ING Bank Slaski SA

WSE:ING

Earnings Call Transcript

[Piotr Utrata, executive]

Good morning. Welcome to our conference, where we are going to sum up the fourth quarter, but also make a comment on the whole year. Let me introduce our team, Brunon Bartkiewicz, President of the Board; Bozena Graczyk, CFO; Rafal Benecki, Chief Economist; Iza Rokicka, Investor Relations and ESG reporting. My name is Piotr Utrata, and I am this bank's spokesperson. Let me give the floor to Brunon. Over to you. Microphone, please?

[Brunon Bartkiewicz, executive]

Welcome. Let's summarize Q4 on a formal note, but I'm sure you will all be looking at the whole year anyhow and our figures that have not been audited yet. So let me say the following. Yet another time, it's my pleasure to inform you that all is well at the bank. And nothing extraordinary is happening, which means nothing wrong is going on at the bank.

Quarter 4 is within the mainstream of our actions and their outcomes, what we have targeted for this year, what is consistent with our vision of the world and our place in it. Certainly, once we have a lower economic activity, we are more dependent on the macroeconomic outcomes. So hence, more the reason for having Rafal here with us and in part to, just as soon as I am done speaking, Rafal will present to you our assessment of the current economic situation and the vision of our office that Rafal chairs as far as the macroeconomic development is concerned in Poland in the nearest future. And then Bozena's part that will be more financial details.

And I'm sure that due to relatively high predictability of our quarter 4 figures, which we see in the analyst views, we will perhaps give more room to questions to address your remarks, notes. I'm not counting on price, but still that's not part of our job description. And now in our activity, quarter 4 is no surprise to you or us. We see that in today's -- in this moment's comments already. So it would be an overstatement if I were to guide you through the specific figures and graphs that we talk about Page 4, for example, in our market share.

And due to some of the comments, let me just remark that our market shares are not dropping, stable and consistent with our expectation, mainly as regards keeping the balance in a good shape and not underbalancing it with insufficient loan-to-depo ratios. A lot can happen. So we're trying to keep the proportion between the basic figures of deposits and loans in adequate terms without excessive focus on debt instruments and investment, which is not the core activity of the bank even though at present time, it might be reasonably profitable. And this is not an issue that has enjoyed our full confidence in the past.

So therefore, we are cautious in the proportion of our balance sheet, which indicates that we are less willing to bet on deposits. The credit alone dynamics is a picture of the macroeconomic situation and the situation of the sector as such. And here, we do have some turbulence -- we are seeing some. I don't want this to be interpreted as though we are being vague on the activity of the whole economy throughout 2024 and our conclusions for 2025. We are still increasingly optimistic. We are very optimistic as far as the missing points in the macroeconomic factors in 2024, but we're thinking that 2025 will be the beginning of a new great era, and we will make Poland great again. This is contagious, do forgive me.

But I will leave that to Rafal, who contrary to his character, will try to put an optimistic hat on. I should say that that's probably all for me. Our outcomes will not be a surprise to you. I can see that the cost of risk in Q4 are a surprise, which is not a surprise to me, but it is a surprise to you. But I don't want you to think on the basis of the figures of Q4 in risk department to draw far-reaching conclusions. The situation is dynamic. It is volatile. We are currently exiting a phase, which I personally still consider to be a relatively low economic activity with a GDP growth of 2.8%, 2.9%, seems to be an overstatement, but we want more, we wouldn't want more to be happening?

I do not envy my colleagues in other countries, especially other EU countries who have to scratch their foreheads thinking about what's happening in their own economies. But seeing the excellent outcome of Polish economy, I am very glad because we need more of what we have and what we need is key to this whole setup. So both the results and the figures probably would not raise much doubt. Reading our presentation, I suspect you would have noticed the recommendations of the Board on the payment of the dividend, that's probably a novelty of some thought.

But if you look at the figures and the rationale of our attitude to the dividend policy, frankly speaking, I believe a lot of you could have expected that kind of recommendation, which is consistent with the financial authorities' recommendation of the payment of dividend, given the lower economic activity, which does not mean that we are going to extend that to the following year. We are quite optimistic. However, the capital surplus that we have today allows us to pay that dividend because this is the time to do it. And my dream is to have the Polish economy grow at such a rate that I would have to explain why we do not want to pay the dividend. But hopefully, the great bright future is ahead of us.

Our attitude towards dividend is slightly different. I'm sure we would all be very happy if the loan activity were to fire away on the level that we're talking about. Investors would not be complaining upon the results that would ensue. That's all by way of introduction.

Now, let me give the floor over to Rafal and I'm hoping you will be motivated and you will be optimistically looking ahead at the future.

[Rafal Benecki, executive]

Hello. If we were to see the optimism, let's look at the region and 2024. In 2024, Polish economy grew by almost 3%, 2.9%. Historically speaking, you could say there is perhaps nothing to care about. But if we look at the forecast for the region, we have delivered the expected growth, whereas our neighbors had half of that or 2/3 of what was expected, especially Hungary and Romania, a lot weaker than expected. The Czech Republic half of what was expected.

So from that point of view, Poland definitely delivers the expected growth. Although, like I said, historically, it is not very strong, and this is the future ahead. We are assuming that in 2025, our growth will be slightly above 3%. We will still be one of the fastest-growing EU economies, but that's a new norm. So 3% or 4% peak, rather than 5% or 6%. There are a few reasons, stagnation in Europe but also supply in the Polish economy. I will go back to that very shortly.

In 2025, we're assuming growth above 3%, still mostly domestic demand. The second motor of domestic demand is launching that investment because in 2024, practically, it was segment. In 2024, the main driver of the growth was consumption. We're assuming that in 2025, there will be more investment to be seen. We can see that in the following slide. I will not perhaps surprise you if I say that the EU financing cycle will be the main driver behind it. And we're looking not just at how much money the state will absorb, but also how much money will reach the ultimate beneficiaries. And to simplify it, looking at some potential delays between the inflow of the fund and the disbursements to the final beneficiaries.

So taking into account those delays, the forecast that you can see on the lower graph and that's the money that will be paid off over 3% of GDP in 2025 vis-a-vis about 1% in 2024. And that's the main driver that we're waiting for versus the Polish recovery program, structural funds and perhaps some Polish recovery plans -- loans. An important factor here, from that point of view, Poland, is different than our neighboring countries. We have at least 3 main driving factors of growth, which do not depend on trade policy and customs. So consumption, salaries, the savings buffer, the EU financing cycle, that's another factor, which will drive public investment and the deleveraging of the economy, which we're hoping will evolve.

In 2024, we're counting on public investment, private investments should improve perhaps before the end of the year. The rate of private investment is shown at the graph above. Until the end of 2024, they were still slowing down. The plans are not excessively optimistic, but we're hoping to get public funding. And then towards the end of the year, '25, '26, private investment will probably rise up. Definitely grant-related projects from the Polish recovery plan need to be prefinanced and that would too generate some demand for loans, perhaps not as big as we'd hoped for, but still it's an element that supports our loan actions, but there are other factors as well. High interest rates are a significant factor. We can see that some of the loan demand is satisfied by getting financing abroad.

This week, there was a lot of issue -- a big issue in dollars in one of the biggest Polish companies, but we looked at the payment balance. There is an increasing share of financing by mother companies of their subsidiaries. I'm talking about the enterprises. And we're -- what we need to conclude is that the banking sector might not necessarily be the beneficiary of that pickup. There is an increasing demand still for external financing.

Going on looking for positive signs. In Q4, in December, we saw some early signs, mostly in Q4. The GDP allows us to make a more sound estimate of Q4. There is an increase in consumption still. And over the last 3 months, we have seen infrastructural investments launching. You can see on the top left graph, the dark blue line curve, is 1/3 of the construction business infrastructure. And here, we've seen an improvement for the last 3 months, which means that the cycle of public investment is being launched, which is quite positive too.

On the right-hand side, you see a graph for industrial production. That's a red lot we often see. It shows us that the whole region of Central Europe, is right now quite stagnant in terms of industry, which is an important factor because it used to be based on industry and export. You can see German, Czech and Polish production here, which are flat, right? And the latest global data indicates that the global industry is slowly moving on.

Germany's structural problems are not really changing. The general news from Germany is that there's a slight improvement, probably just before the customs duties are enforced. Let's hope something will come out of it, but maybe there is a change of cycle, but not a structural improvement. So hence, a not very typical pickup in 2025, mostly driven by domestic demand and the 3% growth of GDP over 3 rather than 5% to 6% growth. Now for interest rates, we can see some room for lowering 50 to 100 points, mainly in semester 2.

Poland is still struggling against inflation, not just the regulated prices that we have been hearing about in the commentary, but also base inflation, which is -- core inflation, which is 4% as of the end of 2024. Now it should be going down gradually, but the forecast for Poland and for Hungary, for example, are still quite high. There is some room for improvement, but not much. The central bank's rhetoric is very restricted, and that translates into the exchange rates. And as we look at other channels of influence, we can see that credit shows that these high interest are very restrictive. There is some leeway for 50 to 100 points downwards, but we think it will probably happen in the second half of the year.

Now the trap of medium or high growth is certainly a factor and the supply side is also slowing down economic growth. Some of it comes from Germany. Some of it comes from other economy. It's hard to estimate the proportions between the two. But if you look at the graph at the top, that's GDP per capita after exceeding [indiscernible], and you can see what happened to those countries. The yellow line is Spain. And starting from the Lehman Brothers crisis, Spain became stagnant as far as this is concerned. Poland dealt with it quite well, nearly as good as Korea, but there is some problems certainly. The model based on low productivity and low labor costs has to change, and we're hoping for that to happen as the banking sector. We do hope that private investment will become unlocked. We do not believe that Poland is using the full growth capacity.

Our economy is very much deleveraged and at the moment, when we require higher productivity and a new growth model, the diagram at the bottom shows, we are very much deleveraged, the second one from the bottom in the year. So there's a lot of headroom, and we are still a good place to invest, both for the Polish and foreign business. But the economy is now kind of stagnant, just surviving, but it's good idea, we believe, to come back to higher rate of investment to come back to the line -- the dotted line in the top diagram, that's Korea. We'd like to follow that example rather than the path that Spain had taken.

In terms of business demand for credit, there is a slight improvement. And given our forecasts that assume a sort of average growth in mortgages and in corporate lending, there will still be deleveraging of the economy, which shows that we are not using the growth possibilities that are in place and the banking sector is not participating in this upcoming brightening up of the situation.

Now people say that a lot has to change in order to make our economic growth stronger. But what we've been paying particular attention to as the banking sector is the financial deepening. This is what we need at this stage of economic growth in Poland. A fully fledged financial and capital market with the banking sector as an important part of it. But in fact, we need all different segments of the financial market to make sure that companies can use different tools. Scalability is needed. We have a very large SME sector, and that's a vast resource. But in order for the economy to keep growing, we need to scale up those companies. We need large international companies and leveraging is necessary for that.

So we do hope that the Polish business will develop in that direction. But right now, these forecasts are not very optimistic. 3% this year, similar next year, other forecasts, but we would very much prefer for Polish business to be more open to these growth possibilities. Thank you.

Q4 performance and the results for -- which is PLN 1.3 billion of net profit and as we said before, this is a better result than what the market expected, mostly due to lower cost of risk. And I would like to take this opportunity to comment our performance in terms of other types of income, and that's higher. They are similar to Q3, but the composition is slightly different. In Q4, we had a positive profit from leasing and we updated the operational risk.

And you've been asking about the tax rate in 2024. We saw a reduction of certain differences we had seen before, namely just like in the banking sector, as a whole, we received a positive interpretation for the losses from the Swiss franc lending -- Swiss franc credits. And this year, we are also including the positive effects of the R&D break that reduced the effective tax rate. If you look at the analysis we showed you, the PLN 4.4 billion is the net profit, and that's only slightly lower to our net profit from 2023.

PLN 140 million was the total amount of the repayment vacation as it was called. If not for that, our profit would have been better. Now interest -- in terms of interest rates profit, we had 7% and the commission performance, which is a good idea because that reflects the transaction amounts of our clients, that's PLN 130 million year-on-year. Now we still have a higher operating cost, PLN 258 million was the growth, which is 7%, and that's the result of price increases and other activities that are due to the inflation adjustment. And the banking tax, which is PLN 96 million higher, which is a growth of 15% and this is due to a different asset structure and a lower share of T bonds, which as you know, are exempt from the banking tax.

When we talk about profitability, our ROE adjusted for MCFH is 20.4%, which is a satisfactory level and the cost to revenue indicator is at 41.7% in 2024.

Now just a few words about our net interest income. As you can see, it's PLN 8.9 billion, which is a growth of 8% year-on-year. In Q4, PLN 2.2 billion was the result and that's similar to the previous quarter. Now the quarterly interest margin is 6 basis points lower at 3.55%, but this should come as no surprise to you. This is the result of a higher cost of financing, and it directly resulted to -- directly related to the promotions we had in Q4. It should also come as no surprise that our loan-to-depo indicator is at 75.8% at the end of the year, which is below our ambition, but it's a good idea to emphasize that it's still better than the sector average, which was even lower than in Q3, namely at 67.8%.

This is a good moment to say that the segment that ruled in terms of asset growth was retail with over PLN 20 billion new lending, and that's only PLN 1 billion less than in our record year, which was 2021. In terms of mortgage lending, it's also an important factor. New lending share is over 17% and that's without any support and without the 2% credit effect. So this is a very good trend. We do hope it will continue or indeed speed up into 2025.

In terms of commission, this income is 6% higher at PLN 2.3 billion, and that's a very good performance. This is something we are very happy about, and we are happy to see growth in pretty much every type of commission income subsegment. 23% growth on payments cards and credit cards, which is the result of a growing number of transactions and the value of transactions and the very high activity in the first 3 quarters in particular. 20% growth on the distribution of our brokerage activity and in terms of custody, you know that this is near the end of its life cycle as a product in the bank.

So this revenue is going down. And income from the distribution of participation units has grown. Our assets in investment funds grew by 51% last year. As a result of our higher activity in mortgages, we saw a 6% growth of revenue from insurance products as well. Now, the trend in the last quarter was slightly different. I would like to comment on the slightly worse performance on cards -- card commission. This is mostly the result of Q3 being that high and a slightly lower amount of transactions that we saw that year, but that's just a marginal reduction compared to the previous quarters.

In terms of our OpEx, in 2024, our expenses grew by 8%. The total expenses grew by 8% to a level of PLN 4.7 billion. Operating costs and general and administrative costs went up and as you can see in the analytical data, this is as a result of the higher cost of legal and advisory services and IT services and I'm sure you'll understand that marketing and promotion also a more significant cost item.

You can also see a 5% growth in terms of salaries. This includes the salary increase from April, which was about 7% and our banking tax going up, this is plus 15%, but I've commented on that before. Regulatory costs are another item that's worth commenting on. In 2024, the banking sector was not encumbered by the cost of the DGS and this is going to change next year. The regulatory costs in 2025, as we have been informed, should be about PLN 3 billion and the DGS rates -- the cost is not something we incurred for 3 years.

So this item will certainly increase the total share of regulatory costs in the total expenses in 2025. Now as for the cost of risk, we had them at a very high level in Q3, PLN 432 million. In Q4, it's PLN 173 million, and this includes PLN 65 million of the provisions for legal risk for the Swiss franc credit. And after taking this effect into account, the cost of risk for retail was PLN 53 million. And for corporate, they were PLN 55 million. Now these lower costs of risk stem from the fact that every quarter, we carry out a review. And in this June, Q4, we didn't identify certain items that had existed in Q3 that those bigger impairments, which we had seen in Q3, impacting the cost of risk.

We still maintain a careful -- or a cautious stance. And we hope that 2025 will see a good economic growth and a positive impact on the cost of risk. But we believe that for the next 2 quarters, we have to remain cautious in terms of how we identify project risk stemming from the previous economic cycle. Now in terms of the portfolio quality, as you can see, for the corporate sector, we have the same levels as in the previous quarter for the nonperforming part and a very low rate or very low amount of irregular loans.

Now as a result of the sales of irregular corporate loans in Q4, we saw a plus PLN 21 million positive impact, which translated into a lower level of coverage -- the provisioning rate because what we are selling are the credits with the worst parameters. And we are down by 13% with the provisioning ratio which was the result of our credits or lending activity in Q4.

We meet all the MREL requirements. And as you know, from our communication to the market in October, we received PLN 350 million of senior loan that ensures meeting all the requirements and having the sufficient buffers for this. And finally, the last bit of commentary, it is the intent of the management Board to recommend to the Supervisory Board that a dividend of 75% of the net profit should be pair for 2024. We have a capital surplus, which make it possible to do that.

[Iza Rokicka, executive]

Thank you, and let's have questions. We will be going to the Q&A session right now. We will respond to questions from the room first, if there are such and then from the Internet. Over to you.

[Unknown Analyst]

[indiscernible], Santander. First, the dividend. The basic dividend policy is 50%. I always think about the future. 2025 seems -- it seems it will be similar to 2024. Is the basic policy up to 50%? And what is the motivation for the higher payout this year? I have 2 further questions.

[Brunon Bartkiewicz, executive]

In our documents, we have 50% policy as the basic one. But what I want to say is that our dividend policy is always one that matches the needs. So the bank wants to have capital independence. It finances itself from its own activity, but the power of being able to predict the growth of loan activity is subject to failure sometimes.

If we look further ahead, right now, we believe that the 75% payout and baseline assumptions for 50% does not in any way breach anything and does not bring us any closer to the buffer period as regards to legal requirements, optimization of the capital size. So that's how I explained. Typically, it's 50% assuming there is a growth in loan activity, but the growth of loan activity is lower than foreseen.

So there is a natural element here that exists. And even if we look optimistically forward, we believe that we are able to pay 75%. So hence, we do that. It's the same principle that we go by. And many times in the past, it has led to a nonpayment of dividend, but that wasn't the time when the dynamic predicted and actual of loan activity went into the 2-digit figures. But those times, as you have heard from Rafal seem rather distance, but we do not lose hope.

[Unknown Analyst]

Another question concerns the intervention of the President of ING Group. And that's the appetite for M&A. As far as I remember, a statement was made that M&A would be an interesting option in every country where it makes sense. Three countries were listed. So my question is, when we look at the loan, ING is close to the market tendency. Has something changed in the Board's opinion for M&A area and a potential instrument that ING could use? Are you looking at what we think locally?

[Brunon Bartkiewicz, executive]

Steven never listed Poland, as you would have probably noticed. He listed countries where upon slight turbulence, you can find that ING's market share is relatively low. You can't say that this would be true in ING Bank Slaski. Our growth in market share looking from the decades perspective is highly satisfactory if we compare to where we were 10 years ago and where we are right now. So today's situation and the demand in Poland, we're looking at 4 years of interesting recession. That does not mean that the credit action was not dynamic as it was in 2021, but that's easily explainable. Rafal explained a lot to that end.

So that aside, our standing for M&A, our position on M&A changes in no way. If we want to increase our scale, we have proven over the last 20 years that we don't need M&A for that because our organic growth is linked to the growth that should be considered appropriate. Now overheating, excessive growth triggers some consequences, and it is often demonstrated in analysis over the course of several years. Not all M&As are successful. And to be clear, the same analysis demonstrate that hardly any M&As in Polish banking have been profitable in the long run.

So our position remains unchanged. However, as a rule, just I don't want to create a vision that we definitely say no, we never definitely say no. Being operational is always commendable. So that intervention, that statement is a confirmation of certain signs that our group's Board has been sending -- our local position remains unchanged. There is a difference, though, right? The group may have its own policy, and we might not even be aware of it. Perhaps, they want to buy an insurance company. But definitely, we don't here locally.

[Unknown Analyst]

And my last question. This is what I get asked as an analyst. The demand for corporate loans in the Polish recovery plan context. Dozens of billions will be distributed throughout 2025, and that the recovery plan means prefinancing. So the question is whether your bank today has a pipeline of smaller or larger financing tools and whether a Polish recovery plan will, in fact, trigger a jump start to corporate loans?

[Brunon Bartkiewicz, executive]

Let me hand over to Rafal for that. Let me just say the following, first. Yes, but that's mostly an announcement, right? The rollout -- the cascading rollout of recovery plans train is getting slightly late. We're hoping for this train to move a bit sooner, but it's still more of a wish than a reality. I'm not going to say anything else. Rafal, perhaps you should like to comment on that.

[Rafal Benecki, executive]

Yes. The grant part should speed up in 2025, and that does require prefinancing indeed. We have some banking products for that purpose that are addressing -- addressed to that purpose, that have been designed to do that. Grant are paid out at a certain stage. Advanced payments are rather small in grant reality. So companies need prefinancing, local governments need prefinancing.

Our estimate is that in 2025, there will be over 1% of GDP of those grants to be paid out. That's about PLN 40 billion. So part of that will be prefinancing and I think this will be a catalyst. And of course, structural funds are being launched and prefinancing is needed for that. And the third thing, we're hoping that the pickup of public investment dominating 2025. We'll generate private investment at some point. And that's the -- that's what we're really counting on most because that's private loans to private businesses and decisions of individual companies. Any further questions in the room?

[Unknown Analyst]

I wanted to ask about the current level of IRS and what is the level of loans on fixed rate? And another question, the overheads grew by 4% last year. You mentioned about 7% raise about in April. I think the head count dropped by 5% year-on-year. So what are the estimates for this year? I believe that the salary pressure is slightly lower? What is your budget? And is it going to look like?

[Brunon Bartkiewicz, executive]

From the point of view of IRS, we do not disclose such information. This is our internal policy on macro cash flow policy and strategy. I can only comment that due to the new measure of risk, so NII, most banks -- in fact, all of the banks should have a decreased sensitivity of the balance sheet to the volatility of interest rates, especially when such a drop of interest rate is expected. So that would be my general comment in that.

As far as the salary cost. We also would not disclose forward-looking information. Please feel invited to join us at the conference after the first quarter. If salary increases are announced, they're usually publicly announced together with the financials for quarter 1. 7.5% was the increase indeed in the year-on-year dynamic. We took into account the restructuring provision. That changes dynamics slightly. That was over PLN 80 million. That's another point.

And also from the point of view of Q4, definitely, it's component of the internal settlement and estimates for bonuses. And so those are the 3 components that constitute the nominal dynamic of the whole year and quarter 4 alike. And the fixed interest rate mortgages. As far as I can recall, that's about 35%, PLN 22 billion of our overall portfolio, PLN 22 billion, those are fixed rate interest rates. And about 75% of the '24 production was based on fixed rates.

These are details that are not too much different than the whole sector, perhaps in the higher ballpark. You are completely right about salary increases that it is a lot higher -- that it is higher than the cost of remuneration, cost of employment. That's the restructuring provision that we referred to. The reductions or redundancies are not totally linear that needs to be looked at, but the market did, in fact, pay more.

We always benchmark ourselves next to that. There are 2 in-depth analysis on the remuneration situation in the banking sector. We do that twice over the year in order to be well prepared. That is due to the fact that there are institutions that regularly issue salary increases early in the year, about 1st of April and some do the adjustment in autumn. So hence, the analysis is performed twice in the year. You're also right to say that any forecasting for increase in remuneration is -- for that to be slightly lower than last year. But as Bozena said, our adjustment level, which we are always making sure is market-related. So will be communicated after quarter 1.

Are there any questions -- any further questions in the room? But the banking sector is not the biggest contributor to salary increase in the economy, as you know. We're no energy. We're not mining, but that was mean of me to say.

[Iza Rokicka, executive]

Okay. Questions online. There are 2 questions. First, what is the MREL ratio for the end of Q4 2024?

[Bozena Graczyk, executive]

10.6 vis-a-vis almost 6% of the minimum level that we should be maintaining. However, for us, the reference point from [indiscernible] was that's the most binding one and is a basis for our decision.

[Unknown Analyst]

What is your estimate on the legal risk on the free loan sanction and the fact that the LIBOR rate is being challenged?

[Brunon Bartkiewicz, executive]

For both cases, our estimate is that it is a relatively low risk, but for both cases, those are not threats that we would ignore. Now in terms of the number of lawsuits against the bank, do we disclose these numbers? We didn't -- we have not been disclosing these numbers, but they are not big numbers and they are not increasing incrementally. The increase in lawsuits for LIBOR, well, that is not more than 10 per month and usually lower than 7. And we are also observing a decrease in the latest months.

Now of course, we are hoping that -- well, let me say directly, I'm a banker, I'm a simple banker. Let me just be fun. And that's a modest appeal. It's in fashion. It's time to end with this craziness because it's worth dealing with what's important in life, and that is increasing Poland's competitiveness, and it's time that we understood that. That's all for me.

[Unknown Executive]

There's one more question. I think there's one called in Lublin that undermined LIBOR in its ruling. And that's what I'm talking about. That's why I said what I said. There are things in public life and in economy that should not be given to judges who, by the way, have a problem deciding what the social compact is in this respect. It's a philosophical approach. I know. But that was brought up in a rational reality, and it's time to put an end to this madness.

Fortunately, the state issues its securities based on LIBOR. The whole financial system, including T-bonds is based on LIBOR and this is the definition of reality that has to be used in practice and also to be translated into legal acts. We are wasting social energy on talking about these things. We are wasting our energy as a society. And it's the wrong thing to do.

[Unknown Analyst]

Actually, my question was about something else. I wanted to ask you about your exposure to the old indicator. I think you had about PLN 9 billion at your bank. Is that going to be translated into this new indicator somehow? Or what's your idea for this?

[Brunon Bartkiewicz, executive]

As you know, there's an old and a new member of our committee, [ Bozena Graczyk ] and I will say that after this new indicator is defined because we have halted our production in terms of -- not to confuse everybody. We have exposure as far as corporate clients are concerned and also in mortgages that were based on floating rate and we had the use of WIRON in our fixed rate system as well. So all these elements are there.

The corporate part is being extinguished quite fast as is its nature. Some of the floating rate lending, which is about 4% of our portfolio, I think, is based on the floating WIRON and that's not being extinguished, of course -- 5.5% actually. It's going to be closer to 4% towards the end of the year. But these are quite significant amounts certainly.

Any changes across the WIRON and its use are concerned, should follow decisions from the National Working Group Steering Committee, that has the representatives of all the relevant bodies in Poland. So that's why it's so important. And we are still waiting for decisions in this respect. However, this is a process where we have to meet all the administrative and regulatory requirements because we need to lower it to the biggest possible extent, and that's our lone star, because we don't want to get the clients confused as far as this is concerned.

This change, which has to happen sooner or later. It's probably better for us if it's slightly later, but we have to do that in order to stop confusing the clients and to do it in a way that doesn't cause any doubt whilst maintaining full compliance with the administrative and legal requirements. When this is going to happen, it's a question we are not in a position to answer because it's not our decision to make. WIRON is one of the rates, one of the indicators used on the Polish financial markets, and we are far from being the only entity that used WIRON.

Now the transition of the LIBOR and WIRON portfolios, something that the steering committee is working on. And in the fact, we are working on a modified road map after the decision of the steering committee on selecting a new indicator, and we are waiting for when this benchmark will be ready to publish. The nearest quarter is when this roadmap will probably accepted. And when it comes to WIRON rates, those portfolio will also be subject to these changes.

[Unknown Analyst]

Can you remind us what the name is going to be?

[Brunon Bartkiewicz, executive]

I think it will take some years in getting used to. It might not be the most obvious name, but it's in line with how other markets do it. [indiscernible] maybe the pronunciation will be [indiscernible] for short-term rate -- Polish short-term rate. [indiscernible], perhaps we can pronounce it. So from this point of view, the Steering Committee and the teams on the working group are working very hard on developing the new road map. And once the steering committee approves it, it will be published.

However, and we've said this in other public communication, the original objective was for the end date of the road map, not to change. So when you look at the WIRON portfolio, which is a BMR indicator -- BMR rates, by the way, and it's got the necessary fallback clauses. So all of this is under control as far as this is concerned.

Any last questions? If there are none, thank you very much and I'll see you in May. And let me thank you for the 37 past quarterly meetings. This is my last meeting. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]