Bank Polska Kasa Opieki SA
WSE:PEO
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Ladies and gentlemen, welcome to the quarterly report of the Pekao S.A. Capital Group for the third quarter of 2020. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Pawel, who will lead you through this conference. Please go ahead.
Good morning, and good afternoon to everyone joining us today on the conference call. Pawel Rzezniczak, Head of Investor Relations, and welcome, everyone, to Q3 2020 Results Presentation for Bank Pekao. As always, I'm joined today in a similar lineup with our CEO, Mr. Leszek Skiba; our CFO, Tomasz Kubiak; our CRO; Marcin Gadomski; as well as our Chief Economist, Ernest Pytlarczyk.
Similar to the usual format, we'll go first through our outline of quarterly results. Afterwards, we'll go into Q&A first for those on the line. And afterwards, we will cover those questions that have been registered through our mailbox. So with those few introductory words, I would like to pass right now to our CEO, Mr. Leszek Skiba, to kick off the presentation.
Thank you very much. Good afternoon, ladies and gentlemen. Before I will start, I would like to outline our agenda today. First, we'll discuss our achievements in third quarter. Next, macro environment and financial results. And with -- we will conclude with overview, our asset quality and approach to risk management.
Turning to the presentation. It was a quarter that showed that Bank Pekao can successfully adopt to operating in demanding a tough macro and business condition due to COVID-19. First, we continue to show a strong balance sheet growth by -- at 17% year-to-year. We have adopted our bank to successfully operate in COVID-19 environment with even more processes enabled digitally. We don't ignore focus on profitability of our business. Wild tranche of cost initiative has been implemented to support business.
Finally, I will reiterate strong fundamentals of bank and prudent credit approach. Despite pressures on revenue lines due to the full effect of rate cut on interest income, we have improved quarterly profit by 3% to 3 PLN 371 million. We maintain prudence in credit origination and risk management. And in third quarter, we established another PLN 148 million or 37 bps of COVID-19 provisions, and total cost of risk of 70 bps. Our risk profile continues to remain strong.
Client activity has been gradually rebuilding in third quarter. What is important? We see strong client reception to digital tools, as we continue transforming the business. We are very close to reach 2 million active digital clients in 2020. We continue to look for cost efficiency across many segment categories of activity. Through a number of actions, we reduced cost base by 7% year-to-year and 3% quarter-to-quarter.
Despite difficult operating conditions, we remained strong pace of growth, 70% year-to-year, albeit, skew in more defensive segments like mortgage. Our strong and primary relations with clients are very well reflected in inflow of liquidity from our retail and corporate clients. We are very active and actively supported our clients in their access to financing. In the capital market, by selectively deploying our balance sheet, distributing vast public support programs for corporate sector. We are very proud to have supported Tauron in innovative sustainability-linked bonds. We are glad to be 1 of the 2 banks from Poland, among the safest in CE region according to Global Finance Magazine.
In this slide, I would like to stress action taken to prepare our organization for COVID-19 environment. We continue to roll out a number of services in digital and electronic channels. We have shifted a large part of our organization to work relatively. We are well prepared to continue to service our clients, we are taking care of our employees in the second wave of pandemic.
Actions that we take yield good results across client acquisitions, digital sales, platform usage. As the economic activity improved in the third quarter, our business shown similar path of improvement. This was particularly visible in cash to loans sales, mortgage sales, strong recovery in asset management and one of the best quarter for new client acquisition.
Despite the recovery, we continue to be prudent in deploying our business sheet. We can -- continue to originate consumer lending with lower tickets versus market. We make active use of guarantees in SME lending. We have prepared for a more difficult credit cycle with highest amount of extra COVID-19 provisions at PLN 700 million.
Last, but not least, we maintain strong focus on efficiency in response to revenue pressures. We achieved 7% year-to-year and 3% quarter-to-quarter reduction in cost -- the operating cost base. Our focus on digitalization has been in parallel with steady reduction of physical locations by 10% year-to-year. Thank you.
Definitely, Polish economy experiences the second wave of COVID-19. Fortunately, the expected impact on businesses seems to be less severe than in the previous surge of pandemic. Especially all those restrictions imposed by the Government, we may name them as so-called soft lockdown, they clearly exclude blocking production and construction sites. Still, we do not see any disruptions in supply chains on the European level. So these are the clear differences as compared to the first wave of pandemic.
Policy response in Poland was very significant, and we think it will also affect the liquidity of Polish enterprises going forward. Still, this liquidity buffers in -- of Polish enterprises. They seem to be -- due to those liquidity buffers, Polish enterprises seem to be well equipped to withstand poor economic conditions in the quarters to come. Still, we see some negative effects of the measures already implemented by the Government, resulting in this soft lockdown, I mentioned.
Employment situation on labor market is very good, and the unemployment rate bond is the second lowest in the European Union, but still we might expect some deterioration in the months to come. What we see based on high-frequency data is the slowing economic activity, which already started at the beginning. This downward trend is visible already from the beginning of October. And it's likely this slowdown or the second dip is likely to be more prolonged. That's why we think it will also affect the recovery in 2021.
So as for now, we think that recovery will be more gradual, and we are replacing this square root recovery with this W and being followed by U-shaped recovery. And consequently, we lowered our forecast for 2021, simply we think that recovery will be less vigorous going forward.
Good morning, ladies and gentlemen. In terms of financial performance, let me just drive you through on Slide #15 with our P&L walk through. We achieved a net profit of PLN 917 million, probably is worthy after 3 quarters. Now in terms of what changed, first of all, we paid less for BFG, around PLN 100 million. We spent more on restructuring versus last year. And we had some additional consumer protection costs generally, mainly resulting from the European Court of Justice ruling on Swiss franc mortgages on consumer loans. But the big change that impacted P&L was the COVID provisions. They impacted PLN 560 million. Those extra provisions mainly related with slightly deteriorating macro prospectus under IFRS 9, which is the key buffer for facing the potentially tougher economic conditions.
If we go to Q3 itself, PLN 271 million net profit. I would say, 3 elements that impacted the most. First of all, we continue to create the, so-called, COVID provisions. That's point number one. Point number two, second -- third quarter is the quarter where the full NII impact is visible. And third, we see some rebounds, especially in the fees and commissions line in Q3, which allowed for some offsetting of the revenue drop effect. And that's visible on the next slide, where you see operating income on a cumulative basis, 2.7% down, and 10% quarter-over-quarter down in terms of revenues.
At the same time, cost discipline is our priority in those -- in this situation as we have been anticipating in the last quarters. We put a lot of attention to get the bank ready for tougher times for lower interest rate environment, working on the cost side all the time, and I will elaborate on that in a second.
Discussing revenues, I'll start from net interest income, 1.3% down on a cumulative basis and around 12% quarter-over-quarter. If we look at the NIM, NIM year-over-year went down by 30% -- 30 bps on cumulative and 64 basis points comparing this quarter with the third quarter last year. And we try to decompose the effects of the NIM drop as they were anticipated. So the first element is the impact of the interest rates. That's 43 basis points. And that -- the full effect of this is already visible in the third quarter as it was anticipated before.
The second effect is the commercial effect that's related with the asset mix. Currently, we are growing in lower yield, but much, much safer assets like mortgage loans. And the consumer loan book is flat or slightly decreasing, and that's positive -- that's causing the negative asset mix effect. But for sure, we will benefit from this in the next year in the provision line.
The third element is the liquidity excess. Now as you will see on the next slides, we are growing quite sharply in deposits, having more or less a flat loan book, which is growing by 1%. That liquidity is placed in bonds. Some of that liquidity is placed in low-yielding bonds, like NBP bills, which is giving us a potential to reinvest this as the liquidity stabilizes in future in higher-yielding bonds. But at this stage, that liquidity surplus is causing simply a negative impact on the NIM, slightly positively affecting the total NII, but this can be further brought into better yields in the future.
Now in terms of the loan book. As I anticipated, the total loan book is growing year-over-year by 1%. We see lack of demand on corporate, and that's a declining portfolio at this stage. Companies are not investing and are having liquidity surplus coming from the support programs. On retail side, as I was saying, the key driver are mortgages in this environment. You -- we've been anticipating that our credit policy was quite careful during this period, slightly opening, but careful, and that actually put a big impact on the type of assets which were growing in the loan book.
In terms of deposits, deposits are growing and the mutual funds are rebounding. That's a very good news. More or less 50% of the mutual fund drop observed in the first quarter is already recovered. We see growth in deposits, both in corporate and in retail, and that surplus gives us some potential, first of all, to optimize further the liquidity impact and also -- the pricing on deposits and also some potential to enhance the bond -- the yield on the bond portfolio because, as I was saying, short-term liquidity was mainly investing so far in this quarter in low-yield bonds, which can be further improved.
In terms of fees, fees rebounded by 5% during this quarter. We had quite, I think, a rebound in FX fees. We had very good brokerage. Mutual funds are also rebounding. Still, of course, weak card and credit fees is the most biggest problem related also with the lending portfolio.
Now cost. Cost discipline is something that is absolutely crucial in short-term as well as in the long-term. BFG has been decreased as it was anticipated. We are working on both personnel and nonpersonnel costs. We have been restructuring the bank. We have finished the redundancy program already by now. And the effects of those elements are impacting. And the main actions on the cost-cutting initiatives are visible on Slide 23. So you saw us -- our branch optimization went -- which went down by 10% year-over-year, you saw the redundancy programs, which reduced HR cost. We also done some, let's say, temporary reduction in costs related with marketing, with travel, with consultancy costs, which at some point will probably revert as well as variable compensation programs.
But we also benefited very much already this year from the insourcing, especially on the IT side of certain services; and on the centralization of a lot of services than internally, which also gives a benefit on the cost side. So the costs, probably half of the cost reduction that you're seeing is permanent, the other half is more temporary, related from protecting this year's profit.
Capital. Capital remains very strong. We have 16.8% Tier 1. The improvement comes from many of the risk-weighted assets reduction that was done. Part of this was related with reduction of the credit exposure, but part of that was also a better efficiency in securities and data quality and lower risk weight. So that improved capital efficiency to close to 17% Tier 1. And this capital position puts us in a very privileged position versus the published sector in terms of potential dividend payments. Because, just to remind you, as soon as the regulators allow for this, we are a bank that has now very high capital ratios that has -- doesn't have a Swiss franc mortgage exposure, and has a lot put aside on the COVID provisions, which -- so we don't expect also volatility in the P&L., which means that we should be -- versus the 14.5% Tier 1 target level that you saw. We have over PLN 3 billion of capital surplus right now.
Now LCR and NSFR, so liquidity at very high levels. That's also seen from -- for safe levels of both capital and liquidity. And I'm passing the voice to Marcin, our CRO.
Thank you, Tomasz. Good afternoon. So we are on Slide 26. As you can see on the graph on the right top, we did not encounter significant defaults. They are at usual level. So our NPA ratio is at the level 5.4%, and it did not increase. Our quality of our portfolio is very stable. We do not have transitions to stage 3. Another metric, which is coverage of portfolio with provisions, is traditionally at the high level. It actually rose to 70% for NPL portfolio and to 86% if we relate provisions on the whole portfolio. And this increase in provisioning of NPL portfolio moves us to the left side of the slide. Because -- as you can see, our cost of risk for third quarter is 70 basis points, but similarly to quarter -- to the second quarter, our standard cost of risk, so calculated according to our normal provisioning methodology, is at the same level as it used to be in the second quarter.
And it's significantly below our normal 40, 50 basis points cost of risk. And this additional 37 basis points of provisioning relates to additional COVID-conservative and front-loading provisions. And as you may remember, in the second quarter, we were making expert adjustments to performing portfolio. We increased our PD parameters by 50% in retail, part and by 30% in corporate part. We also made some conservative transitions to Stage 2. Whereas in third quarter, we focused a bit more on nonperforming portfolios.
And these COVID provisions related to expert adjustment to LGD parameter. So our model-driven LGD parameter was increased a bit to reflect potential -- some impact on the recoveries, and it is for collective portfolio. Whereas for some individually assessed loans in Stage 3, we put also some buffers if there will be some issues with recoveries recovering of full potential, which we thought before pandemic. And this actually caused our coverage in NPL portfolio rose in third quarter.
And in terms of our credit policy, we continued our kind of prudent approach to originations. During second quarter, we developed changes to methodologies approach, how to assess our clients during COVID times. And it allowed us to open our credit policy in a controlled manner. It's still a bit -- we are still prudent for some more cyclical portfolios, but in many others, we already operate as a -- in pre-COVID times.
We are focusing on monitoring. We have our intensive monitoring meetings, unions covering business and restructuring, where we discuss if there are some clients, large clients where some issues may arise and if we should not be in more intensive contact with our clients. And we are also utilizing governmental guarantee programs, which we'll discuss a bit more in the further slides.
So on Slide 27, very quickly, you can look at the left graph on the gray line. Here is indicator -- quick portfolio quality indicator. It shows what is the percentage of loans with small delays in portfolio -- in performing portfolio. And as you can see, it's actually going down. So on one hand, it proves that nothing wrong -- nothing bad we are observing in our portfolio. To some extent, probably it's also effect of moratoria and liquidity programs responsible by the government. But as of now, the portfolio is performing well.
Slide 28 was already showed during second quarter presentation. So I will not go deeply into it. Just to -- just it shows that our exposure to the more cyclical segment is lower than our overall market share, which puts us in good shape in case of some portfolio deterioration on the market. And just to remind you that our engagement in FX mortgages, Swiss franc mortgages, it's -- is insignificant if we compare to the whole portfolio and if we compare to our peers.
On Slide 29, is something which we put lots of attention during pandemic time. So support programs to our clients and to our portfolio. So on the very top, we have moratoria. A bit more is discussed on the next slide. So I will skip it for now. And then we already originated PLN 3 billion loans with guarantees of BGK, so Polish Development Bank, guaranteed by Polish State. And here we are -- we saw above market activity in utilization in these support programs. It's -- similar can be said about Polish development fund programs.
So liquidity for businesses here. Our -- we have market share of 30% compared to 10% of our loan portfolio and generally a fair market share, I would say. So it also shows that we were very active, and our clients took advantage to the greater extent from these liquidity programs than generally on the market.
And the last slide in this asset quality part of our presentation, so Slide 30. It shows the development in moratoria area. So in the peak moment, so in June, we had almost PLN 11 billion of loans with moratoria. A vast majority of them already matured. Because, as you can see, at the end of September, only PLN 2.5 billion of portfolio is still with moratoria. And if we look at what is happening with our clients who took moratoria, so more than 80% of them come back straight to regular payments. 14% renewed moratoria, and 5% of them had some delays.
And 2 comments -- 2 additional comments. First of all, unlike our peers, we were preparing 3 months moratoria with option to extend it for another 3 months. Whereas most of the banks in Polish markets actually, from start, gave 6 months moratoria. This somehow clarifies why we have this 14% of renewal because after 3 months, some of the clients decided to take another 3 months. On the other hand, this is why our portfolio is quicker going back to payments. And in terms of 5% of delays, these are all delays. Of course, majority of them are insignificant delays. So only a fraction of these clients, we can expect that we have a major -- more significant issues with repayment, which is actually quite similar to the normal levels of portfolio performance.
So this completes our presentation, which we prepared for you.
Thank you very much, Marcin. And now we will move to the Q&A session, and maybe I will ask first our Co-moderator to solicit any questions from those that join us on the call. Afterwards, we will move to questions asked through our mail channel. Thank you.
[Operator Instructions] Our first question is from Sam Goodacre, JPMorgan.
I've got 3 questions. The first one is on capital. Obviously, this quarter, a big debate across the sector is dividends given the current restriction. You're still accruing only part of the profit generated this year. So does that signal your intent to resume dividend payments when allowed? And could you give us any comment on your expectations out of the KNF and the time lines, and the process for deciding and announcing a dividend?
The second question is also related to capital, and it's following up on your comments from earlier this morning, I think, to the press, about consolidation in the sector. I think you have ruled out a merger or exploring a merger with Alior, but it does seem you are still open to consolidation within the Polish banking sector. So could you give us some color on the role you think you would be playing in that?
And then my third and final question is on your operating expenses. You've obviously made very good headwind with the cost initiatives. Which sort of further cost initiatives might you be able to explore at this level? So perhaps you could give us a bit of a steer for how costs in light of further optimization might trend into next year?
All right. On the capital. So 3 questions, capital, consolidation and OpEx. On the capital, first of all, we are waiting as majority of the European banks for the regulators to open up the gates for further dividend payments. From one side, we have some profit. So we -- assuming KNF would return to the original dividend policy, we would be in the position to pay out 75% of that profit. And second of all, as you remember, we have an undivided profit of PLN 1.6 billion or PLN 1.7 billion, if I remember well, which is also an extra dividend, something that could be potentially discussed. Of course, the capital position is very strong and is now allowing for a decent dividend policy from one side.
From the other, to consolidation. Now our assumption at this stage regarding to your first question, so what will be the dividend policy of in the next year? We were so far assuming that in 2021, we will be able to return to the normal dividend policy. Of course, the situation is dynamic, and we will observe how it goes. What will be the ECB policy? And how we can follow-up? But at this stage, our basic scenario is that we would be able to return to the dividend policies.
Now in terms of dividend policy and your second point, so consolidation. What is the first thing that we always stressed, and this didn't change is that we will approach consolidation, which I think everybody is now saying that there is a need of consolidation in the Polish banking sector. We will take an approach, which is opportunistic. Meaning that if we see that consolidation brings higher value for the shareholders versus extra dividend or any type of return to shareholders and generates positive EPS accretion, then we will consider that. Now there is no specific target at this stage that we would, I would say, flag or exclude at this stage. The situation is, I would say, quite open for us. At this stage, it's more a type of potential direction than anything that we have currently on the table or are discussing on the table.
And our comments so far was relating more to the fact that, I would say, we don't have anything on the table that -- a target that we want to currently take over. It's more, I would say, a general approach.
In terms of the OpEx line, this is still being discussed. For sure, we are taking benefits of what we have already done last year and the redundancy programs this year, and some initiatives taking next years. For sure, the cost line is something that is very important for the future years. For sure, physical footprint is something that we are now heavily discussing. I don't have an outcome yet to share with you to tell you what will be the next year cost trajectory.
For sure, as we have been promising last year, already this year that in this pandemic situation, we will keep costs below last year. We're trying to deliver this. And I believe we're doing this so far successfully. I don't know, Leszek, you want to add, probably something.
Yes. Yes. One thing regarding this consolidated question. Yes, one thing is that the second part of this year is the time when we prepare our strategy for the next 3 years. And this strategy will be announced in the beginning of the next quarter in the next quarter. We think about the proper time. But what is our message is that, for us, important. And we understand the position and the gaps, technology, drivers of the growth in banking sector. It is necessary for us to focus more on organic growth. And this is the main aspect of our strategy. But we are aware that this is the time when the consolidation is important feature of the banking sector. This is why we -- our message is, where the baseline, the base scenario for us is organic growth. But also, we are aware that there will be consolidation within these 3 years, within this strategy period. That is why our message is that we can't be blind that there is not possible to merge with somebody. But there is, as Tomasz said, there is no such issue now. Thank you.
Our next question is from Gabor Kemeny from Autonomous Research.
It's Gabor from Autonomous. A few questions on net interest income, please. You felt this additional headwind from the excess liquidity we observed in the corporate sector now, and is partly related to the anti-crisis shared programs. And you also mentioned the negative corporate lending dynamics on the back of this. With this in mind, I wondered how you see the net interest income outlook for the next few quarters. Do you expect your NII to stabilize here? Or do you see more downside for the coming period?
And then the other question is, can you remind us how much kind of unrealized gains do you have on your bond portfolio? And how you think about potentially realizing any of those gains in the coming period? I saw a PLN 1.2 billion accumulated other comprehensive income in your equity. But it would be useful to get a better steer.
And just finally, why do you think you have lost market share in consumer and overall retail lending? Is it because you don't see a decent quality demand? Or you are willing to preserve your margins? And how do you think your market share could develop?
First of all, NII, I believe we reached the bottom currently in terms of NII. So therefore interest rate impact is now in our books. What is crucial for NII to bring it further is -- upwards are 3 things. First of all, it's the loan growth, which stopped today, and that is very much a question on the macro situation.
For sure, in Europe now, the COVID situation is severe enough to -- for us not to be, let's say, over-optimistic, let's put it like this in this respect. But I believe that step-by-step, we will be learning how to live with that and how to recover loan growth. The second element is repricing, and this is something that is still going on, both on deposits, probably still some place to further go deposits although probably limited. And also in the margins on the lending side.
Third element is related to investing the extra liquidity. Like I was saying, majority of that is currently temporary, let's put it like this, invested in short-term bonds. We can probably extend the maturity of that portfolio and also get a much better yield on that liquidity surplus. We're talking about a few billion Polish in here. So down should be going up, but the pace will really depend on the lending portfolio growth.
In terms of the market share on consumer loans, because I think on mortgages we are doing very fine, the key point is mortgages. Is something that has been anticipated by our CEO, and showing the credit policy that we have been doing, and especially in this segment? And clearly, the biggest thing that costs the drop of the market share was an elimination of the largest tickets in our books. So we kept quite, let's say, prudent approach in this third quarter. Despite seeing recovery in the economy, we -- as also anticipating P&L. We were saying the real testing point will be the fourth quarter. And we remained prudent for that fourth quarter. And this is why the credit policy was, for sure, tougher than in our competitors. As I was saying, especially relating to the large tickets on the corporate.
You asked also the question on other comprehensive income. I don't have the number in my mind. It's around -- if you put together the 3 components, so the old -- the so-called health to collect and sell, so the old available for sale portfolio. But if you also put health to collect, we are talking about over PLN 2 billion total valuation, if I remember well. We had also a policy putting together that a lot of these long-term bonds with especially better yields were put in the portfolio, how to collect. So with not an intention to sell, but with an intention to keep the NII stable for a longer period. And as we were also anticipating to you that our hedge for NII is relatively long term, so we were hedging may be a smaller volume, but for longer periods. The intention is actually to stabilize the NII.
I don't have at this -- an intention to put this quickly back into the P&L, for example, through selling bonds because stability of our NII, I think, is more important in the longer-term through the cycle, and that was the intention of our general hedging strategy, which was done by both long-term bonds as well as IRS transactions. But of course, if market opportunities will be there and we will be anticipating a drop of value of bonds, we will tactically might use some of that. But I don't anticipate.
Our next question is from Alan Webborn for Societe Generale.
How much visibility do you have on the asset quality of the corporate portfolio, given the long-term support that's been given by the PFR and someone up until now? You've made a lot of store about your near PLN 700 million of COVID provisions that look quite high compared to your peers. And I think you've said that, that PLN 700 million should skew through 2021, if there's a deterioration in the economy. So can we interpret that as being -- you won't need to have any further COVID provisions, even though the economy is now turning down? Or is that too optimistic view? I'd just like to have an idea of what you feel the visibility is? I mean you've shown us know what's happening on the retail side. And I think it's clear that performance coming out of moratoria and retail is quite good. But I'd like to talk a little bit more about the corporate side, and what you really mean about that PLN 700 million being sufficient? So that was the first question.
The second question was, you've clearly made some very big strides in digitalization. I mean within your reporting documents today, there are a number of examples of new ways of digitally signing documents and so on and so forth, which clearly is related to sort of branch utilization and so on. What does that mean in terms of your -- a need that you seem to have to consolidate? Is it just that you feel you can get a lot more customers because you might argue in Poland, at least, you wouldn't want too many more branches? So I wondered just to put into context the digital development against your need or certainly your willingness to look at consolidation, that would be interesting.
The third question, I mean, I know your -- I guess your economists or you've put in a banking sector outlook for 2021, where you have sort of 3.1% effect loan growth. And just, I think, 1.1% corporate loan growth for 2021. Does that reflect your own view in terms of what the CAIB is going to do next year? Or do you think, as in the past, you've often been able to do a little bit better than that? That would be interesting to put that into context. And I think the very last question, I know it's a small thing for you, but are we going to see sort of PLN 25 million a quarter in FX loan -- in FX legal provisions for the next year? Or was that just a catch-up and we shouldn't expect to see any more.
Maybe I will start, Marcin Gadomski, and then pass part of the answers probably to. So first of all, in terms of portfolio quality, so of course, I do not have to say that the picture is a bit blurred. There's a kind of caveat. But what is our view? So from the very beginning, from the end of first quarter and the second quarter, we took a view that pandemia and its impact, it's not entirely short-term issue. So even if it will be delayed through some banking kind of moratoria activity and support programs and so on. Some -- it's kind of prudent.
To put aside some provisions for some issues of our clients debtors. And already, when we were doing our provision in the second quarter, we somehow anticipated that there is quite material risk that there will be a second wave of pandemia. And having it in mind, we made quite a lot of provisions.
In third quarter, we kept doing that. And probably, in fourth quarter, we will do something similar. And having said that, of course, not knowing the future, we think that we will do, by that, most of the provisioning, which is required. If we look at 2021, we still think that the level of provisioning will be greater than it used to be in previous years, but already materially lower than in 2021. So the buffers, which we created, will cover most of the actual losses, which are related to pandemia.
Of course, with the assumption that after, let's say, spring, the activity we -- to much -- to a great extent, come back to the levels for pandemia. Here, what is important to be said, is Government support programs. Because at the moment, we are in the situation where most of the -- great part of the economy is performing well. Then there are some sectors which have problems, but we still consider them short-term and provided -- banks and Government will provide adequate support -- liquidity support programs. These are viable businesses.
And on that assumption, we think that, what I said about provisioning and the levels of provisions. Here, the good examples, for example, are hotels. Yes. So we believe that this is a viable business in long term. Whereas if the current squeeze, let's say, will be prolonged, they really need some liquidity support. But having said about, for example, hotels in our portfolio, we have very strong sponsors, and we are in discussions with them, and they are able to support the investment.
I would also comment about sales of loans in 2021. So we are still in the process of budgeting next year. But if we look overall, so mortgage portfolio is behaving quite well. We did not see a great drop in the demand or it was fully built already, and we think that it will continue in the next year.
The demand for unsecured loans is very much correlated with actually pandemia and sentiment, consumers -- spending sentiment and consumer sentiment. So like 2 weeks ago, if we were -- if we would be discussing this thing, we would be very optimistic now. We see that demand is a bit weaker for a week or 2 already. So if lockdown will -- measures will continue. So in this month, it will be weaker, but then we think it will rebound.
In terms of corporate portfolio, historically, about 50%, 50% was investment loans and kind of operational working capital loans in our portfolio structure in our sales. So what we see that operating loss, the demand is greater. It's 20% greater than it used to be in 2019. But on the other hand, investment -- demand for investment loans is 50% lower. So again, we hope for recovery of this demand in 2021, but the kind of level of this recovery depends on -- it's more medical question, I would say, than the banking question. And I would pass to probably to Tomasz to cover the rest.
Yes. On Swiss franc mortgages, just to explain, we created extra provisions in the range of PLN 30 million. PLN 25 million went into provisions, PLN 5 million in other operating costs. That was relating with adjusting the probabilities of winning or losing courses. We deteriorated those probabilities taking into account the recent quarter. The number of cases in Pekao is still, I would say, very much under control and below the models that we were forecasting.
So we might create one more provision in the range of, let's say, PLN 20 million to PLN 30 million, but I wouldn't expect that we would be making additionally PLN 20 million, PLN 30 million per quarter. At this stage, I don't see in Pekao, at least, a number of cases that would justify such a theory especially that we have a relatively old portfolio that was granted in good conditions.
Third, your question regarding the reasons for an M&A or consolidation. I would name 3. First of all, it's the scale for investing. For sure, everybody needs to have a top quality, for example, mobile app in terms of servicing its customers, and the cost is relatively fixed of creating these things. And this relates to many things. So the scale of activity for sure.
This also relates to things like the potential of other revenues like data management things and things like this. So simply scales matter. Second of all, we observed some regions of Poland where we think we should be more active on, and that's generally the Western part of Poland. Of course, you don't necessarily have to do this with M&A, but it can be potential.
Cost synergies are, of course, related with the scale of activity, and this creates an additional potential. And then last, but not least, as you mentioned, the number of customers. So probably those are the main reasons that, let's say, are on the other edge of this digitalization, although I agree with you that the physical footprint impact. So the digital impact on physical font print will be visible in the next few years, although still, I think, branches will be also needed for acquisition, especially, and for new sales because digital sales are not always the only possible way.
[Operator Instructions] We haven't received further questions. I will hand back to the speakers.
Well, thank you very much for those questions. Going to the list and also those questions that we received on our mailbox. I think most of those topics have been covered. In case there are any further questions that we haven't really answered, please do reach out to the Investor Relations team, and we are obviously happy to speak. But I think since we covered most of the topics and also those on the list, I think we would like to conclude today's presentations and Q&A session. Thank you very much.
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