, we are forecasting stable environment, stable prices and the future growth of NII based on volumes.

[Fernando Bicho, executive]

And to complement. So as you see on Page 9 of the presentation, in terms of the dynamics of the average combination from loans and average cost of the deposits. it is visible that in the first quarter, the increase on the average combination of the deposits was already much smaller than between the third and the fourth quarter and between the second and the third. So there is a clear sign of this stabilization. Also, the cost of the deposits in a specific quarter depends on the pricing decisions taken on the previous period. So it's -- sometimes there's always a lag between what we are actually doing and how it is translated into the NII and margin of the bank. And so this already end of the peak, let's say, of these offers in the market also later translates into -- tends to translate into some decrease in the average cost of the deposits.

The -- and so we -- in terms of expectations, we will tend to be marginally up or down in terms of NIM in the nearest future. But still, the picture for now is a little bit better than even we had anticipated 3 months ago, we must say, in terms of the NII and the NIM.

Regarding the -- I think there was another question also regarding the -- if we have plans to increase the bond portfolio further. We have a significant bond portfolio, which in fact has been increasing during the recent quarters. Due to the excess of the liquidity. The portfolio is -- we have 1 part that is decreasing, which is in this or to collect and sell, and this part is going to continue to decrease and another part in hold to collect portfolio. And so -- but the increase or decrease of the bond portfolio is more a consequence of the bigger or smaller excess of liquidity of the bank.

[Dariusz Górski, executive]

We have one, I would say, unusual question or specific about other operating income, and I'll probably handle that very quickly. The question is other operating expenses to that PLN 72 million double year-on-year. What is included in that? And what is the guidance for future quarters? I mean, in this position of chiefly book legal expenses. I think this is the main reason simply. There was also a handful of questions relating to our capital. First of all, there was specific questions about the impact of IFRS 9 on CET1. There was also questions in terms of our capital path for the rest of the year. Start with this.

[Fernando Bicho, executive]

The -- so regarding the capital ratios during the quarter, just to -- because I did not explain this in detail during the presentation. So in the quarter, of course, we knew that we were going to have the negative impact over the end of this transition period of treatment of the losses on the bond portfolio in the portfolio of holds to collect and sell, which on the 1st of January, started to be treated with a 100% impact instead of 60% impact before. However, this negative impact was significantly offset by the improvement of the valuation of this portfolio during this first quarter. And so this impact turned out to be much smaller. On the other side, we had the impact of this IFRS transition was in terms of amount because this is the question was close to the PLN 90 million.

Regarding the capital position of the bank and what we are, let's say, planning for the next -- for the remaining of the year. So we stick to the statement that we have done already in previous reports and meetings, which is we continue to manage actively the capital base of the bank in order to -- through a combination of generation of organic results that later will be translated into the increase of own funds of the bank.

Second, continuation of the optimization of risk-weighted assets, which includes this carefully -- careful management of exposure, especially in the corporate area, but also continuing to explore additional possibilities of securitization of assets as we disclosed last year in the report of last year. Last year, we made 2 securitization transactions of SME loans. And this year, we are planning to continue the most likely portfolio to follow will be leasing, but this is still under preparation. So we cannot say yet when this will be concluded. But the plan is to continue to generate additional capital also by using this possibility of doing securitization transactions of the loan portfolio.

[Dariusz Górski, executive]

And because you answered it at the same time, a couple of questions about our securitization plans in capital, which is actually...

[Joao Jorge, executive]

There was also a question about path for capital...

[Fernando Bicho, executive]

Don't you have answered that already.

[Joao Jorge, executive]

So our target is, again, to continue to improve the capital ratios and to further increase the surplus over the minimum regulatory requirements. And this is what we plan to continue to do throughout the year.

[Dariusz Górski, executive]

While we are in capital-related subject, it's obviously questions about MREL. Are we plan to be compliant by end of the year? How would we get to the MREL target at the end of the year and whether we plan to issue domestically internationally and so on and so forth.

[Fernando Bicho, executive]

As we also wrote in our report, of course, we have the clear objective of fulfilling the MREL requirements until the end of this year. But this is a combination of several factors. One is the level of MREL requirements by themselves, which we are expecting to be lower when we will receive the upside of such requirements from the banking guarantee fund. And these new plight issues should reflect the lower pillars 2 buffer P2R that was communicated by KNF in the end of 2022. We still did not receive this upside, but this is the expectation that we have that will decrease the interim and ultimate level of MREL to be fulfilled.

The second contributing factor will be the improvement of the own funds of the bank, obviously, which can -- which will be hopefully done through the generation of positive results. And the third is the issuance of bonds where we will be permanently assessing the market conditions in order to try to make one or more issues. We -- this is -- this will depend exactly what will be the ultimate amounts that will be needed. And we will be contemplating both domestic and international issuance. And the plan is to do such issue or issues until the year-end.

[Dariusz Górski, executive]

There's a handful of questions relating to cost of risk. One was whether we confirm our earlier 60 to 70 basis points guidance. The other one is what is our expectation for the cost of risk for the full year. So that's pretty much the same question. There was also a question whether we -- in which segments do we see cost of risk increasing and whether we see increase of overdue loans in the retail segment.

[Fernando Bicho, executive]

So first of all, as I mentioned during the presentation, for now, the cost of risk is very close to the level that we guided in the previous meeting. So as it is visible on Page 11, first quarter, 63 basis points of our total loans. When we had guided for something between 60 to 70. So we are there. The second, in this quarter, the cost of risk was driven by retail loans, while corporate was at virtually 0. So we have 2 relevant -- 3 relevant portfolios in retail. One of them is not generating, let's say, cost of credit risk is generating another type of risk, which is the FX mortgage.

But we have the PLN mortgages and consumer loans. So we -- let's say, we have the combination of both in terms of the cost of risk of the quarter. As we had expressed already in previous meetings, the higher level of interest rates would always potentially imply some additional levels of delinquency and NPLs, which, of course, is gradually happening, but it's still within what we would expect. And so according to the information that we have and that we see and the data that we see, we do not see any reason to change this outlook regarding the cost of risk for the year 2022. So we stick to this range of 60 to 70 basis points over total loans.

[Dariusz Górski, executive]

There is a very interesting question from Gentleman named [ Marak ] is why did Bank Millennium sell for almost PLN 0.5 billion, its interest in insurance company, which is not true. And whether this was related to any liquidity problems at the bank. So I think it basically boils down to our reasons for the bank assurance transaction.

[Joao Jorge, executive]

So maybe we can take the opportunity to -- because there is other questions as well. So we were one of the -- or the bank that was still without exclusivity agreement in terms of insurance. The possibility of establishing this joint venture and making this transaction allows the bank to extract more value of this bank of bancassurance that we have. Liquidity part, of course, is irrelevant in terms of the gain, the capital gain, it's relevant for the bank, especially in this time of Swiss franc mortgage.

There is a question about if we will do the extraordinary provisions without this capital gain, I would say that we joined convenience with the moment. So it's not -- we didn't do the provisions because of that, but it was a good opportunity that we were allowed with this capital gains to make this adjustment because one way or another, there was an opinion of the General Counsel of the European Court of Justice and the opinion is negative for the banks. And so we are making these adjustments.

It's clear that we have a very simplified methodology, let's call it like that. So it was the results of the court decisions that will translate in a probability and the new court cases that we are having. As time goes right, we have more negative decisions on the bank side, so it means that also the probability to lose is getting much higher. And we have more cases, so it means that also the volume of the present case is bigger, but with -- for us with this decision and the good timing, of course, we made first adjustment, preparing the bank to the possibility of a negative decision. That can happen up to summer. So we don't -- we never can be sure, but we are pointing between June, July to have the decision of European Court of Justice.

And the process of the decisions in considering invalid, these long-term credits and even stating that the usage of the capital is without any compensation is being so surprising that today, we could not forecast or predict any kind of decision. So we are preparing ourselves for the worst. And this is what we have been doing up to now. Of course, there is always this kind of questions. If the bank with a negative decision will have impact is, of course, there is always impact. So it's every time that we make provisions, forecasting a negative situation when the negative situation occurs, we need to do much less.

But it's obvious that the materialization of a negative decision is -- would require an adjustment of our model. There is 2 adjustments to be done. One is adjusting in the model of the probability of having remuneration that today is becoming smaller and smaller. Another one is future cases that we need to have also evidence of the changes of the behavior that for the time being, it's still difficult to assess if there will be a change or not. But this is something that also needs to occur with the timing because this is an area that it's very difficult to make immediately assessment since the beginning. What is the level of provisions that we need to do for this legal risk. If we would do in beginning of all of this saga.

Of course, it would be a small percentage of the provisions that today, the banks have. So it's -- I think it's the same way that we are not forecasting a dramatic movement. Also, it's difficult to say when it will stop because it's a process of -- we need also to have a slowdown of cases or from another side also to finish the cases that we have or the life contracts that we have. So -- or we are able to convert and that will repay everything or we will have to a minimal number, which is the customers that decide not to do anything and just to pay the installments that are, of course, very low due to the interest rates and even the maturity of the loan. But for this, we need to wait. So we are not forecasting dramatic increase, but also we are not forecasting a dramatic decrease of the effort of the provisioning for the legal risk of Swiss francs.

[Fernando Bicho, executive]

And also just to -- because there are some additional questions relative to the same topic. So we still cannot -- we still are not able to establish a connection between the opinion of the general Council of the European Court of Justice and the inflow of the court cases during the first quarter. The opinion was published on the 16th of February, and the dynamic of a court case is not compatible. So it's not possible that the person here is opinion on 16th of February, put some motion to the court on 17th of February. So in real life, it does not happen like this. So we are not making a link. It's true that we get a more inflow of court cases in this quarter than in previous quarters. It was not a record quarter as well. So we still will need to continue to track and to see if there is any change of behavior, which until now, we cannot say that it's happened.

[Dariusz Górski, executive]

Is probably worth highlighting that the increase of court cases against us is a systemic thing because other banks have seen exactly the same case some increase.

[Joao Jorge, executive]

Yes. And also, it's important to not to give you a wrong, I would say, guidance because if we are talking about a negative trend, a couple of hundreds, this is -- this will be a very positive scenario in terms of the decision. So it's also important because sometimes people are very fast to take assessments, but also do not understand that we are talking about a couple of hundred. So it's not a negative trend if -- or the opinion of the general counsel or even if of the decision, cannot be expected or there is no trend or if there is a trend, it's not going to be just a couple of hundred. So it will be weak, of course, across the time, but I think we need also to be prudent in terms of this to not give you too mild assessment. So it's -- we need to be open to be prepared for the worst, and this is more or less what we are doing with this extra effort of provisioning.

[Dariusz Górski, executive]

There was actually a couple of questions relating to proportion. A number of cases from already we paid loans, we can quantify the impact or proportion of these.

[Fernando Bicho, executive]

We can see that the proportion has been relatively stable, and it's between 10% to 12% of the overall stock of court...

[Dariusz Górski, executive]

We can -- unless you find other questions relating to FX markets that you want to answer, but I think the...

[Fernando Bicho, executive]

No, I think there is also question that somehow tries to -- I think it's a question about what is the level that we expect for the next quarters in terms of provision. I think it's more or less to the sense of the question that I think I saw here. When we look at the graph on Page 13 on the bottom right, we are showing the time series of the last 3 years, where in red, you can see the quarterly P&L charge. And there is somehow some kind of range, right? Excluding this one this quarter, the first quarter where we made this extraordinary provisions. So of course, we don't give any guidance for future quarters because actually, as it was already said, the -- and as we wrote in our financial report today, the major driver is going to be the flow of the court cases and to which extent it matches or not our own expectations.

So this is going to be a crucial element that we will need to be regularly assessing if there is any change of pattern in terms of the inflow of the court cases. But at least looking at this picture on the bottom right, you can see what has been done in previous quarters. And so it gives -- it's not a forecast at all, but it shows that if there will be not a significant change in the drivers, then obviously, there should be not a significant change in the outcome.

[Dariusz Górski, executive]

So what need to highlight or requires highlighting that we already have a very high probability of loss in our models. This parameter will not change at all. Okay. So moving aside from FX, Saga. There was a question about mortgage origination. According to participants, the new volume dynamics in mortgages were relatively weaker than on the market, which I think is not true because we maintain market share. And was it a consequence of the way we report the results? Or was it a consequence of a different approach or policy to PLN mortgages.

[Joao Jorge, executive]

We are maintaining the market share. The mortgage market in Poland is very, very weak. And our forecast is that it's going to stay extremely weak until we have a bigger legal insurance in [ how robust ] is to make a long-term contract or long-term credit contract, let's say, like that in Poland.

[Dariusz Górski, executive]

Do we plan to take part in the 2% mortgage subsidy program?

[Joao Jorge, executive]

Our position is that we are studying and analyzing that the probability of take part is very low.

[Dariusz Górski, executive]

And there was a bit of a cross-checking question. Whether we have any comments on the envisaged exit from the capital protection plan and recovery plan.

[Fernando Bicho, executive]

So thank you for this question because, in fact we did not mention this. So we have been executing thoroughly the plans. We have been implementing everything that we have somehow included in those plans that were submitted to regulators. And in fact, the actual results are better than our original estimates. Regarding the recovery -- so regarding the exit of the recovery plan because I think the question is more about the potential exit of the recovery plan. We will -- this is a process. So we already are above the minimum regulatory capital ratios already for the second consecutive quarter still comfortably above as we showed here on the presentation.

Of course, we want to ensure that this is going to be sustainable and resilient and so this is point number one, and point number two, that also, additionally, we will be taking the steps to fulfill the morale requirements. So these are two things to be continuing to be done in 2023. So we do not have any guidance regarding the exact moment of exiting the recovery plan. What is for us crucial is to demonstrate the capacity of the bank to generate organic results, organic capital and to increase the safety buffers over the minimum regulatory requirements.

[Dariusz Górski, executive]

Do you see any questions that we omitted or I think we loudly answered all of them. So thank you very much for your questions. In case we haven't answered any of them or we haven't answered in full, obviously you are more than welcome to approach us and ask us for a more detailed explanation. Joao, any closing remarks that you would like to share with the audience? We became a borrowing bank, right?

[Joao Jorge, executive]

Yes, yes, yes. We added a little bit what Fernando said. So we are executing in a very disciplined way our capital protection and capital recovery plan. This is with the securitizations, with the transactions that you saw. Of course, with intention to issue MREL also to fulfill our requirements. And also, and this is very important to having a solid business model that allow us to have the profitability to generate capital in an organic way. This is what we are doing. At the same time, we are completely focused in our strategy. So we have been very focused in customer acquisition that was visible in terms of number of customers. As you know, we track just -- and we are just interested in customers that bank in a regular way with us. So they are active customers.

And with digitalization. So it's -- we have this vision about having 3 million customers that up to summer. I don't know what summer means if it is August or if it is July, for sure, it's not September. We will reach the 3 million customers. These 3 million customers was a target that we had for the end of 2024. We will also reach the digitalization levels that we wanted, which is also extremely important to have the efficiency levels that we want to be a bank to serve these 3 million customers. In the corporate side is a pity that we do not have the capital to make growth in market share that we could do at the moment. But it is what it is. So we are using more guarantees. We are trying to make the lending in a process that consumes less capital and also oblige all of our sales teams to focus more in SME and to forget the transactions where we would need to allocate a lot of capital and the profitability will not be so good.

Also in corporate, we are going through digitalization. This is always things that are more difficult for our analysts to see because a lot of our analysts are also our customers. So they witness the digital capabilities as customers in their apps, in their products that they use, incorporate it's more difficult, unless they have a parallel business to see what we are doing. But the numbers are extremely good in terms of usage of the digital means, which in leasing means [ revoke ] of our leasing customers. The usage of the Internet platforms for our corporate customers in terms of analysis, exchange of documents, everything and now we are also after this [indiscernible], we already trained the network. We already made the test and everything.

We will have a very important launch of our mobile app for corporate, that also, we believe that will be distinctive in terms of our corporate offer. And so we are very positive for the business side. And we also believe that this business part will be crucial also for the capital protection plan and the capital protection plan, we already are then, but it's a question of finishing all the cycle. But on the recovery plan, let's call it like that, to address all the challenges that we still have. And also, we need to hope that the authorities will not put additional challenges to the [indiscernible]. We never know, but I think the banking industry in Poland already have challenges enough to make our role, which is financing the Polish economy and helping the prosperity of the Polish people.

[Dariusz Górski, executive]

Thank you, Joao . Thank you very much, gentlemen. Thank you all the viewers and participants. Thank you for your time, your interest in Bank Millennium. To remind our next data point is 27th of July when we report first half results. Have a long weekend -- have a good long weekend and enjoy whatever amount of sun and good weather, you can guess. Thank you very much.